The new Companies Ordinance (CO), with effect from 3 March 2014, will apply to every HK company on the Companies Register. The Government asserted that the commencement of the new CO represents a new chapter in corporate regulation in HK, with the purpose to enhance corporate governance, facilitate business, ensure better regulation and modernize the law.

We understand many companies are concerning themselves with the changes like restricting corporate directors, thus we have outlined some highlights as follows for you to know more:

 

1. Restricting Corporate Directors

With a view to enhancing the accountability of directors, every private company is required to have at least 1 director who is a natural person. In other words, a company can still appoint corporate directors, but with at least 1 natural person director. A grace period of 6 months after 3 March 2014 is provided for existing companies to comply with the change. If your company needs help in complying with this individual director requirement, please feel free to contact us for assistance.

 

2. Abolition of Memorandum

To modernize the law, Memorandum of Association (M&A) is abolished for all local companies. Instead, only Articles of Association is required and becomes the constitutional document of a company. This update does not affect existing companies much since current provisions of their M&A will be deemed to be provisions of their Articles of Association. For new companies, they can just use the Model Articles prescribed under the new CO.

 

3. Abolition of Par Value for Shares

A mandatory system of no-par is adopted for shares of all companies, which means a company’s shares will have no nominal value, as par value is an antiquated concept that may cause practical problems, like inhibiting the raising of new capital and unnecessarily complicating the accounting regime. This is in line with international treads to provide companies with more flexibility in structuring their share capital. All shares issued before 3 Mar 2014 will be deemed to have no par value (conversion process for existing companies is not required). As such, all shares issued will only have the ‘actual’ value that represents the value of the share capital.

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