Hong Kong Ordinances

CLEARING AND SETTLEMENT SYSTEMS ORDINANCE - SECT 28

Right of relevant insolvency office-holder to recover gain from transaction at undervalue between 2 participants

(1) This section applies to any transaction between 2 participants in a
designated system that—

   (a)  is entered into at an undervalue to the gain of one of the
        participants (“first participant”); and

   (b)  was entered into at any time during the period of 6 months ending
        with—

        (i)    the presentation of a petition for the bankruptcy or winding up
               of the other participant (“second participant”) or his
               principal;

        (ii)   the passing of a resolution for voluntary winding up of the
               second participant or his principal; or

        (iii)  the making of a directors’ voluntary winding up statement in
               respect of the second participant or his principal.

(2) A relevant insolvency office-holder acting in respect of the second
participant to a transaction to which this section applies or his principal
may, unless a court otherwise orders, recover from the first participant to
the transaction an amount equivalent to the gain made from the transaction.

(3) For the purposes of this section, a transaction is entered into at an
undervalue if it is entered into—

   (a)  on terms that provide for the second participant or his principal to
        receive no consideration; or

   (b)  for a consideration the value of which, in money or money’s worth,
        is less than the value, in money or money’s worth, of the
        consideration provided by the second participant or his principal.

(4) At the request of a system operator or settlement institution of a
designated system the Monetary Authority may, by notice published in the
Gazette, exempt the system operator or settlement institution from the
application of this section; and where such an exemption is in effect this
section shall not apply in respect of any transaction entered into by the
system operator or settlement institution (as the case may be) as first
participant in his capacity as such system operator or settlement institution.

(5) For the avoidance of doubt, nothing in this section has the effect of
derogating from section 20(2) or 22.