Preliminary of the new Companies Ordinance (“the new CO”) is an introductory part which sets out the title of the new CO, its initiation, its interpretation and definitions of various terms and expressions which are used throughout the new CO, which include “responsible person”, “subsidiary”, “parent undertaking” and “subsidiary undertaking”, and an elaborate explanation of the types of Hong Kong company establishments that can be formed under the new CO.
Objectives and Amendments
It contains the following initiatives to improve regulation and modernize the law:
Help investors to open a company in HK, replacing the formulation of “officer who is in default” with “responsible person” in order to strengthen the enforcement regime
Streamlining the types of Hong Kong company establishments which can be formed
Aside from the above changes, it also provides for the application of the new CO to the existing companies and other types of companies. It also replaces the formulation of “officer who is in default” with “responsible person” to fortify the enforcement regime. A number of offence provisions not only punish a company but also the officers of the company who are in default. The formulation of “officer who is in default” is defined as an officer or a shadow director of a company who “knowingly and wilfully authorizes or permits the default, refusal or contravention”. However, the “knowingly and wilfully” mark allows prosecution against officers difficult. n the new CO, a new formulation of “responsible person” has been adopted to replace “an officer who is in default”, which aims at enhancing enforcement by extending the prospect to cover reckless acts or the omissions of officers.
A “Responsible Person”
A “responsible person” of a company or non-Hong Kong company has been defined as an officer or shadow director of the company or non-Hong Kong company who “authorizes or allows, or takes part in, the contravention or failure”. The scope of a “responsible person” and defines an officer or shadow director of a body corporate that is an officer or shadow director of a company or non-Hong Kong company. Resultantly, an officer or shadow director of the body corporate who caused the default will also be considered a “responsible person” of the company. Streamlining the types of companies which can be formed.
Types of Companies
Eight different types of companies can be formed, in theory, according to their capacity to raise funds from outside sources, the members’ ability to transfer their shares freely and the methods and techniques by which the liability of members is determined. To ease the types of companies that can be formed, the following changes have made: unlimited companies without a share capital have been declared obsolete and are abolished because it is highly uncertain that such companies will be formed in the future and there is currently no such company on the Companies Registry’s register; and companies limited by guarantee without a share capital will become a separate category of companies. They are generally treated like public companies with appropriate modifications. For example all guarantee companies, like public companies, will be required to file audited accounts; and non-private companies are explicitly referred to as “public companies” which are defined as companies other than private companies or guarantee companies.
The types of companies which may be formed under the new Companies Ordinance are reduced to five. Sections 7 to 12 provide for the definitions while section 66 in Part 3 sifts out the types of companies that may be formed under the new Companies Ordinance.
“Limited Company”
11. Sections 7 and 10 mention that a limited company is a company limited by shares or by guarantee, and an unlimited company is a company with no limit on the liability of its members. Section 8 mentions that a company is a company which is limited by shares if the liability of its members is limited by the articles of a company articles to any amount unpaid on the members’ shares.
Private and Public Companies
12. Sections 11 and 12 supplement the definitions of private and public companies. The characteristics required of a private company are the same as those presently provided under section 29 of Cap. 32 (i.e. a company is a private company if its articles limit the members’ rights to transfer shares, restrict the number of members to 50, and forbid any invitation to the public to subscribe for any shares or debentures.) A company is entitled to be called a public company if it is not a private company or a company limited by guarantee.
Company Limited by Guarantee
Section 9(1) mentions that a company is entitled to be called a company limited by guarantee if it does not have a share capital and if its members’ liability is limited by the company’s articles to the amount that the members undertake to contribute to the assets of the company in case the company is being wound up. Section 9(2) clarifies the fact that a company which is limited by guarantee and which has a share capital formed under Cap. 32 before 13 February 2004 (i.e. the date when such type of companies were abolished, will be regarded as a guarantee company under the new CO even if it has a share capital. Application of the New Companies Ordinance to the existing companies and other types of companies. Key provisions in the new CO.
Application of CO on Companies
The new Companies Ordinance applies to an existing company (i.e. a company formed and registered under a former Companies Ordinance) and to an unlimited company registered as a limited company which is pursuing Cap. 32 or section 58 of Companies Ordinance 1911. The new Companies Ordinance is also applicable to companies which are registered but not formed under a former Companies Ordinance.
