The Hong Kong Companies Legislation is on the verge of a major
overhaul. The Hong Kong Companies Ordinance was last substantially
reviewed and amended in 1984 and is largely based on the UK
Companies Act 1948 and some of its subsequent reforms, such as
those in the UK Companies Act 1976. A thorough review of the
legislation is now overdue and it needs to be urgently updated and
A comprehensive exercise to rewrite the Ordinance was launched
by the Hong Kong government in mid-2006 and since then, three
public consultations in 2007 and 2008 had been conducted to gauge
views on a number of complex subjects. The views gathered in the
consultations had been incorporated into a draft Companies Bill
which was introduced in December 2009.
The legislative changes that are proposed in the draft Companies
Bill seek to enhance corporate governance and ensure that the
regulatory regime is more effective and business-friendly. The
changes will also facilitate businesses by simplifying accounting
and reporting requirements and modernize the law by abolishing old
concepts that no longer meet the needs of modern business. The
government has embarked on a public consultation on the draft
Due to the extensive nature of the rewrite exercise, the
consultation on the Companies Bill is being conducted in phases.
The first phase tackles the core company provisions which affect
corporate governance comprising roughly half of the draft Companies
Bill. The second phase will review the provisions relating to
winding-up and insolvency and this will be launched after the
Companies Bill has been enacted by the Legislative Council. A
separate review will be conducted by the Securities and Futures
Commission on the provisions relating to prospectus.
As part of the first phase, a round of public consultation was
conducted from 17 December 2009 to 16 March 2010 to seek views on
certain proposed reforms in the Companies Bill. Feedback was sought
on whether, amongst others, the "headcount test" for
approving a scheme of arrangement and the common law derivative
action should be abolished.
A further round of public consultation was recently launched in
May 2010 which will last until 6 August 2010. In this round of
consultation, views are invited on the following issues :-
whether the provisions on the financial assistance by a company
for the purpose of acquiring its own shares should be streamlined
or should be abolished for private companies;
whether the requirement for all listed companies and unlisted
companies where members holding not less than 5% of the total
voting rights have so requested to prepare separate director's
remuneration reports be dropped;
whether the provisions relating to the investigation of a
company's affairs and enquiries into a company's affairs
that may be exercised by the Financial Secretary be enhanced and
the investigative powers of the Registrar to obtain documents,
records and information be strengthened; and
whether a company should give reasons to explain its refusal to
register a transfer of shares.
The draft Companies Bill will be revised taking into
consideration comments received during these consultations and the
Companies Bill is expected to be introduced for legislative debate
by the end of 2010.
When implemented, the reforms will place Hong Kong on par with
comparable jurisdictions such as the United Kingdom, Australia and
Singapore and complement Hong Kong's role as an international
business and financial centre.
Experienced lawyers in our corporate practice will be happy to
assist you with any queries you may have on proposed legislative
changes to the Companies Ordinance in Hong Kong or on any other
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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