The privatisation saga of PCCW in 2009 stirred up a huge debate, prompting many to focus on the Companies Ordinance. The buyout attempt eventually collapsed but it highlighted the restrictions that one contentious provision has placed on privatisation deals.
Under this rule, shareholders who want to push ahead with privatisation not only have to secure over 75 per cent support from individual shareholders, they also need approval from over half of the shareholders attending a shareholders' meeting.
This so-called headcount rule has created a loophole whereby people could boost their chances of success by 'planting votes', which means splitting up the shares to create a bigger headcount. The majority required is based on the number of shareholders rather than the value of their shareholdings.
To address the problem, the government has, since 2006, launched five rounds of public consultation on a Companies Bill that seeks to update the law. During the review of the headcount rule, the government collected 164 submissions from business groups that represent listed companies, professional bodies, business chambers, and both the barristers' and solicitors' associations. All vehemently opposed the rule.
Despite such strong opposition, the government retained the rule in the bill, gazetting it two weeks ago and tabling it for a first reading at the Legislative Council on Wednesday. It believes the rule is vital in protecting the interests of small investors. As a result, the administration only proposed to add a provision that would empower the court to overturn a ballot result based on the headcount when needed, in a bid to prevent manipulation.
The bill is expected to be cleared before the term of the current legislature ends next year. And, after the drafting of further subsidiary legislation, the new law could be implemented in 2014.
The official in charge, Secretary for Financial Services and the Treasury Chan Ka-keung, has failed to provide a convincing argument to support the bill. The case has once again proved that government consultation exercises are nothing more than political gestures to placate the public.