Hong Kong Ordinances
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STAMP DUTY ORDINANCE - SECT 19
Contract notes, etc. in respect of sale and purchase of Hong Kong stock
(Past version on 01/04/2003).
(Past version on 06/03/2000).
(Past version on 01/04/1999).
(Past version on 05/03/1999).
(Past version on 01/05/1998).
(Past version on 01/07/1997).
(Past version on 30/06/1997).
PART III
ANCILLARY PROVISIONS RELATING TO PART II AND PART IIA (Amended 21 of 2003 s.
10)
(1) Subject to this section, any person who effects any sale or purchase of
Hong Kong stock as principal or agent shall- (Amended 77 of 1981 s. 5)
(a) forthwith make and execute a contract note;
(b) cause the note to be stamped under head 2(1) or (2) in the First
Schedule or, in the case of a note to which section 45 applies, under
section 13(2)- (Amended 43 of 1991 s. 5)
(i) in the case of a sale or purchase effected in Hong Kong, not
later than 2 days thereafter;
(ii) in any other case, not later than 30 days thereafter;
(c) if he is the agent, transmit the stamped note to his principal;
(Amended 43 of 1991 s. 5)
(d) cause an endorsement to be made on the instrument of transfer of the
stock, or cause a stamp certificate to be issued in respect of the
instrument, to the effect that- (Amended 21 of 2003 s. 11)
(i) stamp duty has been paid on the contract note under head 2(1)
or (2) in the First Schedule; or
(ii) in the case of a contract note to which section 45 applies, the
contract note has been stamped under section 13(2). (Replaced
43 of 1991 s. 5)
(1A) Subsection (1) shall not apply to a sale or purchase of a unit under a
unit trust scheme-
(a) where the sale or purchase is effected by extinguishing such unit; or
(b) where the sale or purchase of the unit is effected by the managers
under the unit trust scheme and their power to effect such sale
or purchase arises-
(i) from the transfer to them of that or some other unit within the
immediately preceding 2 months; or
(ii) otherwise than from a previous transfer to them of that or some
other unit. (Added 77 of 1981 s. 5)
(1B) It shall not be obligatory for an endorsement to be made under subsection
(1)(d) where, at the time of the sale or purchase of Hong Kong stock-
(a) the instrument of transfer of such stock is in the custody of a
recognized clearing house in accordance with the rules of the clearing
house; or
(b) the Hong Kong stock is registered in the name of a recognized
clearing house or its nominee. (Added 40 of 1992 s. 2)
(1C) Subsection (1) shall not apply to a sale or purchase of Hong Kong stock
effected under a market contract. (Added 68 of 1992 s. 20)
(1D) (a) Subsection (1) shall not apply to any sale or purchase of
Hong Kong stock specified as an exempted transaction in the Fourth Schedule.
(b) Any transfer made for the purpose of effectuating any sale or
purchase of Hong Kong stock specified as an exempted transaction in
the Fourth Schedule shall not be chargeable with stamp duty under head
2(4) in the First Schedule. (Added 33 of 1998 s. 6)
(1E) (a) Subject to paragraph (c), in the case of a transaction whereby the
beneficial interest in Hong Kong stock passes otherwise than on sale and
purchase, where the transaction-
(i) is not effectuated by way of a transfer chargeable with stamp
duty under head 2(3) in the First Schedule, but is effectuated
by any other means, whether by electronic means or by means of
an entry in any recording or book-keeping system or otherwise;
and
(ii) is effectuated whether under or through a recognized clearing
house or any other person or organization, the transaction
shall, for the purposes of this Ordinance, be deemed to be a
sale and purchase of Hong Kong stock.
(b) For the purposes of this section and head 2(1) in the First Schedule,
in a transaction which is deemed to be a sale and purchase of
Hong Kong stock under paragraph (a)-
(i) the person disposing of the stock in the transaction shall be
deemed to be the person effecting the sale in the sale and
purchase;
(ii) the person acquiring the stock in the transaction shall be
deemed to be the person effecting the purchase in the sale and
purchase;
(iii) where the person maintaining the record of the transaction is
not the principal effecting the sale and purchase, the person
shall, save in the case of a recognized clearing house, be
deemed to be the agent effecting the sale and purchase; and
(iv) the value of the stock in the transaction shall be deemed to be
the amount or value of the consideration for the sale and
purchase.
(c) Paragraph (a) shall not apply to a transaction of the kind referred to
in that paragraph where the transaction would, if it were effectuated
by way of a transfer chargeable with stamp duty under head 2(3) in the
First Schedule, be a transfer of the kind referred to in
section 27(5). (Added 33 of 1998 s. 6)
(1F) For the purposes of subsection (1), where-
(a) any sale or purchase of Hong Kong stock is effected by an
exchange participant, whether as principal or agent;
(b) the contract note required to be made under subsection (1) in respect
of the sale or purchase is one to which an agreement under section 5A
relates; and
(c) the contract note is made by the exchange participant, the
contract note shall, whether or not it has been executed by the
exchange participant, be regarded as having been so executed. (Added
L.N. 90 of 1999 and 44 of 1999 s. 17. Amended 12 of 2000 s. 23)
(2) A contract note required to be made under subsection (1) shall state the
following-
(a) whether the person effecting the sale or purchase of the Hong
Kong stock is acting as principal or agent and, if as agent, the name
of his principal;
(b) the date of the transaction and of the making of the contract note;
(c) the quantity and description of such Hong Kong stock;
(d) the price per unit of such Hong Kong stock and the amount of the
consideration or, in the case of an exchange, particulars of the
property for which such Hong Kong stock is exchanged; and
(e) the date of settlement.
(3) No agent or other person shall have any legal claim to any charge for
brokerage, commission or agency with reference to the sale or purchase of any
Hong Kong stock if he fails to comply with the provisions of this section.
(4) The stamp duty paid in respect of a contract note may be added to any
charge for brokerage or agency and shall be recoverable as part of such
charge.
(5) Where a contract note relates to the sale or purchase of more than one
description of Hong Kong stock, the note shall be deemed to be as many
contract notes as there are descriptions of Hong Kong stock sold or purchased.
(6) If in the case of a sale or purchase of any Hong Kong stock effected by a
person who is not resident in Hong Kong, the stamp duty specified in head 2(1)
in the First Schedule is not paid, there shall be charged on the
instrument of transfer, in addition to the stamp duty otherwise chargeable
thereon, stamp duty equal to the amount of the stamp duty so payable in
respect of such sale or purchase; and in respect of stamp duty charged on an
instrument of transfer under this subsection, the transferee shall be the
person liable for stamping such instrument and the time for stamping it shall
be 30 days after execution thereof.
(7) Where any instrument of transfer is stamped under subsection
(6), the Collector shall endorse the instrument, or issue a stamp certificate
in respect of the instrument, to that effect in such manner as he may think
fit. (Amended 21 of 2003 s. 11)
(8) An instrument of transfer of any Hong Kong stock shall not be duly stamped
unless-
(a) it is endorsed under subsection (1)(d) or (7) in respect of both sale
and purchase; (Amended 40 of 1992 s. 2)
(b) it is endorsed by the Collector in such manner as he may think fit to
the effect that-
(i) stamp duty has been paid in respect thereof under head 2(3) in
the First Schedule; or
(ii) no stamp duty is chargeable thereon under subsection (6) or
head 2(1) or 2(3) in the First Schedule; or (Amended 43 of 1991
s. 5; 40 of 1992 s. 2)
(c) the Hong Kong stock is transferred to a recognized clearing house, or
its nominee, in accordance with the rules of the clearing house.
(Added 40 of 1992 s. 2)
(9) An endorsement under subsection (1) in respect of stamp duty paid-
(a) under head 2(1) in the First Schedule may be made by the Collector or
any person authorized by the Collector in that behalf;
(b) under head 2(2) in the First Schedule shall be made by the Collector,
in such manner as the Collector may think fit.
(9A) An endorsement under subsection (1)(d)(ii) shall be made by the Collector
in such manner as he thinks fit. (Added 43 of 1991 s. 5)
(10) Any person who makes an endorsement for the purposes of subsection (1)(d)
which is false in a material particular commits an offence.
(10A) In relation to a sale or purchase of a unit under a unit trust scheme
other than a sale or purchase referred to in subsection (1A), the obligations
imposed by this section (other than subsection (1)(c)) and head 2(1) in the
First Schedule on any person other than the managers under the
unit trust scheme shall be carried out by the managers in addition to any
obligation so imposed on them, and for that purpose subsection (2)(a) shall
not apply. (Added 77 of 1981 s. 5)
(11) Subject to subsections (12), (12A) and (13), nothing in this section
shall apply to-
(a) a stock borrowing; or
(b) a stock return. (Replaced 67 of 1989 s. 3)
(12) Where, in respect of a stock borrowing-
(a) the borrower ceases to be required to make a stock return in
accordance with the stock borrowing and lending agreement to which the
stock borrowing relates, in respect of the borrowed stock or part
thereof or its reasonable equivalent (other than that which is the
subject of the stock return referred to in paragraph (c)), pursuant to
the stock borrowing and lending agreement or to any other agreement
reached with the lender of the borrowed stock (whether by settlement
or otherwise); (Replaced L.N. 90 of 1999 and 44 of 1999 s. 17)
(b) the borrowed stock or part thereof or its reasonable equivalent was
used for a purpose other than a specified purpose; or (Amended L.N. 90
of 1999 and 44 of 1999 s. 17)
(c) the borrower fails to comply with any demand made by the lender of the
borrowed stock under the stock borrowing and lending agreement to
which the stock borrowing relates to make a stock return in respect of
the borrowed stock or part thereof or its reasonable equivalent, such
stock borrowing shall, for the purposes of this Ordinance, be deemed
to be a sale and a purchase of-
(i) where paragraph (a) applies, the borrowed stock or part
thereof, or the reasonable equivalent, which is the subject of
the stock return the borrower ceases to be required to make as
described in that paragraph;
(ii) where paragraph (b) applies, the borrowed stock or part thereof
which, or the borrowed stock or part thereof the reasonable
equivalent of which, was used for a purpose other than a
specified purpose as described in that paragraph; or
(iii) where paragraph (c) applies, the borrowed stock or part
thereof, or the reasonable equivalent, which is the subject of
the stock return referred to in that paragraph. (Amended L.N.
90 of 1999 and 44 of 1999 s. 17)
(12AA) This Ordinance, except subsection (1)(d), shall apply to the sale and
purchase referred to in subsection (12) as if that sale and purchase were
effected in Hong Kong-
(a) by the borrower who obtained the relevant borrowed stock;
(b) on the specified day; and
(c) for a consideration calculated at the previous closing price of
Hong Kong stock of the same description as the stock which is the
subject of the sale and purchase or, if there is more than one
description of the stock, at their respective previous closing prices
as quoted on the relevant recognized stock market. (Added L.N. 90 of
1999 and 44 of 1999 s. 17. Amended 5 of 2002 s. 407)
(12A) Subsection (11) shall not apply to any stock borrowing or stock return,
unless-
(a) an executed copy of the stock borrowing and lending agreement under
which the stock borrowing and stock return are provided for, or a copy
of the stock borrowing and lending agreement which is shown to the
satisfaction of the Collector as a true copy thereof;
(b) such fee as may be specified by the Financial Secretary for the
purposes of this subsection by notice in the Gazette; and
(c) such other documents, and such particulars and information as the
Collector may require, are provided by the borrower to the Collector
at any time after the stock borrowing and lending agreement is
executed but before the expiry of 30 days after the stock borrowing is
effected. (Replaced L.N. 90 of 1999 and 44 of 1999 s. 17)
(13) A borrower who has effected any stock borrowings under a stock
borrowing and lending agreement, an executed copy of which has been provided
to the Collector in accordance with subsection (12A), shall- (Amended 33 of
1998 s. 6)
(a) keep a book in such form;
(b) enter in such book, in respect of such stock borrowings and any
stock returns made in respect of such stock borrowings, such
particulars; and
(c) furnish to the Collector a return-
(i) in such form;
(ii) containing such particulars in respect of such book; and
(iii) at such times, as the Collector may require. (Added 67 of 1989
s. 3)
(14) A borrower who, with intent to defraud the Government of any stamp duty ,
causes or allows-
(a) an entry to be made in a book kept under subsection (13)(a); or
(b) any particular to be furnished in a return made to the Collector under
subsection (13)(c), which he knows or has reasonable grounds for
believing to be false or misleading in a material respect commits an
offence. (Replaced 70 of 1994 s. 4)
(15) A borrower who fails to comply with the requirements of subsection (13)
shall incur a penalty at level 2 which shall be recoverable by the Collector
as a civil debt due to the Government. (Replaced 70 of 1994 s. 4. Amended L.N.
338 of 1995; 12 of 1999 s. 3)
(16) In this section-
"allotment" (分配), in relation to units under a unit trust scheme, means
the issue of such units;
"borrowed stock" (被借用證券), in relation to a stock borrowing, means
any Hong Kong stock obtained by a borrower under such stock borrowing;
(Replaced 70 of 1994 s. 4)
"borrower" (借用人), means a person who is eligible to obtain
Hong Kong stock under a stock borrowing and lending agreement; (Added 70 of
1994 s. 4. Amended 33 of 1998 s. 6)
"lender" (借出人) means a person who is eligible to lend Hong Kong stock
under a stock borrowing and lending agreement; (Added 70 of 1994 s. 4. Amended
33 of 1998 s. 6)
"market contract" (市場合約) means a market contract within the meaning of
section 1 of Part 1 of Schedule 1 to the Securities and Futures Ordinance (
Cap 571); (Added 68 of 1992 s. 20. Amended 62 of 1995 s. 12; 5 of 2002 s. 407)
"previous closing price" (先前收市價格), in relation to Hong Kong stock,
means the previous closing price of such Hong Kong stock as determined in
accordance with the rules and practices of the recognized exchange company
that operates the relevant stock market; (Amended 5 of 2002 s. 407)
"reasonable equivalent" (合理對等項目), in relation to any stock
obtained pursuant to the provisions referred to in paragraph (a)(i)(A) or
(b)(i)(A)
of the definition of "stock borrowing and lending agreement", means any stock
or monies which, in the opinion of the Collector, can, as a result of the
occurrence of a relevant event, be reasonably and fairly be regarded as the
equivalent of the stock so obtained; (Added L.N. 90 of 1999 and 44 of 1999 s.
17)
"recognized clearing house" (認可結算所) means a
recognized clearing house within the meaning of section 1 of Part 1 of
Schedule 1 to the Securities and Futures Ordinance ( Cap 571); (Replaced 68
of 1992 s. 20. Amended 62 of 1995 s. 12; 5 of 2002 s. 407)
"relevant event" (有關事件), in relation to any stock obtained pursuant to
the provisions referred to in paragraph (a)(i)(A) or (b)(i)(A) of the
definition of "stock borrowing and lending agreement", means-
(a) the exercise of any of the powers conferred by section 53(1)(a) to (d)
of the Companies Ordinance ( Cap 32); or
(b) any other event, which, in the opinion of the Collector, makes any
requirement to return stock of the same quantity and description as
the stock so obtained either impracticable or inappropriate; (Added
L.N. 90 of 1999 and 44 of 1999 s. 17)
"rules" (規章), in relation to a recognized clearing house and a recognized
exchange company, has the same meaning as it has in relation to those bodies
in section 1 of Part 1 of Schedule 1 to the Securities and Futures Ordinance
( Cap 571); (Replaced 5 of 2002 s. 407)
"sale or purchase" (售賣或購買) includes any disposal or acquisition
(other than an allotment) for valuable consideration, and exchange, and any
transaction in respect of which an instrument is deemed by virtue of
section 30(3), (4) or (5) to be a transfer by way of sale, and any
reference to "sale" (售賣) or "purchase" (購買) shall be construed
accordingly;
"specified day" (指明日期), in relation to a stock borrowing, means-
(a) where subsection (12)(a) applies, the day on which the borrower ceases
to be required to make a stock return as described in that subsection;
(b) where subsection (12)(b) applies, the day on which the borrowed stock
referred to in that subsection was obtained under the stock
borrowing and lending agreement to which the stock borrowing relates;
or
(c) where subsection (12)(c) applies, the day on which the borrower fails
to comply with any demand as described in that subsection; (Replaced
L.N. 90 of 1999 and 44 of 1999 s. 17)
"specified payment" (指明付款), in relation to any stock, means a payment
of an amount equivalent to the amount of any dividend, interest and other
distribution payable in respect of the stock or its reasonable equivalent or
both by the issuer of the stock or its reasonable equivalent or by any other
person to the holder of the stock or its reasonable equivalent during the
period after the stock is obtained pursuant to the provisions referred to in
paragraph (a)(i)(A) or (b)(i)(A) of the definition of
"stock borrowing and lending agreement" and before a return or delivery is
required to be made in accordance with the provisions referred to in paragraph
(a)(i)(B) or (b)(i)(B) of that definition; (Added L.N. 90 of 1999 and 44 of
1999 s. 17)
"specified purpose" (指明用途), in relation to the borrowing of stock by
any person, means-
(a) the settling of a sale of Hong Kong stock wherever effected, whether
by the person himself or another person;
(b) the settling of a future sale of Hong Kong stock, whether agreed or
not when such borrowing is effected and whether by the person himself
or another person;
(c) the replacement, in whole or in part, of Hong Kong stock obtained by
the person under another stock borrowing;
(d) the on-lending of the stock borrowed to another person who effects a
stock borrowing in respect of such stock on-lent; or
(e) such other purpose as the Collector may, in writing, allow either
generally or in any particular case; (Added 70 of 1994 s. 4. Amended
33 of 1998 s. 6)
"stock borrowing" (證券借用) means the obtaining by a borrower from a
lender, under a stock borrowing and lending agreement, of Hong Kong stock the
sale and purchase of which in Hong Kong are subject to the rules and practices
of the recognized exchange company that operates the relevant stock market,
whether the Hong Kong stock is so obtained- (Amended L.N. 90 of 1999 and 44 of
1999 s. 17; 5 of 2002 s. 407)
(a) directly from the lender; or
(b) indirectly under or through a recognized clearing house and in
accordance with the rules of that recognized clearing house which
constitute the stock borrowing and lending agreement; (Replaced 70 of
1994 s. 4. Amended 33 of 1998 s. 6)
"stock borrowing and lending agreement" (證券借用及借出協議) means-
(a) an agreement which-
(i) contains- (A) provisions providing for the obtaining of any
stock by a person from any other person; (B) provisions
requiring- (I) the return of stock of the same quantity and
description as the stock obtained pursuant to the provisions
referred to in sub-subparagraph (A); or (II) the delivery of
the reasonable equivalent of the stock so obtained; and (C)
provisions which- (I) require a specified payment to be made by
the person by whom the stock is obtained pursuant to the
provisions referred to in sub-subparagraph (A) to the person
from whom the stock is obtained pursuant to the provisions; or
(II) provide for an arrangement which, in the opinion of the
Collector, can be regarded as a fair and proper alternative to
the requirement to make the specified payment; and
(ii) does not, in the opinion of the Collector, have the effect of
reducing the risk of loss or opportunity for gain, in respect
of the stock, of the person from whom the stock is obtained
pursuant to the provisions referred to in subparagraph (i)(A);
or
(b) the rules of a recognized clearing house which-
(i) contain the following provisions approved by the Collector- (A)
provisions providing for the obtaining of any stock by a
participant of the clearing system of the
recognized clearing house from any other participant of such
clearing system; (B) provisions requiring- (I) the return of
stock of the same quantity and description as the stock
obtained pursuant to the provisions referred to in
sub-subparagraph (A); or (II) the delivery of the
reasonable equivalent of the stock so obtained; and (C)
provisions which- (I) require a specified payment to be made by
the participant by whom the stock is obtained pursuant to the
provisions referred to in sub-subparagraph (A) to the
participant from whom the stock is obtained pursuant to the
provisions; or (II) provide for an arrangement which, in the
opinion of the Collector, can be regarded as a fair and proper
alternative to the requirement to make the specified payment;
(ii) do not, in the opinion of the Collector, have the effect of
reducing the risk of loss or opportunity for gain, in respect
of the stock, of the person from whom the stock is obtained
pursuant to the provisions referred to in subparagraph (i)(A);
and
(iii) are subscribed to by participants of the clearing system of the
recognized clearing house as a precondition for their obtaining
of any stock within the meaning of subparagraph (i)(A);
(Replaced L.N. 90 of 1999 and 44 of 1999 s. 17)
"stock return" (證券交還), in relation to a stock borrowing, means a
transaction by which a borrower, in accordance with the stock borrowing
and lending agreement to which the stock borrowing relates-
(a) returns any stock which is of the same description as the
borrowed stock (other than that which is the subject of a sale and
purchase referred to in subsection (12)); or
(b) delivers any reasonable equivalent of the borrowed stock (other than
that which is the subject of a sale and purchase referred to in
subsection (12)), whether or not the return or delivery is made-
(Amended L.N. 90 of 1999 and 44 of 1999 s. 17)
(i) directly to the lender; or
(ii) indirectly under or through a recognized clearing house and in
accordance with the rules of that recognized clearing house
which constitute the stock borrowing and lending agreement;
(Replaced 70 of 1994 s. 4. Amended 33 of 1998 s. 6)
"transaction" (交易), in relation to a stock return, includes the return by
a borrower to a lender of a lesser quantity of stock than that obtained by him
on the day that the borrowed stock was so obtained. (Added 70 of 1994 s. 4)
(Amended 70 of 1994 s. 4)
"allotment" (分配)
"borrowed stock" (被借用證券)
"borrower" (借用人)
"lender" (借出人)
"market contract" (市場合約)
"previous closing price" (先前收市價格)
"reasonable equivalent" (合理對等項目)
"recognized clearing house" (認可結算所)
"relevant event" (有關事件)
"rules" (規章)
"sale or purchase" (售賣或購買)
"specified day" (指明日期)
"specified payment" (指明付款)
"specified purpose" (指明用途)
"stock borrowing" (證券借用)
"stock borrowing and lending agreement" (證券借用及借出協議)
"stock return" (證券交還)
"transaction" (交易)
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