The Hong Kong government will this week ask legislators to approve funds for a major overhaul of the territory's Companies Ordinance, in what promises to be the most substantial law reform exercise in its history, according to the South China Morning Post.
The reform is expected to be carried out in the next five years, and will cost an estimated HK$156 million (US$20.1 million). This money will go towards the funding the cost of creating three directorate-level posts and an external legal consultant, although Companies Registrar Gordon Jones believes that most of the work will be conducted "in house".
Based on British law dating back to the 19th century, the ordinance has until now been amended on a piecemeal basis, and it is a widely held belief that Hong Kong's company laws have become outmoded compared to other financial jurisdictions. According to Mr Jones, the only way in which future corporate governance reforms will be possible will be through a complete re-write of the laws.
"We've got to the stage where we really can't tackle the remaining [corporate governance] items in piecemeal reform," Mr Jones stated.
Hong Kong has previously reviewed the companies statute, but a report released in 1997 offered only general principles for reform, rather than comprehensive nuts and bolts proposals.
Mr Jones stated that work to reform the ordinance will begin next year. A white paper will be released for consultation in mid-2009, and the SMCP reported that this will be split into three main areas: accountancy, auditing provisions and capital maintenance charges; company incorporation, investigation and offences; and operational provisions such as shareholder remedies.
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