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 been released.
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' approval.
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 next year.