Hong Kong: Companies (Amendment) Ordinance 2003*

Last Updated: 29 March 2004
Article by Joseph Kwan

*The Companies (Amendment) Ordinance 2003 is different from the Companies (Amendment) Bill 2003 (which has not been enacted as law). The Companies (Amendment) Bill 2003, which was first published in the Gazette on 13 June 2003, seeks to amend the provisions of the Companies Ordinance regarding prospectuses, group accounts, registration system for overseas companies and shareholders’ remedies.

The Companies (Amendment) Ordinance 2003, which comes into operation on 13 February 2004, introduces significant changes to the Companies Ordinance. Below is a summary of some of the significant changes.

Reduction of Share Capital

Court’s confirmation for reducing solely the par value of the share capital of a company is no longer required provided that all the following conditions are satisfied:

  • the company has only one class of shares;
  • the issued shares are fully paid up and the amount of the net assets of the company is not less than its paid-up share capital;
  • the reduction applies to and affects all shares equally;
  • the amount arising from the reduction is not less than an amount representing the difference between the amount of the company’s fully paid-up share capital immediately before the reduction and the amount of its fully paid-up share capital immediately after the reduction; and
  • the amount arising from the reduction is credited to the share premium account of the company.

Right to Cancel Resolutions for Alteration in Memorandum and Articles of Association

Members of public companies holding not less than 5% in the nominal value of the issued shares can no longer apply to the Court to cancel any special resolution for the alteration of the objects clause in the Memorandum.

Transfer of Shares

The time limit for the completion of a transfer of shares by a public company has been changed from 2 months to 10 business days.

Threshold for Shareholders’ Proposals

The threshold for shareholders’ proposal has been reduced to 2.5% of the voting rights or 50 members holding shares on which there has been paid up an average sum of not less than HK$2,000 per person.

Loans to Directors

The Companies Ordinance now extends the prohibition against a company making a loan to a director to cover more modern forms of credit, such as the supply of goods under a hire-purchase agreement or conditional sale agreement and the disposal of goods for which payment is to be deferred.

Formation of a "One-Man Company"

The Companies Ordinance now permits the formation of a one-member company and allows a private company to have one single director. The sole member present in person or by proxy constitutes a quorum for a meeting of the company and a written record shall be kept of any decision taken in such meetings. The minimum number of directors for a pubic company (i.e. at least 2 directors) remains unchanged.

Shadow Director

"Shadow director" is now defined as the person in accordance with whose directions or instructions the directors or a majority of the directors are accustomed to act.

Alternate Director

Directors are now vicariously liable for the wrongdoings of their alternates.

Removal of Director

It is much easier to remove a director from a company under the new regime because he may now be removed by an ordinary resolution (despite anything contained in the Memorandum or Articles) provided that special notice is duly served for the meeting.

Indemnities

Companies are now permitted to purchase liability insurance for directors and auditors except in certain specified circumstances.

Directorial Autonomy Rule

The directorial autonomy rule is removed under new regulation 82 of Part I of Table A. The directors’ power to manage the business and affairs of the company is now subject to the provisions of the Ordinance, the Memorandum and Articles of Association and any directions given by special resolution.

Communication in Electronic Form

Except for the appointment of a proxy, communication between the company, its directors or members can be given in the form of an electronic record if the person to whom the communication is given consents to it being given to him in that form.

Update on Enforcement under the SFO

The Securities and Futures Ordinance has come into operation on 1 April 2003. The SFC has indicated on a number of occasions that the priority in its enforcement work in the coming years is to tackle corporate misgovernance. With the expanded scope of the investigation powers of the SFC into listed companies, the SFC indicates that it anticipates conducting considerably more investigations of listed companies.

Enforcement Focus on Part XV of the SFO

The SFO has introduced the 5% notifiable threshold for disclosure and prescribed a more timely notification obligation on the shareholders of listed companies. The SFC has indicated that, from 1 July 2003, its prosecution efforts on Part XV of the SFO will focus on, in order of priority, the following:

  • Non-disclosure of interests;
  • False or misleading disclosure;
  • Late disclosure (which might amount to non-disclosure in certain circumstances).

Failure to Assist SFC Investigation

The SFC has said that persons who are reasonably believed or suspected by an SFC investigator to have relevant information should give all reasonable assistance to the investigator. The SFC also indicates that it will not tolerate deliberate attempts to thwart its investigations and will not hesitate to prosecute offenders in this regard.

  • The SFC has successfully prosecuted a dealer’s representative for failing to give all the assistance which he was reasonably able to give to the investigator in connection with the trades conducted by his clients. The dealer’s representative entered a guilty plea. The magistrate fined the dealer’s representative HK$10,000 and ordered him to pay the investigation costs of HK$17,699 to the SFC. In passing the sentence, the magistrate commented that the offence was not a minor one as it carries a maximum penalty of HK$100,000 and 6 months’ imprisonment. This principle applies equally to other people such as company directors who are asked to assist the SFC in its investigations.

About Deacons

Deacons has a strong team of lawyers who regularly advise listed company clients and their group companies on corporate commercial, regulatory and contentious matters. For further information, please contact the following partners in our Hong Kong office:

Whilst every effort has been made to ensure the accuracy of this publication, it is for general guidance only and should not be treated as a substitute for specific advice.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions