After a long rewriting exercise, the new Companies Ordinance of Hong Kong was gazetted on 10 August 2012. In our previous update, New Companies Ordinance Expected to Take Effect in 2014, we highlighted some of the major purposes and initiatives of the new Companies Ordinance (CO) which are expected to take effect in 2014.
In this legal update we focus on the new provisions in the CO that could impact the financing related transactions of our clients. The key points to note are:
Improvements to Registration of Charges:
What new items must now be registered?
- A charge on an aircraft or any share in an aircraft
- A charge on the due but unpaid instalment of the issue price of shares
What no longer needs to be registered?
- A shipowner's lien on the subfreights for amounts due under a charter
- A charge which secures an issue of debentures
- A charge over a deposit or bank account
Documentation and timing requirements:
- A certified copy of the charge (and the associated release) must be registered with the Registrar of Companies together with a statement of particulars
- The registration period has been shortened to one month
Consequences of failing to register:
- Lenders now have an option to accelerate the secured amount (it is no longer automatic)
Relaxation of Financial Assistance provisions:
In addition to exceptions carried across from the old Companies Ordinance, all types of companies (whether listed or unlisted) can provide financial assistance to another party to acquire the company's own shares or the shares of its holding company subject to:
- satisfying a solvency test; and
- obtaining requisite board and/or shareholder approvals (see "Allowing provision of financial assistance to acquire shares" in New Companies Ordinance Expected to Take Effect in 2014 for specific approval details)