Hong Kong began the new year with an important amendment to its company law receiving approval¹ and this is now likely to become operative within the next few months.

Introduction of Treasury Shares

Currently, if Hong Kong companies repurchase their existing shares, these have to be physically cancelled² and only fresh shares can be issued in substitution for the old shares.

The alternative of permitting treasury shares – in other words, effectively “parking” the repurchased shares for reuse in the future – is popular elsewhere, notably in the Cayman Islands and BVI. As companies from both of these jurisdictions are regularly used in Hong Kong, the absence of a comparable power for local companies has been viewed as a negative in considerations about incorporating here.

So, it is welcome news that the new law will now permit listed Hong Kong companies to hold repurchased shares in treasury and to cancel, sell and transfer these shares.³ Obviously, share buy backs are more common with listed than private companies, and are used to facilitate the return of cash to shareholders, so this amendment addresses the most pressing area for reform.

Website Communications

Currently, there exists a cumbersome regime of paperwork for significant corporate communications made by Hong Kong companies.

Under the new bill, an “implied consent” presumption has been introduced and will apply to both listed and private companies.⁴ This means that, if a Hong Kong company’s articles (or debenture instrument) permit communications in this manner, once the new law comes into effect, a one-off notification to shareholders or debenture holders will activate the assumption that they have consented to corporate communications being made through the website.

The way forward

Both of the new proposed amendments are significant steps forward in the practical administration of Hong Kong companies and provide a welcome start to 2025 for all corporate practitioners here.

 

Chris Lambert

 

For more information or advice on the Companies (Amendment) Bill 2024, compliance and related matters in Hong Kong, please contact:-
Chris Lambert | clambert@robertsonshk.com | +852 2861 8417

Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.

¹ The Companies (Amendment) Bill 2024 (the “Bill”) was passed by the Legislative Council on 8 January 2025.

² Section 716 of the Companies Ordinance (Cap. 622 of the Laws of Hong Kong)