It has been one year since the new Companies Ordinance Cap 622 came into effect in Hong Kong. Our local Director of Corporate Secretarial examines its impact in facilitating businesses in the city.
Implemented on 3 March 2014, the new Companies Ordinance (CO) - consisting of 921 sections and 11 schedules - aims to modernise legal framework governing the incorporation and operation of companies in Hong Kong. Besides that, it is also intended to eliminate bureaucracy that hinders the ease of doing business and reinforce HK's role as an international financial and commercial centre.
The new CO contains a host of new initiatives to facilitate business and cater for the needs of the small and medium enterprises (SMEs). It has simplified the procedures for starting a business by removing the memorandum of association, and the mandatory keeping and use of common seal. More SMEs can now prepare simplified financial statements and directors' reports provided that they can satisfy the prescribed qualifications.
Certain companies may dispense with the holding of annual general meetings while general meeting could be held at more than one location through electronic technology. Court-free options were provided to companies that wish to engage in capital reduction exercises or amalgamation of wholly owned intra-group companies in Hong Kong.
One year after the new CO has been implemented; Hong Kong recorded the second highest number of incorporation in five years. Up to 167,280 of local companies have registered with the Companies Registry in 2014. The figure is slightly lower than those achieved in 2013 (174,031) and the reason behind is likely due to the waiver of HK$2,000 for those business registrations during the period from 1 April 2013 to 31 March 2014.
The Companies Registry indicated to us that the Occupy Central Movement appeared not having affected the number of local incorporations. The figures in September, October and November 2014 (during the Movement) remained rather steady when compared to other months in 2014 (except March 2014 where there was an influx of new company incorporation applications). In 2014, US$111bn worth of FDI flowed into the city (46% more than 2013). This made Hong Kong the second most invested economy in the world (only behind China) by over taking the USA and Singapore.
The Registrar of Companies shared in one of her articles that the following statistics from 3 March to end December 2014 may testify the achievement of the initiatives to facilitate business:
- 127 applications for restoration of companies to the Companies Register used the administrative restoration procedure, which represented about 44.4% of the total number of applications for company restoration
- 92 out of 102 companies which reduced their capital used the alternative court free procedure. This also represented a six-fold increase in the total number of companies which have reduced their capital, from 14 in 2013.
- 10 groups of companies have undergone amalgamation through the new court free procedure.
Given new powers granted to the Registrar of Companies under the new CO, the Companies Registry has set up a new Inspection Unit in its Enforcement Section to conduct random checks and site visits of registered office addresses of companies. More resources will also be devoted to step up enforcement efforts for non-filing offences.
Heralding the first anniversary of the new CO, the Companies Registry launched a full scale electronic filing service effective 3 March 2015 to cover 84 specified forms for filing with the Registry. The submission of specific forms can be done through the e-Registry portal instead of the traditional paper submission route. This facilitates easier reporting while delivering efficiency for companies and disclosure of information to the public.
The Companies Registry has conducted a comprehensive multi-channels publicity programme to promote public awareness of the major changes in the new CO. Resources were also allocated to attend questions raised by the public. The Registry will continue to monitor any issues arising from the implementation of the new CO and enhance the services delivered at their e-platforms.
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