Hong Kong Companies Ordinance
Today marks the commencement date of the new Companies Ordinance (Cap. 622) (“the Ordinance”) in Hong Kong.
Various myths and misconceptions have been raised about the way in which provisions of the new Ordinance will operate and the purpose of this article is to dispel these and to clarify certain issues on the Ordinance
1. “You must amend your articles before the commencement date”
A common misconception is that existing Hong Kong companies must amend their articles on or before the commencement date to meet the requirements under the new regime. This is not true. In many cases, companies will not have to take action in order for mere compliance. For example, since the memorandum has now been abolished, any condition contained in a company’s memorandum will automatically be moved into the company’s articles of association. Further, any references to par value and authorised share capital will automatically be regarded as deleted.
This does not mean, however, that your company’s articles do not contain provisions which may conflict with the Ordinance. We do suggest to our corporate clients that perhaps this may be a convenient time to review their articles to determine whether they accord with their business model or whether any updates are required.
2. “It is unlawful to have a corporate director”
Another common myth is that it is now unlawful to have a corporate director for a Hong Kong company. This is also untrue. Under the new Ordinance, Hong Kong companies are now required to have at least one natural person appointed as a director. Existing companies and companies incorporated under the new regime will be allowed to maintain or appoint a (or several) companies to act as directors in addition to the natural person minimum requirement. Existing companies are not required to remove their nominee directors from this position. However, if these existing companies currently do not have at least one natural person sitting as a director within the company, one must be appointed within the 6 month grace period (i.e. on or before 3rd September 2014).
3. “Company seals are abolished”
A third misconception which we have often heard is that company seals are now abolished under the Ordinance. This is not the case. The new regime now gives companies an option to adopt or dispense with the use of a company seal to execute documents locally and overseas. This means that companies may continue to use a corporate seal (which should be made of metal and contain the company’s name in legible characters) or elect to not use the seal as a whole. Whether the company chooses to use, or not to use a company seal, this should be properly reflected in the company’s articles.
4. “You can now hold meetings by email”
A fourth myth is that meetings of members of a company can now be held through email. This is, again, untrue. Under the new regime, companies may now hold meetings with the aid of technology which allows members to listen, speak and vote. Without these three requirements, a members meeting cannot be said to have been properly held and any resolution passed at such meeting would be deemed invalid. Therefore, companies can now use technology such as Skype, Facetime, etc. to hold meetings and to pass resolutions. It appears that email technology would not allow for meetings to be held in compliance with the new legal requirements.
Publication Date: 3rd March 2014
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