The primary purposes of the New CO were of increasing the standard of corporate governance in Hong Kong, improving regulation of Hong Kong’s companies, facilitating the conducting of business activities, and modernizing of Hong Kong’s business laws.
Parties Affected by the Implementation of the New CO
The implementation of the New CO has had a significant impact on various areas of Hong Kong businesses such as directors, officers, shareholders, and the companies themselves. Several charitable institutions in Hong Kong were also impacted by the introduction of the New CO because they had been previously incorporated as companies which had been limited by guarantee.
Enforcement and Standard of care for directors
The New CO has changed several corporate governance requirements in Hong Kong. Most of these changes are related to the enforcement regime as well as the standard of care to which directors are to adhere. The new requirements are especially relevant to directors who are in a more passive role or who are less experienced in the world of business.
For example, according to the stipulations specified in the original version of the Companies Ordinance, there were certain offenses which, when committed, exposed companies and their directors as well as other key figures within the companies alike to liability. Only the officers who deliberately authorized the offense committed would be officially charged.
According to the New CO, any omissions, reckless acts, deliberate violations, failures, and deliberate oversights committed by anyone deemed to be responsible may result in liability. The New CO also expands the possibility of experiencing liability to the officers who have participated in the offense; thus, it is no longer limited to officers who authorized the offensive act.
Therefore, it is important that every Hong Kong company be aware of the regulatory obligations according to the New CO because the new requirements also make it easier for errant officers to be reported.
There are several measures mentioned in the New CO which serve to clarify and update certain matters related to Hong Kong’s corporate laws from a CLG’s perspective. Such matters may be divided into two categories: those of compliance obligations and those matters of procedural convenience.