HK Releases Final Companies Bill Consultation Results
Thursday, October 28, 2010
The conclusions of the second and final phase of consultation on Hong Kong’s
draft Companies Bill, which began in May and finished in August this year, have
Hong Kong’s government launched a major and comprehensive exercise to
rewrite the Companies Ordinance (CO) in mid-2006. By updating and modernizing
the CO, it aims to make it more user-friendly and facilitate the conduct of
business to enhance Hong Kong's competitiveness and attractiveness as a major
international business and financial centre.
As part of its conclusions from the second consultation, the government will
require a solvency test and compliance with specified procedures for financial
assistance to be given by a company to a third party for acquisition of its
own shares. This arrangement will be applicable to both private and public companies.
Other proposals to be adopted include enhancing the investigatory powers of
an inspector appointed by the Financial Secretary to investigate into the affairs
of a company by requiring a person to preserve records and documents; and providing
better safeguards for confidentiality of information and protection of informers
in relation to the investigations.
The Registrar of Companies will also be empowered to obtain documents and explanations
for ascertaining whether there is misconduct relating to the provision of false
or misleading information to the Companies Registry; and a company will be required
to explain upon request its refusal to register a transfer of shares upon request.
It was said that, with respect to the proposals relating to accounts and audit,
which drew a considerable attention from respondents, the government considered those comments in
detail and fine-tuned its proposals where appropriate.
For example, taking into account the views of the accounting profession that
simplified reporting requirements might not be suitable for larger companies
with more complex accounts, it is now proposed that the the option for large private
companies to prepare simplified financial reports be removed, even if they have members'
Suggestions for the preparation of separate directors' remuneration reports
for listed and unlisted companies incorporated in Hong Kong will not be adopted,
considering many respondents' reservations. However, the Securities & Futures
Commission and Hong Kong Exchanges & Clearing have been invited by the government
to maintain a continuous review of the compliance and effectiveness of the listing
rules on the disclosure of directors' remuneration.
It was confirmed that all the comments received have been carefully considered,
and the Standing Committee on Company Law Reform has also been consulted. A
total of 57 submissions were received during the three-month consultation.
The government is now in the process of finalizing the new Companies Bill,
taking into account the two phases of consultation and other technical and drafting
comments. Its introduction into the Legislative Council is planned for early