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2012.08.01 - Hong Kong: New Companies Ordinance published after six years of work.

 

Hong Kong: the authorities commenced the task of developing new corporate legislation (Companies Ordinance) in 2006. The purpose of the task was to modernise the laws of company registration in Hong Kong thus enhancing the status of Hong Kong as one of the leading international business and financial centres.

After 5 stages of public debate and numerous workshops, the proposed text of the new Companies Ordinance was completed in January 2011 and referred to the Legislative Committee for consideration. After 44 committee meetings and 120 hours of additional debate, the Committee completed its work on the new Companies Ordinance in 2012, which is reflected in the Companies Registry Circular No 5/2012 dated 12th July 2012.

The new Ordinance, which consists of more than 900 sections and 10 schedules, provides a modernised legal framework for the incorporation and operation of companies in Hong Kong.

Some aspects of the new legislation include:

  1. Abolishing par value for shares. After the new Companies Ordinance takes effect, shares of Hong Kong companies will be issued with nо par value to be in line with international trends and to provide companies with more flexibility in structuring their share capital.
  2. Each company is required now to appoint at least one director who is a natural person. This standard is to enhance transparency of and accountability for the operation of companies. A grace period of six months from the commencement date of the new legislation will be given to companies to comply with the new requirement.
  3. Simplified reporting is allowed for companies with the status of a Small Private Company. Private companies that are not large or public are also entitled to use simplified reporting, provided that at least 75% of company shareholders vote for simplified reporting and no shareholders vote against this.
  4. Simultaneously, auditors verifying the company’s statements are empowered to require information from a wider range of third parties. In particular, such requests may be addressed to the officers of subsidiary undertakings and other persons related to operations of the audited company. The law provides for material penalties for failure to provide the information requested by the auditor.

The new Companies Ordinance is expected to come into force in 2014 (following substantial changes in the electronic recording system of the Companies Registry, as well as corrections in 10 other regulatory enactments related to the Companies Ordinance).

International Overseas Services comments:

The new legislation is not only designed to improve and streamline procedures of company registration and operation, but to enhance the extent of regulation and control of incorporation and subsequent operations of companies in this jurisdiction. This is a global trend. Hong Kong is likely to gain an even higher standing in the corporate world by enacting the new legislation due to its high popularity among businessmen.

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