Macau concession dissolution proposal problematic: experts
An article in Macau’s draft new gaming law, to create a mechanism to dissolve an existing gaming concession in the event it were not granted a new licence after the current six concessions expire in June, is legally problematic for a number of reasons, say several experts on Macau law, in commentary to GGRAsia.
The bill is due to have a first reading on Monday (January 24) in Macau’s Legislative Assembly. The government has said the bill needs to be enacted before there can be a fresh public tender for Macau gaming rights.
Referring to Article 50 of the bill, which deals with concession dissolution, António Lobo Vilela, a lecturer in gaming law at the University of Macau, and former advisor to the local government, explained some of his reservations.
“It does not make sense that the company is asked to undergo dissolution because it fails to secure a gaming concession,” he stated.
In that event, although the company “cannot operate casino gaming,” it could still “continue to operate other businesses, as the hotels, the MICE facilities, retail, etc,” said Mr Vilela.
Mr Vilela added: “Do those drafting the… law proposal understand the tax burden” that would be faced “to transfer all these [non-gaming] assets to a new company? A mandatory change of business scope seems more than sufficient.”
Local gaming lawyer Sérgio de Almeida Correia took a similar view. Referring to the existing legal framework for casino gaming in Macau he said: “It is true that the current law says that a concession can only be granted to a company whose exclusive objective is gambling.”
But he added: “If one of the current concessionaires is unable to obtain a concession in the future tender, there is no reason, from a legal point of view, to prevent the company from changing its corporate purpose and proceeding with non-gaming activities.”
Liability issues
Another proposal under Article 50, is that those that are either shareholders with 5 percent or more; directors; or on a management body of a gaming concessionaire, must bear all the firm’s liabilities, including guaranteeing all gaming chips in circulation, in the event of the ending of the gaming concession. Mr Vilela and Mr Correia see difficulty here.
Mr Correia stated: “This is a legal aberration since the concessionaire companies are limited-liability companies.”
He added that with such wording under the article, “an acquired principle regarding the responsibility of companies is receiving a death sentence”.
The proposed approach “seriously jeopardises legal predictability, good faith and investors’ expectations”, the lawyer said, as a “limited liability partner/shareholder is … not liable for the company’s debts generated by its commercial activity.”
“The company’s assets are the only support for guaranteeing the company’s debts arising from its commercial activity: only the company’s assets are responsible for these debts. The situation would only be different if companies had unlimited liability, which is not the case,” Mr Correia added.
Macau-based lawyer José Alvares told GGRAsia it was “important to understand how crucial” the gaming sector is for the Macau economy, and that – from a government perspective – it would not be unreasonable to ensure that a concessionaire “has sufficient funds to redeem the chips that it has put into circulation”.
“I think the underlying concern of the government is to ensure that a current operator is not in an overleveraged position,” said Mr Alvares. But he warned that the way the article is drafted in the bill “is a departure from normal rules”.
“Shareholders are only liable up to their stake in the company and directors only in case they were deemed to have contributed to the situation of default,” he stated. “By effecting this change, it will definitely force operators to be extremely more cautious.”
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