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News and information for clients and professional colleagues The TAP Bulletin March 2015 二零一五年三月 now be taken into consideration in transactions in which further contracts are to be signed at later

Corporate Growth Companies limited by guarantee Spring Dinner of the TAP Family (5 March 2015) New Law Contracts (Rights of Third Parties) Ordinance (Cap 623) The Contracts (Rights of Third Parties)

The new Ordinance affects parties to a contract in relation to third parties possible right to enforce terms of the contract despite their being third parties.

In the meantime, it should be noted that, although the new Ordinance will apply only to contracts entered into after it has come into operation, it should TAP has advised clients on the formation,

1 News and information for clients and professional colleagues The TAP Bulletin March 2015 二零一五年三月 now be taken into consideration in transactions in which further contracts are to be signed at later stages. Corporate Growth Companies limited by guarantee Spring Dinner of the TAP Family (5 March 2015) New Law Contracts (Rights of Third Parties) Ordinance (Cap 623) The Contracts (Rights of Third Parties) Ordinance (Cap 623) ( the new Ordinance ) was passed and gazetted in December 2014 but it has not yet come into operation. It is expected that it will come into operation by the end of this year. The new Ordinance affects parties to a contract in relation to third parties possible right to enforce terms of the contract despite their being third parties. The TAP Bulletin will introduce the new Ordinance in more detail in a later issue. In the meantime, it should be noted that, although the new Ordinance will apply only to contracts entered into after it has come into operation, it should TAP has advised clients on the formation, operation and restructuring of various companies limited by guarantee. In Hong Kong, entities engaged in activities which are not purely commercial or profit-making in nature often take the form of companies limited guarantee. Typical companies which take this form include charitable bodies and private schools. TAP advises clients from both categories. Intellectual Property Management The following questions often prompt fast growing clients to seriously consider the need to have a comprehensive intellectual property audit: What intellectual property rights (IRPs) have you been creating? Are the created IPRs being exploited for profits or for free or you do not know? Will your buyers/ customers be free to continue to use the IPRs even after they have stopped doing business with you? Tony Au & Partners 2015 All rights reserved 1

2 What IPRs have you been using? Do you own them or are you using them under a licence only? Can you save money by owning the IPRs instead of paying licence fees for them? Are your business competitors competing unfairly by using IPRs (yours or others ) without authorization? Do you or your employees or contractors own the IPRs you are now using? What happens when they cease the working relationship with you? Do you have a list of IPRs on your list of assets? How are your IPRs valued? Is there any licensing arrangement in place within your group of companies? Have you checked, or when was the last time you checked, the sufficiency of the software licences for the software used on the computers in your office? Is there any company policy regulating the installation of software by your employees on their PCs in the office? TAP provides clients with a full range of services dealing with these questions. The results to achieve are: High net worth of the company/ group; Enhanced competitiveness; Costs saving; Reduced risk of litigation/ liabilities; Prevention of unnecessary disputes with suppliers, customers, staff and contractors; and Ultimately, better profits! Our IP team will be happy to assist. Intellectual Property Portfolio Management The term portfolio management for an international business often refers to the management of a company s/ group s IPRs all over the world. The work involves: (i) coordinating and monitoring application for new IPR registrations for trademarks, domain names, patents designs, etc. in multiple jurisdictions; (ii) managing renewals of existing registrations (watch out for the deadlines!); (iii) assisting management in formulating and implementing global and local IPR protection/ anticounterfeiting policies. Clients should make sure that the work is properly allocated among its staff and to external advisers. Besides handling IPR related work in Hong Kong, TAP also serves as regional coordinating legal counsel to assist clients in managing their global or regional IP portfolios. Exchange & Production Industrialists in Hong Kong TAP is proud to have a number of long-term clients who despite all the ups and downs remain enthusiastic about creating new technologies. We have, through serving these great clients, learned about new things which are created to hopefully change the world for good, as well as the most ordinary things we use every day which are in fact ever evolving, because of the constant efforts made by these clients from different industries. We take pride in being able to be part of many transactions that lead to these great things. Tony Au & Partners 2015 All rights reserved 2

TAP s commercial team, with industry-specific knowledge, serves Hong Kong, Mainland China and foreign clients from various industries which include: - Medicines - Biochemical products - Information

3 TAP s commercial team, with industry-specific knowledge, serves Hong Kong, Mainland China and foreign clients from various industries which include: - Medicines - Biochemical products - Information technology - Media and entertainment - Green energy - Industrial machines - Consumer products - Building and engineering In the Courts Watch out for internet fraud This is what can happen to a foreign buyer: The buyer places an order with a seller in Hong Kong or its Mainland China factory by . The seller issues an invoice with details of the bank account and it to the buyer. The buyer receives the invoice by but it then receives another from the seller asking it to transfer the purchase money or deposit to another account in a bank in Hong Kong instead. The buyer arranges the transfer accordingly, only to find out later that the second it received was a fake from an unknown fraudster. Clients should watch out for this kind of fraud. The fraudster can be an insider in either the buyer or the seller or just an unknown internet hacker. Transactions that lead to money transfers should be handled with more care. If unfortunately money has been transferred to an unknown bank account in Hong Kong, the Hong Kong police may be able to freeze the account in time to preserve the money. In appropriate cases, follow-up civil proceedings for injunctions and other temporary and permanent remedies may also be available. Tony Au & Partners 2015 All rights reserved 3

4 The Topic Enforcement of Monetary Judgments in Hong Kong The successful plaintiff in a court case in Hong Kong is awarded a judgment for certain relief, which is usually a monetary award. The successful plaintiff is now the judgment creditor, and the unsuccessful defendant is now the judgment debtor. The awarded amount is the judgment debt. This article introduces the various steps a judgment creditor with a monetary judgment given by a Hong Kong Court may take in order to actually recover money under the judgment. EXECUTION OF JUDGMENTS There are several execution proceedings which are commonly used: Writ of Fieri Facias A Writ of Fi Fa is used where the judgment debtor has personal property such as motor vehicles, furniture, office equipment, computers or works of arts. It instructs the bailiff to seize the goods or other movable property and sell them to pay the judgment debt. Garnishee Order A judgment creditor may enforce judgment by attaching a debt owed to the judgment debtor by a third party. Once a debt is attached, the third party must pay the debt to the judgment creditor instead of the judgment debtor. The most common example is to obtain a Garnishee order against the bank accounts of the judgment debtor. In a bank and customer relationship, the customer s deposit with the bank is money lent to the bank to be repaid to the customer upon his withdrawal of the same. Accordingly, if the debtor has money in a bank account, a Garnishee order will direct the bank to pay the judgment debtor s deposits over to the judgment creditor. Charging Order This method is commonly used where the debtor owns land or property. After obtaining a charging order absolute, the debtor's property will be subject to an equitable charge in favor of the creditor. The next step is to apply for an order for sale and use the sale proceeds to satisfy the debt. Oral Examination of Judgment Debtor Where there is no sufficient information as to what assets are possessed by the judgment debtor, the judgment creditor may apply to court for an order to examine the judgment debtor under oath to identity such assets. If the judgment debtor is a company, then oral examination may be conducted against its officers or even former officers. BANKRUPTCY/WINDING-UP PROCEEDINGS There may be chances that the enforcement methods above are not working satisfactorily. For example, the judgment debtor (or its officer in the case of a company being the judgment debtor) cannot be reached at all or no information about the judgment debtor s assets can be obtained. In such situation, the judgment creditor may, instead of commencing execution proceedings, commence bankruptcy (against individuals and the debt is unsecured) or winding-up (against companies) proceedings against the judgment debtor. Tony Au & Partners 2015 All rights reserved 4

5 Normally, bankruptcy and winding-up proceedings are commenced by serving a statutory demand on the judgment debtor. Currently, only a demand for a debt of HK$10,000 or above would qualify as such a statutory demand. If the statutory demand is not satisfied within 3 weeks, then the judgment creditor may file a Bankruptcy Petition or Winding-Up Petition, as the case may be, to bankrupt or wind up the judgment debtor. The effectiveness of bankruptcy and winding-up proceedings largely depends on the available assets of the judgment debtor. If the judgment debt is not secured by a security, the judgment creditor ranks pari passu with other unsecured creditors of the judgment debtor, meaning that distribution will be made to all unsecured creditors proportionally out of the judgment debtor s available assets after satisfying the claim of preferential creditors and secured creditors. There is chance that the judgment creditor will only be paid the judgment debt in part, if at all. 在出售公司股份或资产时, 买卖协议通常包含卖方确定各项事实 ( 有些时候是意见 ) 是真实和准备的各项保证每一项保证都是一项事实 ( 有些时候是意见 ) 的陈述一份典型的买卖协议 ( 尤其是在买方具有较强的议价实力时 ) 包含很多标准保证一个明显是买方律师不时会在没有顾及现实情况下很方便地草拟的经典例子是 : 卖方保证, 它拥有的所有知识产权均已注册然而, 在现实里, 没有公司是能够把它的所有知识产权都注册的 ( 例如关于它的产品的广告材料的版权 ) 一份妥为草拟的买卖协议, 不应让双方在争议出现时才去争辩这种保证的真正意思如果一项保证有失实或不准确之处, 买方可能有权向卖方追讨违反保证的损害赔偿买卖协议通常规话题披露函 (The English version of this article, The Disclosure Letter, appears in the January 2015 issue of The TAP Bulletin) ( 本文的英文版 The Disclosure Letter 载于 The TAP Bulletin 的 2015 年 1 月号 ) 披露函是公司股份或资产买卖过程里的一个十分重要的环节然而, 它往往被误解, 甚至被认定是不必要的步骤事实上, 披露函是界定实际出售的是甚么, 以至股份 / 资产的真正价值的关键文件本文简单介绍甚么是披露函, 和它在股份 / 资产购买交易中担当的角式定, 损害赔偿相等于能使买方重回有如该保证没有遭违反一般的位置所需的赔款这对卖方来说, 可能意味着一个商业恶梦, 尤其是当买方在出售后仍在一段时间里保留着部份买价, 以便作出违反保证的索偿披露函是由卖方或卖方的律师代表它在完成出售前发出的 ( 通常在签订买卖协议的时候 ) 卖方凭借披露函, 针对在买卖协议项下发出的保证而作出披露 ( 即是说, 去规范那些保证 ) 通过声明那些保证不真实或不准确和说明关于每一项该等保证的真实情况, 披露函可使卖方避免遭受买方索偿 Tony Au & Partners 2015 All rights reserved 5

一份披露函通常包含两部份第一个部份是一般披露第二个部份是专项披露在出售股份的交易里, 典型的一般披露会包含 : 公司 / 集团公司管理账目的一般披露 ; 已向相关的公司注册处存档的资料的一般披露 ; 公司 / 集团公司租用或拥有的物业的一般披露 ; 及公司 / 集团公司拥有或被授权使用的知识产权的一般披露专项披露可能包括 (a) 如没披露则会违反保证的事项 ; 及 (b)

6 一份披露函通常包含两部份第一个部份是一般披露第二个部份是专项披露在出售股份的交易里, 典型的一般披露会包含 : 公司 / 集团公司管理账目的一般披露 ; 已向相关的公司注册处存档的资料的一般披露 ; 公司 / 集团公司租用或拥有的物业的一般披露 ; 及公司 / 集团公司拥有或被授权使用的知识产权的一般披露专项披露可能包括 (a) 如没披露则会违反保证的事项 ; 及 (b) 规定买卖协议项下的保证必须包含的资料披露函通常会连同一个披露文件册一起出具视乎披露函的内容而定, 披露文件册可能载有在尽职调查过程中已向买家披露的文件的复印本和在专项披露里提述的文件的复印本买方准备披露函, 或指示代表律师代劳, 应当十分小心向代表律师发出的指示和文件必须完整和准确尽职调查过程常被误解为已执行了披露函的作用买方进行尽职调查, 为的是它本身搜集资料和进行评核这过程并不自动消除卖方违反保证的责任在一些情况里, 卖方在尽职调查过程中作出的失实陈述更可能会导致额外的失实陈述责任从实务角度来看, 商议保证的条文和披露函的条文, 两者可视作同一过程在买卖协议项下的保证, 效力受披露函限制 / 规范尽职调查并不自动给予这些限制 / 规范 Contact Us Rm 1808, 18/F, Tower One, Lippo Centre, 89 Queensway, Hong Kong Tel : (852) Fax: (852) mail@taupartners.com Website : 联系我们香港金钟道 89 号力宝中心 1 座 18 楼 1808 室电话 : (852) 传真 : (852) 电邮 : mail@taupartners.com 网站 : Important Notice: The information provided in this document is for general reference only and is not to be relied upon as legal advice or otherwise for any other purpose. 重要通知 : 本文件中提供的资讯, 仅供一般参考之用, 不可当作法律意见倚赖或作任何其它目的之用 Tony Au & Partners 2015 All rights reserved 6

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1 2 1 2 3 4 5 6 How to enforce a judgment 1. How can a judgment be enforced Content 1. How can a judgment be enforced 1.1 After a winning party has obtained a judgment for payment of money from the Tribunal