The new Companies Ordinance (Cap. 622) (“new CO”) was launched in March 2014. It serves as a modern statutory framework for the incorporation and operation of the companies in Hong Kong. With a view to incorporating new developments, addressing various comments provided by stakeholders and providing clarity on policy intent, the new CO and its subsidiary legislation have been further amended. As such, the Companies (Amendment) (No. 2) Ordinance 2018 (the “Amendment Ordinance”) was enacted by the Legislative Council on 28 November 2018 and came into effect on 1 February 2019.
Updating relevant accounting-related provisions
The definitions of “holding company” and “parent undertaking” are updated to reflect the current accounting standards and “control” is adopted as the basis for determining whether an entity is a “subsidiary” of the “parent undertaking”.
Expanding the types of companies eligible for reporting exemption
The holding companies of two types of corporate groups as set out below are allowed to benefit from the reporting exemption, i.e. to adopt simplified accounting and financial reporting provided that both the holding company and all its subsidiaries meet the size criteria:
- holding companies of corporate groups comprising small private companies or eligible private companies and small guarantee companies (mixed groups); and
- holding companies of groups of small private companies, eligible private companies, small guarantee companies, or mixed groups described in paragraph (i) above, with non-Hong Kong subsidiaries.
Enhancing the administrative, procedural and technical requirements regulating local companies and non-Hong Kong companies
| Major Changes | Relevant Provisions |
| Display of company names for non-Hong Kong Companies – empowering the Financial Secretary to make regulations for non-Hong Kong companies to provide for the detailed requirements relating to the display of company names and the disclosure of liability status in order to align the obligations of non-Hong Kong companies with those of local companies. | Part 16 of Cap. 622 – ss. 792, 803, 805A and 805B; Cap. 622B |
| Alignment of penalty provisions relating to financial statements and reports – aligning the penalty level for an offense for making a misleading, false or deceptive statement to an auditor relating to revised financial statements with a corresponding offense relating to original financial statements. | Part 9 of Cap. 622- s.450 |
| Expressly allowing a company’s articles to be in electronic form | Part 1 of Cap. 622- s.2 |
| Clarifying that if a company has both an English registered name and a Chinese registered name: (i) both names must be stated in its articles (ii) The common seal of the company may be engraved with only its English name or Chinese name (iii) The company may display either its English name or Chinese name | Part 3 of Cap. 622 – s.81 Part 3 of Cap. 622 – s.124 Cap.622B |
| Providing for an exemption from the general registration requirement for an alteration of articles if such alteration is in respect of a change of company name only, as separate registration requirement already applies to a change of company name. | Part 3 of Cap. 622 – s.88 |
| Clarifying that the statement of capital should report the share capital position immediately after the relevant change instead of capital position as at the date of the change | Part 4 of Cap. 622 – ss.142, 171, 173, & 175; Part 5 of Cap. 622 – ss.224 & 225 |
| Clarifying that the obligation to give particulars of class rights in the statement of capital only arises if the share capital of a company is divided into different classes of shares | Part 4 of Cap. 622 – s.201 |
| Providing that if all members in a class agree to a variation of the class rights, the variation will take effect on the date of, or as specified in the consent or resolution. No holder or member may apply to the court to have the variation disallowed in such circumstances. | Part 4 of Cap. 622 – s.190 |
| Providing for an exemption from the requirement to notify the Registrar of Companies of a change in the place where copies of instruments creating charges are kept if the relevant change only relates to a change of the address of a company’s registered office or the address of a registered non-Hong Kong company’s principal place of business in Hong Kong, as separate notification requirement already applies to the change of such address. | Part 8 of Cap. 622 – s.351 |
| Providing alternative means for a holding company to disclose the names of the directors of its subsidiary undertakings by adding an option of allowing a holding company to provide such information on its website, or by keeping a list at its registered office and making it available for inspection. | Part 9 of Cap. 622 – s.390 |
| Providing for an option for a holding company which is also a wholly owned subsidiary to prepare consolidated financial statements instead of its own financial statements. | Part 9 of Cap. 622 – s.379 |
| Providing that for a group of eligible private companies, the adoption of simplified reporting will require a resolution by members of the holding company only. | Part 9 of Cap. 622 – ss.359 & 360 |
| Clarifying that “non-statutory accounts” do not include a summary financial report. | Part 9 of Cap. 622 – s.436 |
| Providing that the financial year of a company may be shortened or lengthened by a period not exceeding 7 days. | Part 9 of Cap. 622 – s.367 |
| Clarifying the primary accounting reference date for a dormant company that has ceased to be dormant. | Part 9 of Cap. 622 – s.368 |
| Clarifying provisions in respect of company record-keeping and company administration and procedure including matters relating to :- (i) the keeping of records of directors to include resolutions passed by directors without a meeting; (ii) the records which may be used as evidence of proceedings at a directors’ meeting and general meeting; and (iii) the notice to the Companies Registry on where minutes of directors’ meetings, resolutions of directors and written records of decisions of the sole director are kept. | Part 10 of Cap. 622 – s.481 Part 10 of Cap. 622 – s.482 Part 12 of Cap. 622 – s.619 |
| Amending the “small payment” exception to the prohibition on payments for loss of office of a director to make it clear what payments are not aggregated for the purpose of calculating the total amount of the small payment. | Part 11 of Cap. 622 – s.525 |
| Clarifying that the court-free procedure for horizontal amalgamation is also available for subsidiaries of a holding company which is incorporated outside Hong Kong so long as the merging companies are Hong Kong companies. | Part 13 of Cap. 622 – ss.678 & 681 |
| Clarifying that in the case of a takeover offer relating to shares in a class, the requirement for 90% of the number of shares means 90% of the number of shares of the class. | Part 13 of Cap. 622 – s.700 |
| Clarifying the power of the Government to dispose of any property or right vested as bona vacantia under the predecessor Companies Ordinance. | Part 14 of Cap. 622 – s.733 |
| Clarifying the conditions for granting applications for administrative restoration of companies. | Part 14 of Cap. 622 – s.761 |
| Clarifying that an authorized representative of a non-Hong Kong company must have an address in Hong Kong. | Part 16 of Cap. 622 – s.774 |
| Providing a definition for “officer” of a subsidiary undertaking. | Part 9 of Cap. 622 – s.412 |
| Clarifying in the Model Articles that an ordinary resolution of a company is required only for certain types of alteration of the share capital of the company. | Cap. 622H – Schedules 1 & 2 |
Eva Lo
Director
Corporate Services
- (852) 3528 0282
- evalo@hkmanagers.com
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