Hong Kong: Disclosure Of Company Name – What Else And What Next?

Last Updated: 7 August 2014
Article by Patrick C.K. Wong and Loretta W.M. Chan

Keywords: Companies Ordinance, subsidiary legislation, Hong Kong company

Introduction

On 3 March 2014, the Companies Ordinance (Cap.622) ("CO") together with 12 items of subsidiary legislation commenced operation. One item of the subsidiary legislation – Companies (Disclosure of Company Name and Liability Status) Regulation (Cap.622B) ("Regulation") – has rather unexpectedly led to some serious concerns from the market. Practitioners and compliance professionals, in particular, have been concerned about early indications from the authorities that for a Hong Kong company registered by both an English name and a Chinese name, full compliance requires it to state both names in all circumstances where its registered name is required to be displayed or disclosed under the Regulation.

In response to these concerns, the Registrar of Companies has considered the matter further and sought legal advice. On 24 July 2014, the Companies Registry ("CR") published External Circular No. 13/2014 (the "External Circular"), stating that for the purpose of compliance in ensuring that a company is properly identified, the CR considers that it is sufficient for a company with bilingual names to display or state either its English name or Chinese name. Of course, such a company may still choose to display or state both its English name and Chinese name. The External Circular further states that the CR will enforce the provisions accordingly.

This has gone a long way in addressing the concerns of compliance professionals, and the responsiveness of the CR should be applauded. However, while dealing with the issues identified by the market by way of the External Circular may be a very good interim measure, longer term we believe that the Regulation should be amended after consultation.

In this article we discuss why we consider, despite issue of the External Circular, an amendment of the Regulation is still necessary. In addition, we study a few other areas of the Regulation in respect of which refinements should preferably be made.

What led to the concern about disclosure of bilingual names?

As pointed out by the CR on several occasions, the requirement for disclosure of a company's registered name in its communication documents and transaction instruments is not a new requirement because there were similar disclosure requirements under section 93 of the old Companies Ordinance ("old CO"). Yet, people have been quick to note the difference in the wording, i.e., section 93 of the old CO only stated "its name" while the Regulation now uses "registered name", and the rationale for and implications of such difference have never been highlighted during the consultation and legislative process. One possible reason for such difference in wording is that in making reference to the UK Companies Act 2006 and the Companies (Trading Disclosures) Regulations 2008 (which uses "registered name") during the old CO rewrite exercise ("Rewrite Exercise"), the special circumstances of Hong Kong, being a place which adopts the policy of bilingualism in law, have not been fully considered. The issue of bilingual names which is unique to Hong Kong has no relevance for the UK. The replacement of "the name" by "registered name" in the Regulation has therefore resulted in confusion which is most probably an unintended result of the Rewrite Exercise.

In response to initial enquiries from practitioners on the scope of "registered name", the CR indicated that for a company with bilingual names, its full registered name consists of both its English and Chinese names and therefore they both need to be disclosed in accordance with the Regulation together. This view is apparently based on a literal interpretation of the Regulation. The Regulation defines "registered name" as "the name by which the company is registered under the Ordinance", and one reasonable interpretation is that this means both the English and Chinese names. Of course, a more purposive interpretation may well lead to the conclusion that this means no more than where the company is registered by both an English name and a Chinese name, each of these names on its own constitutes the registered name of the company.

The early indications that the CR would require both the English and the Chinese names to be stated have prompted strong reaction from companies with bilingual names since most of them had only used either the company's English name or Chinese name before the commencement of the Regulation, in the belief that this practice was in full compliance with section 93 of the old CO. And the lack of any enforcement by the CR in respect of this practice under the old regime has in a way reinforced this belief. If it is the intention of the legislature to bring about a change in the practice which is likely to affect the daily operation of companies with bilingual names, it is generally felt that this should have been highlighted during the consultation stage of the Rewrite Exercise.

While disclosing and displaying both names all the time is surely not impossible, this could be extremely burdensome for companies, taking into account that the broad definitions of "communication documents" and "transaction instruments" would capture intra-group agreements and those to be circulated by electronic means. It will also give rise to certain unforeseen practical difficulties when it comes to documents to be published and circulated outside of Hong Kong. For example, it may not be practical for a company with bilingual names to use its English name in mainland China. Similarly, it is also odd if not impractical for a company with bilingual names to use its Chinese name in countries where Chinese is not a language in general use.

Putting aside the above practical inconvenience and difficulties that may arguably be overcome, the approach to enforcing the Regulation in a way that requires both the English and the Chinese names to be stated seems to be inconsistent with the general policy of bilingualism in law in Hong Kong. This policy means that legal obligations imposed by statutes can generally be satisfied by using the English language or the Chinese language. For example, statutory filings under the CO and other statutes can be satisfied by either using English or Chinese. There are of course exceptions in specific circumstances, e.g., a prospectus in English must be accompanied by a Chinese translation and vice versa, but these are exceptions rather than the rule.

Does the External Circular suffice?

Amid the confusion in the market over the Regulation, the External Circular is a welcome move which shows the CR's responsiveness and receptiveness to market concerns. The External Circular states that the CR has sought legal advice, presumably from the Department of Justice on the question. Apparently, a more purposive interpretation of "registered name" has been found acceptable in the context of enforcing the Regulation. Hence, for compliance purposes, it seems to be safe for companies with bilingual names to rely on the External Circular as a policy statement of the regulator. These companies can now be freed from any worry that a failure to disclose both names may lead to criminal prosecution under the Regulation.

The next question is whether it is sufficient or satisfactory from the perspective of civil liabilities.

We consider that there still remain justifiable concerns about the adequacy of the External Circular as a solution in so far as civil consequences for the companies and their officers are concerned. A claim under common law that a contract is void because the other side has not stated say its Chinese name which in turn is a breach of the Regulation (but which is not considered a breach by the enforcement authority) would probably be so disreputable that the possibility of such claim being upheld in court should be minimal. We will come back to this later in the article. On the other hand, a claim for statutory remedy under section 661 is a different matter.

Section 661 of the CO (previously section 93(5) of the old CO) provides that if an officer of a company or a person acting on the company's behalf signs or authorises to be signed on behalf of the company, any bill of exchange, promissory note, endorsement, cheque or order for money or goods in which the company's name is not mentioned in the manner as required by the Regulation, that officer or person is personally liable to the holder of the bill of exchange, promissory note, cheque or order for money or goods for the amount (unless it is duly paid by the company).

Therefore, if a company with bilingual names fails to honour a cheque for whatever reasons, e.g., it is on the brink of insolvency, it would be possible for the payee to make a claim against the director who signed the cheque pursuant to section 661 on the basis that only the English name (or only the Chinese name) of the company has been stated in the cheque. Further, commentators have raised the possibility that if an officer is held liable under section 661, he may have a cause of action against the bank which supplied the pre-printed cheque forms in negligence. In these situations, the court has to determine whether the Regulation has been breached. Given that one reasonable interpretation of the requirement of the Regulation is that both names need to be stated, the director would be exposed to such a claim if such an interpretation is adopted by the court. After all, while the External Circular can serve as a statement of policy when it comes to enforcing the Regulation by the CR, it does not have the effect of changing the Regulation. Therefore, in bills of exchange, promissory notes, cheques or orders for money or goods, it is advisable for companies with bilingual names to state both their English and Chinese names.

Now let's turn to other possible civil consequences of a breach of the Regulation. The primary purpose of the Regulation is to ensure that a company will be properly identified. In the External Circular, the CR has stated that it considers that disclosing either name is sufficient for the purpose of properly identifying a company. Apart from the imposition of a fine and the civil consequence provided for in section 661, neither the Regulation nor the CO has provided for any other consequences for contravention. It is therefore unlikely to be the intended consequence that a breach of the Regulation, on its own, has the effect of rendering a transaction void or voidable. In any event, there are always express provisions to that effect in the CO when this is indeed the legislative intent1.

Despite the absence of any such provision in the CO, a mistake as to identity can be a ground for arguing that a contract is void under common law. It is possible that a company's failure to disclose both of its names in a contract (despite the External Circular) will still be raised by a contracting party who desperately wants to get away from the transaction. Although the risk is minimal, this cannot be removed entirely.

The way forward - public consultation?

As with all new legislation, no matter how thoroughly the market was consulted when the statute was formulated, there are bound to be issues which would only surface after implementation. The difficulties encountered by compliance professionals on commencement of the Regulation are a case in point. In addition to the problems discussed above which are specific to companies with bilingual names, a number of other issues regarding the Regulation have been identified. We cover some of these issues here.

It is a new requirement that a company must state its registered name on any website of the company. It is common practice for a corporate website to include profiles and information about various companies within the group. Does this mean that all companies within the group have to disclose their registered names on the website? Also, would it be acceptable if the registered name is only found after clicking several links? The Regulation is not particularly helpful on these points.

The Regulation has broadened the scope of "communication document" and "transaction instrument" by providing that a reference to a communication document or transaction instrument is a reference to it in hard copy form, electronic form or any other form. With electronic circulation becoming increasingly prevalent, the requirement to disclose the company's registered name in these electronic messages and documents (even if it has only an English or Chinese name) could be rather challenging for companies which frequently send out marketing materials to clients by way of SMS messages, emails, etc.

Last but not least, the exact meaning of "communication document" is a bit unclear as part of its definition – "official publication of the company" – has not in turn been clearly defined. To what extent would internal communication documents such as staff newsletters, notices to staff, etc., fall within the term "official publication of the company"? This is a common query raised by many companies. It would be desirable for the CR to provide some guidance on the criteria, whether by way of refining the Regulation or by issuing a FAQ.

The scale of the Rewrite Exercise was massive, taking more than seven years to complete. The public were engaged all along and were given plenty of opportunities to express their views on the draft legislation. The CR had also done a very good job in briefing the public and practitioners on the changes and initiatives introduced by the CO with a view to getting them fully prepared for the implementation. And as evidenced by the issue of the External Circular, the CR has been very quick in addressing the concerns of the market after the implementation, and their efforts are to be commended. However, given the important implications of all these changes for local companies – e.g., the Regulation does have a lot of impact on the daily operation of Hong Kong companies – it is important to collect feedback from the market on a regular basis after implementation, and conducting a public consultation in due course and suitably amending the Regulation as well as other parts of the CO (about which the market may also have some concerns) would be highly desirable.

Originally published 4 August 2014

Visit us at www.mayerbrownjsm.com

Mayer Brown is a global legal services organization comprising legal practices that are separate entities (the Mayer Brown Practices). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; Mayer Brown JSM, a Hong Kong partnership, and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2014. The Mayer Brown Practices. All rights reserved.

This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein. Please also read the JSM legal publications Disclaimer.

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
Similar Articles
Relevancy Powered by MondaqAI
Mayer Brown
 
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
 
Similar Articles
Relevancy Powered by MondaqAI
Mayer Brown
Related Articles
 
Related Video
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