New Companies Ordinance commenced operation in Hong Kong

On March 3, 2013 New Companies Ordinance commenced operation in Hong Kong aimed to enhance corporate governance, facilitate business, ensure better regulation and modernize the law.

New Companies Ordinance has new provisions regarding to registration and activities of companies registered in Hong Kong. In particular there are the following changes:

1. Shares with par value are cancelled. This new provision facilitates the authorized capital formation;

2. Form of financial statements and director’s report is simplified due to the criteria of certain enterprise’s size. Therefore the most loyal requirements are set for small enterprises;

3. There must be the Director who is natural person in order to ensure the transparence of company’s activities and reporting. The companies which are incorporated before New Companies Ordinance commenced operation have six months grace period to fulfill the requirements;

4. The provision of compulsory annual general meeting is abolished. If all shareholders unanimously expressed consent, then the meeting is not held. Annual general meetings can be performed with electronic means, if all members in different places;

5. New standard requirements for a director of company are established: he must meet the requirements of certain qualification, experience and so on;

6. Finally, New Companies Ordinance abolishes the obligation of settling Article of Association. Now the Ordinance allows companies to have the Charter only.

Источник: http://www.cr.gov.hk/en/news/highlights.htm#157

These changes in Hong Kong corporate legislation are related to on the one hand with facilitating business, on the other hand with ensuring effective regulation companies’ activities. The such measures as abolition of par value shares, simplification of report’s preparation and submitting procedure, dependence the statements from company’s annual turnover, the abolition of compulsory annual general meeting and possibility of using electronic means (durante bene placito) mean that Hong Kong follows the world business community and tries “to be in trend”, to comply with the modern requirements not to miss its high financial ranking in Asia. All these measures are about to attract new investments and promote the further development of business in this jurisdiction.

However along with some simplification of the legislation new provisions will complicate the inner structure of companies. Earlier in Hong Kong companies legal entities as directors were used often (it was in compliance with Hong Kong legislation). Now companies must have at least one natural person as director of company. This kind of situation happened in the UK when all companies registered there had to change their inner structure. But the jurisdiction is still popular. I guess, the same with Hong Kong: there will temporary difficulties with “restructuring” the company’s structure, however it will not affect on company’s activity. It is worth nothing to meet the deadline (6 months starting from the Ordinance commencing operation) to comply the company’s structure with requirements of legislation (or fines will be levied). New companies should take into account the new legal requirement.