With the aim to further enhancing Hong Kong status as a major international business and financial center, the Hong Kong Legislative Council has passed the new Companies Ordinance (the “Ordinance”) on 12 July 2012. The new Ordinance is expected to come into effect in the first quarter of 2014. The new Ordinance consists of more than 900 sections, 11 schedules and 12 items of subsidiary legislation. The major reforms as following:  

Modernization of the law

  • Abolition of memorandum of association for all companies
  • Adoption of a mandatory system of no-par value of shares for all companies with a share capital
  • Removal of the power of companies to issue share warrants to bearers

Enhancing corporate governance

  • Requirement of having at least one natural person as director for all private companies
  • Clarification on the standard of directors’ duty of care, skill and diligence
  • Requirement on disinterested members’ approval for various prohibited transactions and replacing the headcount test for specified privatisation and takeover schemes
  • Lowering the threshold for members to demand poll

Ensuring better regulation

  •  Empowerment of the Registrar to give directions to a company to appoint directors and company secretaries
  • Lowering the threshold for prosecuting officers for a company’s contravention of the Ordinance and extending it to cover reckless acts
  • Modification of registration of charges regime
  • Empowerment of the Registrar to compound specified offences to encourage due compliance and optimise the use of judicial resources

Facilitating business operations

  • Introduction of new exceptions to prohibitions on loans and similar transactions in favor of directors and connected entities
  • Introduction of new alternative court-free procedures for reducing capital based on a solvency test
  • Allowing all companies to buy back shares out of capital and to provide financial assistance for acquisition of own shares, subject to a solvency test
  • Allowing eligible small private companies to prepare simplified financial and directors’ reports
  • Relaxation of the requirement for a company having an official seal for use abroad
  • Dispensing with annual general meeting by unanimous shareholders’ consent