Hong Kong: the Companies (Amendment) Bill 2010

The Financial Services and the Treasury Bureau has announced that the Companies (Amendment) Bill 2010 was passed by the Legislative Council last week and has become law: see here (pdf). One of the changes introduced concerns shareholder remedies: the scope of the statutory derivative action (under Section 168BC the Companies Ordinance) has been expanded to permit a derivative action to be brought on behalf of a company by shareholders in a related company.

Hong Kong: first criminal conviction for insider dealing

Hong Kong has seen its first successful prosecution for insider dealing under the Securities and Futures Ordinance 2003. The case concerned a finance manager of a subsidiary of Sino Golf Holdings Ltd. In the course of her employment the manager became aware that a debtor of the subsidiary company had filed for Chapter 11 bankruptcy protection in the US. She sold her holding of 180,000 shares in Sino Golf before the market became aware of the debtor's financial difficulties and its impact on the subsidiary.

The Securities and Futures Commission (SFC) argued that by selling her shares at this time she avoided a loss of HK$63,333. This argument was upheld by the the Eastern Magistracy. The Principal Magistrate sentenced the employee to six months' imprisonment (suspended for two years), fined her HK$200,000 and ordered her to pay $20,253 in costs to the SFC.

For further information see:

SFC press release | Insider dealing is defined in Section 270 of the Securities and Futures Ordinance 2003.

Hong Kong: company law reform - third consultation paper published

The Financial Services and the Treasury Bureau has published a third consultation paper as part of its review of the company ordinances in Hong Kong.  The third consultation paper deals with share capital, capital maintenance and amalgamations. Amongst the proposals are:

• The introduction of a mandatory no-par value share regime for all companies
• The removal of the requirement for authorised capital
• The retention of the current capital maintenance regime
• The introduction of a court-free statutory amalgamation procedure

For further information see:
press release | third consultation paper | third consultation paper executive summary | earlier consultation papers | reform homepage

Hong Kong: Companies Ordinance Rewrite - second consultation phase launched

The second consultation phase for the Companies Ordinance Rewrite began today and will last until 6 August 2010. A consultation paper has been published - see here (pdf) - along with parts of the draft Companies Bill (see here). A full list of the phase two consultation questions is available here (pdf).

Hong Kong: draft Companies Bill - first phase consultation launched

The first phase of consultation for the draft Companies Bill began today and will last until 16 March 2010. A consultation paper has been published along with parts of the draft Companies Bill. The remaining parts of the Bill will be published early next year. 

Chapter 2 of the consultation paper is titled "enhancing corporate governance" and this sets out, inter alia, proposals for the codification of the director's duty of care, skill and diligence and the requirement that every private company should have at least one natural person as a director. Chapter 9 seeks views on whether the common law derivative action should be abolished, given the availability of a statutory derivative action.

Hong Kong: company law reform

The Standing Committee on Company Law Reform has published its 2008/09 annual report: see here (pdf). The report highlights those matters considered by the committee over the past year as part of the companies ordinance rewrite and the committee's recommendations in this regard. The committee has, for example, recommended that:

• the director's duty of skill, care and diligence should be codified
• all companies should have at least one natural person acting as a director
• reduction of capital should be permitted through a court-free procedure involving a solvency test
• the statutory derivative action should be extended to include multiple derivative actions, thereby bringing it in line with the shareholder's common law right to bring an action on behalf of the company following the decision of the Hong Kong Court of Final Appeal in Waddington Ltd v Chan Chun Hoo Thomas and others [2008] FACV 15/2007.
  

A draft Bill is expected next month. 

Hong Kong: the HKEx Listing Committee report

The Hong Kong Stock Exchange Listing Committee has recently published its 2009 report: see here (pdf). The report notes (pp. 5-6):

The Listing Committee has formed a sub-committee to consider whether issuers should set up a corporate governance committee and how the role of the company secretary may be further enhanced. The sub-committee is also taking the opportunity to review other issues relating to the Code on Corporate Governance Practices (“CG Code”) as well as items pertaining to corporate governance that have arisen in the course of our administration of the Listing Rules in recent years. The objective is to make possible enhancements to the CG Code that is benchmarked against international standards. Topics covered include disclosure of information on directors, shareholders meetings and matters relating to directors, in particular, independent non-executive directors".

The report states that the enhancement of listed issuers' corporate governance standards is a priority for 2010. Specifically, the following are amongst the issues to be considered: the development of a corporate social responsibility code for listed companies; a review of the role of company secretaries; contributing to the Companies Ordinance rewrite; and the continuation of the Corporate Governance review (noted above).

Hong Kong: Company Law Reform

The Hong Kong Financial Services and the Treasury Bureau is conducting a review of company law. As part of this programme, a three month consultation has begun concerning company names, directors' duties, corporate directorships and registration of charges. A consultation paper has been published. Amongst the questions asked are:

(1) Should the general duties of directors be codified and, if so, should the UK approach (as in Section 172 of the Companies Act (2006)) be adopted?

(2) Should corporate directorships be abolished?

(3) Should "book debts" be statutorily defined?

Hong Kong: Court of Final Appeal recognises the multiple derivative action

Where a subsidiary (or sub-subsidiary) of a parent company has suffered harm, can a shareholder of the parent company bring a derivative action on behalf of the subsidiary? This question has been considered in Waddington Ltd v Chan Chun Hoo Thomas and others [2008] (FACV 15/2007) by the Hong Kong Court of Final Appeal. The Court held that such a derivative action (often known as a double or multiple derivative action) could be brought. In doing so the Court provided what appears to be the first reasoned decision concerning this matter by a higher court in any common law jurisdiction outside of the USA.