The new Companies Ordinance, Chapter 622 of the Laws of Hong
Kong, commenced operation on 3rd March 2014 and applies
to every registered company.
The new law is intended to enhance corporate governance, ensure
better regulation, facilitate business and modernize the Law.
Following is a brief overview of some of the key changes.
1. Adoption of Articles of Association (AA) instead of
Memorandum of Association (MA)
The requirement for a company to have a MA as a constitutional
document is abolished. New companies can be registered by
submitting a new incorporation form and a copy of the company's
Articles of Association ("AA").
For companies already registered under Cap. 32, the current
provisions in their MA will be regarded as provisions of their
Some provisions in existing Articles of Association may become
void due to changes in the new ordinance. These are detailed
All shares issued, before, on and after the commencement date
of the new ordinance shall have no par value.
The law will deem all shares issued before the abolition to
have no par value (Section 135 of the new ordinance). That is why
there is no conversion process required from companies unless
individual companies would like to have some specific changes to
their AA having regard to their circumstances
3. New requirements for directors
Every private company must have at least one director who is a
natural person. That means, if a corporation is the only director
in the company, then, under the new ordinance, the company will be
considered as not complying with the Law.
There is a grace period of 6 months after the commencement date
of the new ordinance in order to give companies time to comply with
the new requirements.
If a company fails to appoint a natural person as a director,
the company and every responsible person commits an offence and
each is liable to a fine of HKD 100,000 and a further fine of HKD
2,000 for each day for a continuing offence.
4. New Standard for Directors 'Duty of Care'
The new ordinance sets out a new statutory standard by which
directors must exercise reasonable care, skill and diligence in
their work. It contains both objective and subjective elements. In
carrying out their duties, a director must demonstrate:-
the general knowledge, skill and experience that may be
reasonably expected of a person who is carrying out the functions
of the director in relation to the company (objective test);
the general knowledge, skill and experience that the director
actually has (subjective test).
The new standard of care will also apply to shadow directors,
meaning a person who is not officially a director of the company
but gives instructions or directions to the existing
5. Simplified Reporting Requirements
New provisions have been incorporated to facilitate more small
and medium enterprises to prepare simplified financial and
A private company that qualifies as a "small private
company" and a holding company of a group of companies that
qualifies as a "group of small private companies" will
qualify for simplified reporting.
The full text of the Companies Ordinance is available at
Companies Registry's Website. (www.cr.gov.hk)
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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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Failure to comply with company law in Hong Kong can be very expensive for businesses. In a highly dynamic business and regulatory environment such as Hong Kong, it is challenging for business owners to remain fully aware of the latest legal requirements.
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