Part 3 – Company administration, procedure and operations
3.1. ANNUAL GENERAL MEETING (AGM)
New CO references: sections 430(3), 609 to 614
Position under the Old CO
The Old CO requires every company to hold an AGM in each year, with not more than 15 months between the date of one AGM and the next. There are no rules on shorter accounting periods. In addition, there is no provision to regulate the first accounting period, except that the first AGM has to be held within 18 months of incorporation.
Under the Old CO, every company is required to hold AGMs, although a company can dispense with holding AGMs if everything that is required or intended to be done at the meeting is done by written resolutions, and a copy of each of the documents (including any accounts or records) which would be required to be laid before the meeting is provided to each member of the company.
Key changes under the New CO
Time for holding AGM
Unless exempted, companies are required to hold an AGM within six months (for public companies) or nine months (for private companies or companies limited by guarantee) after the end of their accounting reference period.
Resolution to dispense with requirement to hold AGM
Section 613 of the New CO allows a company to dispense with the requirement for holding of AGMs by passing a written resolution or a resolution at a general meeting by all members. After passing the resolution, the company will not be required to hold any AGMs for the financial year or for subsequent financial years to which the resolution relates. The financial statements and reports originally required to be laid before an AGM still need to be sent to the members (section 430(3)).
Under section 613(5) of the New CO, any member may request the company to convene an AGM for a particular year. Such notice must be given no later than three months prior to the last day that the company would otherwise be required to hold an AGM for the relevant financial year.
The company may also revoke the resolution dispensing with AGMs by passing an ordinary resolution to that effect.
Single member companies
Single member companies are not required to hold AGMs (section 612(2)(a) of the New CO). However, a single member company is still required to send financial statements and reports to its member under section 430(3).
Written resolution procedure
The written resolution procedure under the Old CO is retained in section 612(1) of the New CO for any company (including a public company or a company limited by guarantee) wishing to dispense with an AGM on a specific occasion by a written resolution.
As was the case under the Old CO, dormant companies are exempt from the requirement to hold AGMs. Dormant companies are also exempt from the requirements to prepare financial statements and reports.
3.2. ANNUAL RETURN
New CO references: section 662, schedule 6
Position under the Old CO
The Old CO provides that, except where the company is a private company having a share capital, the annual return is required to be filed within 42 days after the AGM for the year. The Old CO further provides that, except where the company is a private company, the annual return shall include certified copies of the company’s balance sheet and reports laid before the company in general meeting to which the return relates.
Key changes under the New CO
Public companies and guarantee companies
The annual return must to be filed within 42 days after the company’s return date. The return date is six months after the end of the company’s accounting reference period for public companies, or nine months after such period for companies limited by guarantee.
Private companies are still required to file their annual returns within 42 days after the anniversary of their incorporation.
Information to be included in, and documents to accompany, annual return
Schedule 6 of the New CO sets out the information to be included in an annual return and the documents required to accompany it. The requirement for listed companies to file the details of all members in their annual returns has been relaxed. Section 2 of schedule 6 requires listed companies to include particulars only of members who held 5% or more of the issued shares in any class of the company’s shares as at the date of the annual return.
3.3. WRITTEN RESOLUTIONS
New CO references: sections 547 to 561
Like the Old CO, the New CO provides that anything which may be done by a company by resolution in a general meeting may be done, without a meeting and without any previous notice, by a resolution signed by all shareholders of a company.
The New CO establishes procedures for proposing, passing and recording written resolutions of Hong Kong companies.
Section 549 provides that the directors or a shareholder of a company may propose a resolution as a written resolution. A shareholder of the company who proposes the resolution may request the company to circulate with the resolution a statement of not more than 1,000 words on the subject matter of the resolution (section 551).
The company must circulate a written resolution to every shareholder within 21 days after it receives the proposal if:
- the resolution is proposed by a director of the company; or
- if it has been requested to do so by shareholders representing not less than 5% of the total voting rights (or a lower percentage if specified in the company’s articles) (section 552).
The company must send shareholders together with the proposed resolution guidance as to:
- how to signify agreement to the resolution; and
- the date by which the resolution must be passed if it is not to lapse.
Circulation may be effected by sending copies of the resolution in hard copy form or electronic form or by making the copies available on a website (section 553).
The company must also send the proposed resolution and any statement which a shareholder has requested to be circulated with the resolution to the company’s auditor on or before the date of circulation of the resolution to shareholders (section 555). Copies may be sent to auditors either in hard copy or electronic form (section 555(2)).
A company or any other person who claims to be aggrieved by a statement which a shareholder has requested by circulated with a proposed written resolution may apply to Court for an order that the company is not required to circulate the statement (section 554). The court will make such an order if it is satisfied that the rights given by section 551(2) are:
- being abused; or
- being used to secure needless publicity for defamatory matter.
The court may also order the shareholders requesting the circulation to pay all or part of the company’s costs.
The period for agreeing to the proposed written resolution is 28 days or such other period as specified in the company’s articles (section 558). The proposed written resolution will lapse if not passed within 28 days after the circulation date (or such other period as provided for in the articles). Members may signify their agreement to a proposed written resolution and send it back to the company either in hard copy form or electronic form (section 556). A written resolution requires agreement in writing by all eligible shareholders of a company (section 556(1)). If a resolution is passed as a written resolution, the company must send a notice of that fact to every shareholder and the auditor of the company within 15 days (section 559).
Non-compliance with the requirements on circulation of proposed written resolution or notification of the passing of a written resolution is an offence for which the company and every responsible person of the company may be liable to a fine of $10,000.
The new procedures do not replace the common law doctrine of unanimous consent to the effect that, if all the members of a company actually agree on a particular decision which can be made at a general meeting, the decision is binding and effective without a meeting (section 547(3)). A company’s articles may also set out alternative procedures for passing a resolution without a meeting, provided that the resolution has been agreed by the members unanimously (section 561).