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Going for the funds: Re Gold Fund Securities Company Limited [2020] HKCFI 2884 addresses how to deal with unclaimed cash and securities of a securities broker ceasing business

25 Nov 2020

Securities brokers looking to cease their securities business may sometimes be faced with the stumbling block of not being able to contact or otherwise obtain instructions from their clients to deal with, dispose of or return certain unclaimed cash and securities.

Section 62(1) of the Trustee Ordinance (Cap. 29), which provides that “Trustees, or the majority of trustees, having in their hands or under their control money or securities belonging to a trust, may pay the same into court, and the same shall, subject to the rules of court, be dealt with according to the orders of the court”, is a “flexible and pragmatic” solution for securities brokers in such scenarios to pay into court any unclaimed assets, in a way that would allow the applicant to cease its securities business while at the same time enabling the unclaimed assets to be dealt with a way that protects the interests of the beneficiaries. This was what had occurred in the recent case of Re Gold Fund Securities Company Limited [2020] HKCFI 2884.

In particular, after applying the test that an applicant generally needs to establish that (1) the assets in question are held by the applicant as trustee, and (2) despite reasonable endeavours, the beneficiaries cannot be contacted or are unresponsive, or the trustee is otherwise unable to obtain instructions as to how to deal with, dispose of or return the trust assets (see §13), the Court went on to consider how each category of unclaimed assets should be dealt with (see §§15-18). In short:

(a) For unclaimed cash, this can simply be paid into Court.

(b) For unclaimed securities which physical certificates could be withdrawn, the certificates could be withdrawn and deposited with the Court.

(c) For unclaimed securities which physical certificates could not be withdrawn, given the small total value, leave was granted to the applicant to sell or otherwise dispose of (including forfeiture thereof) the same as it sees fit, and to pay any proceeds into court.

It can therefore be seen that in applications of this nature, thought should be given as to how the unclaimed assets in question should be delineated into different types, and how each type of unclaimed assets can best be dealt with, taking into account matters such as their physical nature and value.  Technical requirements, such as the need for advertising the order in question (see §19(c)) should also be considered.

Jasmine Cheung acted for the Applicant and authored this article.