On July 12 2012, the Legislative Council of Hong Kong passed a new Companies Ordinance, revamping the existing Companies Ordinance, which was last updated nearly 20 years ago in 1984, and strengthening the city’s status as an attractive hub for business.
The new Ordinance, which is expected to come into effect on March 3 this year, is one of the largest pieces of legislation in Hong Kong, comprising 921 sections and 11 schedules. It provides the legal framework for the formation and operation of companies in Hong Kong, and benchmarks the island territory against jurisdictions such as the UK, Australia and Singapore.
The new Ordinance aims to put in place better regulations, support small- and medium-sized enterprises, facilitate business, and improve corporate governance by increasing the accountability of directors and improving shareholder engagement in the decision-making process. It also hopes to modernise the law by removing certain requirements and documents, and retiring several obsolete concepts.
The changes to the new Ordinance are extensive, and affect the type, formation, administration and reregistration of companies, the Registrar’s functions and powers, share capital and transactions in relation to share capital, financial reporting and analysis, directors’ duties and responsibilities, communication to and between companies, and investigations and enquiries. Many of the changes will also affect the interests of businesses and individuals who have dealings with companies, such as members and creditors.
The new Ordinance covers all the areas regulated under the existing Ordinance. However, the provisions regarding winding up and insolvency, prospectuses and the disqualification of directors will remain in the current Ordinance, which will be renamed the Companies (Winding up and Miscellaneous Provisions) Ordinance (Cap.32). The changes will take effect on March 3 when the new Companies Ordinance is enacted, and all the provisions in the old Ordinance relating to existing companies will be repealed.
According to the Hong Kong government, the provisions relating to winding up and insolvency will be dealt with under a separate Modernisation of Corporate Insolvency Law exercise. Any proposed legislation for winding up or corporate rescue is expected to be introduced to the Legislative Council of Hong Kong before June 2014 and enacted before July 2016. The prospectus provisions will eventually be removed from Cap.32 and added to the Securities and Futures Ordinance.
For further information, and to hear from the key individuals involved in the drafting and implementation of this new legislation, register for ALB’s conference on Hong Kong’s Companies Ordinance. The conference, which is limited to 50 attendees, will be held on March 5, 2014, at the Excelsior Hotel in Hong Kong.
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