Hong Kong Companies Registry New Release 12 December
Companies (Amendment) Ordinance 2003 to improve corporate governance
and make company law more business-friendly
The Secretary for the Financial Services and the Treasury has appointed
February 13, 2004 as the commencement date of the Companies (Amendment)
Ordinance 2003 (save for section 67 relating to the index of directors).
"This Ordinance, when brought into operation, will enhance
our corporate governance regime, and make our company law more business-friendly,
thereby ensuring that our companies legislation continues to provide
Hong Kong with a commercial legal infrastructure that is commensurate
with its status as a major international commercial centre,"
a Government spokesman said today (December 12).
The Ordinance aims to implement certain Phase I recommendations
of the Standing Committee on Company Law Reform (SCCLR) on the review
of the Companies Ordinance (Annex), which seek to enhance the protection
of shareholders' rights, update the requirements regarding directorships
etc, and make some amendments regarding technical matters. It also
introduces some changes to the Companies Ordinance to simplify the
filing requirements, and to facilitate electronic processing at
the Companies Registry, in anticipation to the operation of its
Integrated Companies Registry Information System (ICRIS).
The spokesman added," Phase I of the ICRIS, which allows customers
to conduct online searches on the documents kept by the Companies
Registry over the Internet round-the-clock, is currently at an advanced
stage. It should start to provide online search services in early
2004. To avoid any serious impact on this implementation schedule,
the commencement of section 67 of the Ordinance, which involves
substantial modifications to the system design of the ICRIS, would
need to be deferred until after the live run of the Phase I of the
Section 67 of the Ordinance expands the scope of the index of directors
under the Companies Ordinance to cover any person who is nominated
by a one-member/director company in general meeting to act in place
of the sole member/director of the company upon the latter's death
(ie, a reserve director). This reserve director mechanism was proposed
in response to the concerns raised by the Bills Committee during
the scrutiny of the Ordinance that there was no separate mechanism
to deal with issues arising from the death of such a company's sole
member and director pending the grant of probate or letters of administration
to the deceased estate.
The SCCLR was formed in 1984 to advise the Financial Secretary on
necessary amendments to the Companies Ordinance, the then Securities
Ordinance and the then Protection of Investors Ordinance (now consolidated
into the Securities and Futures Ordinance) to ensure that Hong Kong's
company law continues to meet the needs of the business community.
Members are drawn from a wide spectrum - lawyers, accountants, company
secretaries, businessmen, academics, and representatives of government
departments and regulatory bodies.
The SCCLR's Phase I recommendations included in the Ordinance relate
to three areas, namely, shareholders' rights, requirements regarding
directors and technical matters, as follows:
the law to give every shareholder the right to enforce the terms
of the memorandum and articles of association of the company.
the threshold for circulating shareholders' proposals to 2.5%
of the voting rights or 50 shareholders to make it easier for
shareholders to make their views known to the company.
the law to provide for the removal of directors by ordinary
resolution instead of special resolution, the latter being a
companies, repealing the right under section 8 of the Companies
Ordinance to resort to the court to annul amendments to the
objects clause in the memorandum of association of the company.
Requirements regarding Directorships
|| Making directors
vicariously liable for any tort committed by their alternates
unless otherwise stated in the company's articles of association
a statutory definition of "shadow director" in the
Companies Ordinance to include someone who can influence a majority
of the directors.
that a company is unable to give an indemnity to its directors
or officers for liabilities incurred to the company or a related
company but allowing companies to obtain insurance for directors
and officers to cover certain liabilities to the company or
a related company and other parties.
law such that the prohibition of a company from making loans
to or providing security for loans to directors is extended
to include modern forms of credit.
Permitting the formation of
a company by one person; permitting a private company to have a
minimum of one director; prohibiting the incorporation of a company
limited by guarantee with a share capital; amending Table A in the
First Schedule to the Companies Ordinance to remove the directorial
autonomy rule; defining the term "manager" to which the
definition of "officer" refers; providing a much reduced
time limit for the completion of transfers of shares of public companies;
and providing that court approval is not required where a reduction
of share capital is solely for the purpose of a redesignation of
the par value to a lower amount, subject to certain safeguards.