Published on 27.01.2014
Hong Kong - New Companies Ordinance (NCO)
Since mid-2006 a task force of Hong Kong legislators worked on the re-writing of the existing Companies Ordinance. Its aim was the modernization of Hong Kong's company law and further enhancing Hong Kong's status as a major international business and financial centre. On 12 July 2012, the Companies Bill was passed by Legislative Council.
The new Companies Ordinance provides a modernised legal framework for the incorporation and operation of companies in Hong Kong. It aims to achieve four main objectives, namely, to enhance corporate governance, ensure better regulation, facilitate business and modernise the law. We give a brief summary of major changes which affect the interests of those parties who have dealings with companies in Hong Kong.
Abolition of Memorandum of Association
Under the existing provisions a company must have both a Memorandum of Association and Articles of Association.
Under the new provision the sole constitutional document of a company will be the Articles of Association.
- This changes relatively little in effect, but it is advised to update the current constitutional foundation of the company to be in accordance with the New Ordinance.
Currently it is permissible to instate a corporate body as director of a company.
In the future any company will need at least one natural person acting as director.
- Companies with a sole corporate director will need to appoint a natural person as director as well.
Personal Data Protection
The Companies Registry requires directors and individual shareholders to list their identification document numbers as well as their residential addresses. The Companies Registry makes these records available to the public.
To protect shareholder’s and director’s privacy the last few digits of the ID card will be masked to the public. Only correspondence addresses will be shown in the Companies Regsitry.
- No action necessary.
Approval for Long-term Service Contracts
Persons who enter long-term service contracts with the companies for which they serve as director will require the approval of the members.
- It will be necessary to prepare Minutes of Meetings of the Members when entering such a contract.
Under the new ordinance members and directors can request any resolution to be passed in writing.
Demanding of Polls
The threshold for the percent of the members required to initiate a poll is lowered from 10% to 5%.
Simplified Financial Reports
Depending on the size of the company (number of employees, revenue and assets) small companies will be allowed to file simplified financial and director reports to the Companies Registry.
Additional Requirements for De-registration
Companies will in the future also need to show that they are not a party to legal proceedings and neither them nor their subsidiaries have any immovable property in Hong Kong.
Abolition of Par Value of Shares
Shares will in the future no longer have a par value. A company will in the future also not be required to have authorized capital.
What to do:
Adopt the new Articles of Association which incorporate the changes to the Companies Ordinance and create one single constitutional document for the company.
Additionally the par value should be abolished.