Select Page

Key changes under the Companies Ordinance (Cap. 622)

, , ,
Key changes under the Companies Ordinance (Cap. 622)

3.4. GENERAL MEETINGS

In the New CO, all meetings of shareholders are referred to as “general meetings” instead of “extraordinary general meetings”. The exception is AGMs.

Under the New CO, the notice period for an AGM is at least 21 days. In any other case the notice period is at least 14 days for a limited company, irrespective of whether an ordinary or special resolution will be considered at the meeting, and at least 7 days for an unlimited company (section 571(1)).

If the Articles require a longer period of notice, the meeting must be called by notice of that longer period (section 571(2)). For resolutions requiring special notice, such as the removal of a director or auditor, notice of the intention to move the resolution must be given to the company at least 28 days before the meeting, as previously section 578). A company may wish to amend its Articles to reduce its notice periods to the new statutory minimum.

3.5. MEETINGS PERMITTED TO BE HELD AT MORE THAN ONE LOCATION

New CO reference: section 584

Section 584 of the New CO permits a company to hold a general meeting at two or more places using any technology that enables the shareholders of the company who are not together at the same place to listen, speak and vote at the meeting. A company may set out rules and procedures for holding a dispersed meeting in its articles.

3.6. EXECUTION OF DOCUMENTS

New CO references: sections 124 to 125 and 127 to 129

Position under the Old CO

The Old CO required every Hong Kong company to have a common seal. A company had to be authorised by its articles of association to have an official seal for use outside Hong Kong, and have objects which required the transaction of business outside Hong Kong. In addition, under the Old CO, an attorney could only bind a company in respect of deeds executed by him on its behalf outside Hong Kong.

Key changes under the New CO

Common seal optional

Section 124 of the New CO makes the keeping and use of a common seal optional. Where a company has a common seal it must be a metallic seal with the company’s name engraved on it.

Overseas seal

Section 125 allows a company with a common seal to have an official seal for use outside Hong Kong, removing the restrictions under the Old CO.

Execution of documents by company

Section 127 provides that a company may execute a document:

  • under its common seal in accordance with its articles (section 127(1) and (2));
  • in the case of a company with only one director, by having the document signed by the director (section 127(3)(a)); or
  • in the case of a company having two or more directors, by having the document signed by any two directors or by any director and the company secretary (section 127(3)(b)).

In favour of a good faith purchaser for value, a document is to be regarded as having been executed by a company if the document purports to have been signed in accordance with section 127(3)(a) or (b).

Section 127(5) provides that a document signed in accordance with section 127(3)(a) or (b) and expressed to be executed by the company has effect as if the document had been executed under the company’s common seal.

Execution of deeds by company

Section 128 of the New CO provides that a company may execute a deed by:

  • executing it in accordance with section 127;
  • having it expressed to be executed by the company as a deed; and
  • delivering it as a deed.

Execution of documents by attorney

Section 129 of the New CO allows a company to authorise any person as its attorney to execute a deed or any other document on its behalf in Hong Kong or elsewhere. The authorisation must be given by an instrument executed as a deed.

Practical considerations and recommended steps

Although a company may continue to employ other methods to execute documents (e.g. passing a board resolution to appoint authorised signatories), the deeming provisions in favour of good faith purchasers for value will only apply to documents executed in accordance with section 127 of the New CO.

In order to take full advantage of the new flexibility in executing documents (including deeds), a company should review its articles of association and remove any “legacy” limitations regarding use of the seal or execution.

The New CO is silent on the valid mode(s) of execution of a Hong Kong law deed by a foreign company. Foreign companies should therefore continue to execute deeds in the same way as under existing practice.

3.7. STAUTORY PROTECTION FOR PERSONS DEALING WITH COMPANIES

New CO references: sections 117 to 118, 120

Sections 117 and 118 of the New CO provide statutory protection for persons dealing with a company in addition to the common law “indoor management rule”. The “indoor management rule” provides that a third party dealing in good faith with a company is not bound to inquire whether acts of internal management have been regular and is entitled to presume that acts within the company’s constitution and powers have been properly and duly performed.

Section 117 provides that in favour of a person dealing with a company in good faith, the power of the directors to bind the company will be deemed to be free of any limitation under the articles of association, any resolutions of the company or any agreement between the members of the company. Good faith will be presumed (unless the contrary is proved). A person will not be regarded as acting in bad faith by reason only of the person’s knowing that an act is beyond the directors’ powers. In addition, third parties are not required to inquire as to any limitations on the directors’ power, and will not be regarded as having constructive notice of any matters publicly disclosed in the articles or any return or resolution kept by the Companies Registrar.

Section 118 provides that the protection afforded to a person by section 117 will not apply where the party to a transaction with a company is an “insider” (for example, a director of the company or of a holding company of the company; or an entity connected with such a director).

 

Skills

Posted on

2014-06-16