Views Sought On Hong Kong Companies Ordinance Rewrite

by Mary Swire, Tax-News.com, Hong Kong

03 April 2008

The Hong Kong government has launched a three-month consultation on the Companies Ordinance review, covering measures to improve provisions on company names, directors' duties, corporate directorship and registration of charges.

The consultation, initiated by the the Financial Services & the Treasury Bureau, is the second of a series in the Companies Ordinance rewrite exercise.

On company names, the bureau has proposed to consider empowering the Registrar of Companies to act on a court order to direct a defendant company to change its infringing name, and to substitute the non-compliant defendant company's name with its registration number to tackle possible abuse of the company name registration regime by "shadow companies".

The consultation paper also suggests considering whether the directors' general duties - which are mainly found in the case law - should be codified to make them more accessible to the public.

If so, the consultation asks whether the UK's approach, which imposes a duty on directors to promote the success of the company having regard to a wider list of factors, such as the interests of employees, and the impact of the company's operations on the community and the environment, should be followed.

The Bureau has proposed abolishing corporate directorship altogether, subject to a reasonable grace period, or following the UK approach in this area.

The document also recommends updating the list of registerable charges, improving the procedure for registration of charges by making the instrument of charge available in full on the public register, and shortening the registration period from five weeks to 21 days, to reduce the period whereby the charge is "invisible" to third parties.

In addition, the government is seeking views on whether there is any need to introduce an administrative mechanism for late registration of charges, to replace the current system of applying to the court.

Another consultation on subjects such as share capital, capital maintenance rules and statutory amalgamation procedures will be conducted in mid-2008, the Bureau revealed.

The views collected by the consultations will be considered for incorporation into a White Bill to be issued for public consultation in mid-2009. The new Companies Bill is tentatively scheduled to be introduced into the Legislative Council in the third quarter of 2010.

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