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The first phase public consultation on the draft provisions of the Companies Bill (CB) was launched by the Government on December 17, 2009. Comments and submissions could be sent to the Companies Bill Team, Financial Services and the Treasury Bureau on or before March 16, 2010.
The three-month consultation is part of the Companies Ordinance rewrite exercise. As the draft CB is fairly lengthy, the public consultation will be conducted in two phases.
The first phase covering 10 parts or about half of the CB will mainly deal with corporate governance matters. The second phase consultation covering the other half of the CB is scheduled to be launched in March 2010.
The key legislative changes in the CB are summarised below:
Enhancing Corporate Governance
To enhance transparency and accountability of companies and their operations, the draft CB suggested to:
Ø codify the standard of directors’ duty of care, skill and diligence;
Ø restrict the appointment of corporate directors;
Ø improve disclosure of company information by requiring public companies and larger private companies to furnish more analytical and forward-looking business review as part of the directors’ report;
Ø strengthen auditors’ rights to obtain information for performing their duties;
Ø enhance shareholders’ engagement in the decision-making process and facilitate their participation through the use of information technology;
Ø foster shareholder protection by strengthening rules on directors’ self-dealing and connected transactions, providing for multiple derivative actions and extending the scope of the unfair prejudice remedy.
Ensuring Better Regulations
To ensure that the regulatory regime is effective and business-friendly, the draft CB suggested to:
Ø introduce electronic incorporation and expedited company name approval process to enable companies to be incorporated within one day;
Ø empower the Registrar of Companies (“Registrar”) to tackle “shadow companies”;
Ø enhance the Registrar’s powers to help ensure that the information on the public register is accurate and up-to-date and to obtain necessary information for enforcement of the law;
Ø streamline those regulations which are outdated and no longer serve any purpose (e.g. removing the share qualification requirement for directors);
Ø streamline and update the regime of registration of charges;
Ø improve the enforcement regime by updating the provisions on company investigations, offences and penalties.
Business Facilitation
To save compliance and business costs, particularly of SMEs, the draft CB suggested to:
Ø allow more companies to take advantage of simplified accounting and reporting requirements so as to save their compliance and business costs;
Ø allow companies to dispense with AGMs by unanimous members’ consent;
Ø introduce cheaper and less time-consuming court-free procedures for the reduction of share capital and intra-group amalgamation;
Ø streamline the buy-back rules for all companies subject to a solvency test.
Modernising the Law
To modernise the law to meet the needs of modern business and to make it more readable, the draft CB suggested to:
Ø abolish the par value regime and to adopt a mandatory system of no-par for all companies with a share capital;
Ø remove the requirement for authorised capital;
Ø enable scripless holding and trading of shares and debentures;
Ø allow electronic communications between a company and its members;
Ø modernise the language and rearrange the sequence of the provisions in a more logical and user-friendly order.
Special Issues for Consultation
The draft CB also seek views on the following issues:
Ø whether the “headcount test” for approving a scheme of arrangement should be retained or abolished?
Ø whether residential addresses of directors and identification numbers of directors and company secretaries should continue to be disclosed on public register?
Ø whether private companies associated with a listed or public company should be subject to more stringent regulations similar to public companies for the purposes of the provisions on fair dealings by directors?
Ø whether the existing right for shareholders to take common law derivative action should be abolished after the introduction of multiple derivative actions (i.e. allowing a member of a related company to take a statutory derivative action)?
Disclaimer:
The publication contains information in summary form and is therefore intended for general guidance only. This publication is not intended as legal, accounting or other professional advice and should not be relied upon as such. If legal, accounting or other professional advice or expert assistance is required, the services of a competent professional should be sought. Neither Reanda Lau & Au Yeung Limited nor any related entity shall have any liability to any person or entity that relies on the information contained in this publication.
For more details, please refer to the websites of the Companies Registry and CO Rewrite:
http://www.cr.gov.hk/en/publications/press20091217.htm
http://www.cr.gov.hk/en/publications/docs/122009_DraftConsultation_highlight-e.pdf
