Business Registration (Amendment) Bill 1998

Reply to the concerns raised by the
Bills Committee at its meeting held on 24 November 98

  1. Since the enactment of the Business Registration Ordinance (the Ordinance) in 1959, the Commissioner of Inland Revenue (Commissioner) has all along not been required under section 6(4)(a) to register any unlawful business/branch. The proposed section 6(4B) ensures the integrity of section 6(4)(a) by providing a remedy to the Commissioner under the situation where an unlawful business/branch is inadvertently registered, i.e. the Commissioner can remove its name from the Business Register and publish a notice of removal in the Gazette. The power given to the Commissioner under the proposed section 6(4B) will only be exercised under the situation set out in paragraph (a) of section 6(4), i.e. a business/branch is unlawful when it applies for business registration. This proposed amendment is purely technical and involves no new policy or change of policy.

  2. So far, the Inland Revenue Department has not come across any business/branch which should not have been registered by virtue of section 6(4)(a) but has been inadvertently registered. Following the enactment of section 6(4B), the Commissioner will not exercise his power under the section to remove an unlawful business/branch from the Business Register except under the situation set out in section 6(4)(a).

  3. The word "unlawful" is not defined in the Ordinance. "Unlawful" in its ordinary meaning can be used in two senses. First, it refers to an act or thing to which the law will not give effect, either on the ground of immorality or being contrary to public policy (e.g. contracts in restraint of trade). Secondly, it simply means contrary to law, whether statute law or common law.

    Hence, whether a business/branch is unlawful is a question of law and should be decided by the court (for cases involving crimes) or other competent authorities. The proposed section 6(4B) will not give the Commissioner the power to make a judgement on this question. It merely provides a remedy to the Commissioner when "it appears to" the Commissioner that a registered business/branch should not have been registered because it was unlawful at the time of registration, i.e. to remove the registration from the Business Register.

    In the laws of Hong Kong, there are already certain provisions concerning whether a business should be considered as unlawful. For example, under section 143(1)(c)(i) of the Companies Ordinance (Cap. 32), the Financial Secretary can appoint inspectors to investigate the affairs of a company if there are circumstances suggesting that the business of the company is being conducted for an unlawful purpose. The inspectors will then submit a report to the Financial Secretary under section 146(1) in which they will form an opinion as to whether such business is in fact unlawful. Depending on the findings, the Financial Secretary may present a petition to the court to wind up the company. A similar example is found in section 95 of the Trustee Ordinance (Cap. 29) under which the Financial Secretary may appoint an inspector to investigate the affairs and management of a trust company if there are circumstances suggesting that the business of the trust company has been or is being conducted for an unlawful purpose or that it was formed for any unlawful purpose. The inspector shall make a report of his investigation to the Financial Secretary [section 95(3)] based on which the court may order the winding up of the company [section 96]. (Extracts of the relevant sections of the two Ordinances are at the Annex.)

    Under the two scenarios, once the company's unlawful status is established under the respective Ordinances and if the unlawfulness existed at the time when the company was accepted for business registration, the Commissioner will invoke the proposed section 6(4B) to remove the business registration concerned.

  4. The Commissioner in practice will not determine whether or not a business/branch is unlawful. As explained in paragraph (c) above, the proposed section 6(4B) will only be invoked by the Commissioner to de-register a business/branch which is found to be unlawful. Considering that whether a business/branch is unlawful is decided by the court or a competent authority, the court or the authority should give the person carrying on such business/branch the opportunity to show cause or to make representation before it makes a decision on whether the business/branch is unlawful. In other words, since the business/branch owner should be well aware that investigation into the affairs of his business/branch has been made and of the decision in respect of the investigation, a prior notice of the Commissioner's de-registration action should not be necessary.

    Notwithstanding the above, as a good administrative practice, the Commissioner is prepared to send a notice to the business/branch owner, say two weeks, before he removes the registration from the register, at the last known business or other correspondence address of the business. The notice would inform the person concerned the Commissioner's intended action and his right under the proposed section 6(4C) to appeal to court if aggrieved by the decision. With this arrangement, there is no need to send a further notice to the business/branch owner after the publication of the removal in the Gazette.

Finance Bureau
FIN CR 3/2311/90
December 1998