On February 2, the Hong Kong Special Administrative Region Government released the third public consultation conclusions on the Companies Ordinance rewrite covering share capital, capital maintenance structure and statutory amalgamation procedure.
Forty submissions were received during the three-month consultation, which ended September 30.
After consultation with the Standing Committee on Company Law Reform (SCCLR) of all the public feedback, a number of recommendations will be adopted for a draft Companies Bill.
A key recommendation is the migration from the current par value system to a mandatory no-par value share structure. Under the existing regime, companies having a share capital are required to have a par, or nominal value, ascribed to their shares. Respondents generally agree the concept of par is no longer useful and might even be misleading.
“In addition to providing a statutory deeming provision to facilitate the migration to no par, we will allow a period of 24 months for companies to review their arrangements before migration,” a Financial Services and the Treasury Bureau spokesman said.
Another recommendation is to remove the requirement for authorized capital — i.e., the maximum amount a company is permitted to raise by issuing shares. This will simplify companies’ process of raising capital. Nevertheless, a company, if it so wishes, may specify the maximum number of shares it can issue in its Articles of Association.
Other recommendations involve streamlining and rationalizing some of the complex capital maintenance rules in the Companies Ordinance, including those on reduction of capital, purchase by a company of its own shares, financial assistance by a company to another party for the acquisition of its own shares and introducing a court-free statutory amalgamation procedure for the amalgamation of wholly owned, intragroup companies.
The reforms aim at simplifying the law and reducing business costs, while at the same time protecting the interests of creditors and minority shareholders.
A draft Companies Bill incorporating the proposals is being prepared with an aim of consulting the public in the fourth quarter of this year. The bill is expected to be introduced to the Legislative Council in 2010.
The consultation conclusions and the compendium of submissions are available on the Web site: [www.fstb.gov.hk/fsb/co_rewrite] and the Companies Registry’s Web site: [www.cr.gov.hk/].
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