All companies in Hong Kong and the business-related actions which they perform daily are governed by the Companies Ordinance. It specifies the legal framework within which Hong Kong companies are permitted to carry out business activities. It also states specific criteria by which all companies based in Hong Kong are to abide.
Among the criteria which apply to companies of Hong Kong which are explicitly stated within the Companies Ordinance relate to topics such as the rights and powers granted to a company based in Hong Kong, the regulations regarding the shareholders and directors of the company, the name of the company, and how a company may be restored after it has been struck off the Companies Registry.
The Companies Ordinance has existed for many years through changing economic and business conditions which have been present in Hong Kong. Thus, on multiple occasions, revisions of the Companies Ordinance have been made. Some of these revisions were changes which were extremely impactful towards all areas of Hong Kong’s business scene, while others had a more minor and understated effect.
Latest Changes to the Companies Ordinance
The most recent revision of Hong Kong’s Companies Ordinance is the Companies (Amendment) (No 2) Ordinance 2018. Although the year in its full title is 2018, this revision only took effect on February 1, 2019. This revision of the Companies Ordinance included 114 edits to various sections, schedules, and regulations to better reflect the current business environment of Hong Kong and how companies are to operate within it.
The amendments which were made include those intended to take new developments into account, those which clarified the purpose of some of the policies which had been mentioned, and those which removed any ambiguities and inconsistencies.
Perhaps the companies which were the most impacted by the amendments to the Companies Ordinance were holding companies based in Hong Kong. Holding companies which are part of two different types of corporate groups are now permitted to take advantage of the reporting exemption. Thus, they can use more simplified versions of accounting and financial reporting standards if the holding company in question as well as its subsidiaries fulfill the existing size criteria.
Modifications to Definitions
The definition of what is to be deemed to be a Hong Kong-based holding company has also been modified to better reflect the accounting standards which are now in use. The location of the company’s control has become the primary factor in determining if any business entity, including a holding company, is a subsidiary of a parent undertaking. It should also be noted that holding companies which are at the same time wholly owned subsidiaries now have the option to prepare consolidated financial statements instead of any of their own.
There were several other modifications which changed how Hong Kong companies were to operate with regard to their company articles. Companies are now permitted to display their articles in electronic form; thus, a physical copy is no longer a requirement. The articles of any company with a name which has been registered in both English and Chinese must also now include both names. Should the articles of a Hong Kong company have to be changed at any point, the latest version of the Companies Ordinance states that there will be an exemption from the general registration requirement which will take effect should such an alteration be solely related to the change of the company’s name.
Revisions to the Companies Ordinance may happen at any time and may have a detrimental effect upon your company’s financial well-being should you happen to be unprepared for such revisions. For this reason, we at Paul Hype Page & Co will offer you our financial planning services. We will help you generate a financial plan for your Hong Kong company which will enable it to be financially resilient regardless of whatever legal changes may happen to threaten its fiscal stability.