Hong Kong Ordinances

CLEARING AND SETTLEMENT SYSTEMS ORDINANCE - SECT 29

Right of relevant insolvency office-holder to recover transfer between 2 participants giving unfair preference

(1) This section applies to any transfer of funds or securities from one
participant in a designated system to another, being—

   (a)  a transfer to which section 19 applies (other than a transfer that
        forms part of a transaction to which section 28 applies);

   (b)  a transfer by which the participant who is the recipient of the
        transfer (“first participant”) is given an unfair preference by
        the participant making the transfer (“second participant”) or by
        the principal of the second participant acting through the second
        participant; and

   (c)  a transfer that is effected 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 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 transfer to which this section applies or his principal may,
unless a court otherwise orders, recover from the first participant to the
transfer an amount equivalent to the value of the transfer.

(3) For the purposes of this section, a transfer is a transfer as described in
subsection (1)(b) if—

   (a)  the first participant is a creditor of, or is a surety or guarantor
        for any debts or liabilities of, the second participant or his
        principal;

   (b)  the transfer has the effect of putting the first participant into a
        position which, in the event of the bankruptcy or winding up of the
        second participant or his principal, will be a better position than
        the position he would have been in if the transfer had not been made;
        and

   (c)  the second participant in deciding to make the transfer, or the second
        participant’s principal in deciding to cause him to make the
        transfer, is influenced by a desire to produce in relation to the
        first participant, the effect described in paragraph (b).

(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 transfer effected 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.