Leading Counsel opinion on 3 resolutions

Dear HKICPA members

Below is the Leading Counsel opinion we obtained in respect of the letter dated 7 December 2012 from the President of HKICPA, who will normally be the Chairman of AGM (hereunder referred to as “the Chairman”):

1.     The Chairman’s argument that “under section 17(2) of the PAO, no resolution passed in a general meeting shall invalidate the exercise of any power already exercised by the Council” is not entirely accurate.  Section 17(2) says “No such resolution of the Institute shall invalidate … before the date of the resolution.”  What the section says is, in effect, no retroactive invalidation.  A resolution to “suspend” something is, by definition, not retroactive.  It only suspends the thing from the time of the resolution onwards.

2.     Indeed, the fact that section 17(2) bars only retroactive invalidation implies that the law contemplates and allows other kinds of invalidation, i.e., it allows members of the Institute to pass resolutions against what the Council has decided, as long as it is not retroactive.

3.     The Chairman’s argument that “Proposed Resolutions 1 and 3 are both invalid since they intrude on the powers vested solely in Council by the PAO and By-laws” is also not entirely accurate.  Section 18(1) expressly refers to “acts or things as may be exercised or done by the Institute … may be exercised or done by the Council.”  What the section says is, in effect, that the Council can do what the Institute can also do.  The powers are concurrent and in parallel.

4.     To the extent that the Chairman’s argument is that section 18(1) has vested “The management and control of the Institute … in the Council”, one should note that these words do not say that the management and control of the Institute is vested exclusively in the Council.  It would be very unlikely that the legislature meant for “the management and control of the Institute”, especially control, to be vested in exclusively in the Council and to say the Institute cannot “control” itself.

5.     The Chairman’s third argument that “Proposed Resolutions 1 and 3 offend against the power given solely to Council by section 18(1)(aa) of the PAO to set fees” is, for the same reasons above, not entirely accurate.  In short, section 18, with all its subsidiary details, is an enabling provision, not an excluding provision.

6.     In fact, section 9(4) of the PAO provides for what resolutions a member may propose.  It says, “Any certified public accountant may, at any meeting of the Institute, move any resolution which is not inconsistent with the purposes and provisions of this Ordinance but may not move a resolution in respect of any act done in pursuance of the powers conferred by section 18B, 26, 27, 28A, 30, 32B, 32C, 32D, 32E, 32F, 34, 35, 36, 39, 42C, 42D, 42E or 42F.”  Those numbered provisions are about the Institute’s regulatory powers, e.g., to specify professional standards, to accept or refuse registration of a CPA etc.  The reason for not letting members decide these things are obvious.

7.     That section 9(4) does not refer to sections 17 or 18 is significant.  It means that members can indeed propose resolutions touching on matters under sections 17 and 18.

8.     Moreover, section 9(4) says a member “may … move any resolution which is not inconsistent with the purposes and provisions of this Ordinance”.  This shows that the legislature meant for the ambit of what a member may propose by resolution to be a wide ambit.

9.     In other words, the default position is freedom.  Members are free to propose resolutions.  The statutory provisions should not be READ to create exclusivity where such has not stated.  The law should not be read to reduce the freedom that has been expressly provided.

I would request the HKICPA to share with the members the opinion they obtained from their legal counsel.

Horace Ma