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Recent developments in corporate governance in Hong Kong and the PRC

Recent developments in corporate governance in Hong Kong and the PRC

The HKIoD

Introduction

The Hong Kong Institute of Directors is Hong Kong’s premier body representing professional Directors working together to promote good corporate governance and to contribute towards advancing the status of Hong Kong, both in China and internationally.

The Hong Kong Institute of Directors was incorporated in Hong Kong on 1 February 1996 under the Companies Ordinance. Members of Institute of Directors (UK) Hong Kong Branch converted to Members of The Hong Kong Institute of Directors (the “HKIoD”) on 1 July 1997.

The HKIoD currently provide its members with the following services:

  • Continuing professional development and training programmes and activities in Cantonese, English and Putonghua for directors;
  • Up-to-date information and publications relevant to the role of directors;
  • A network of support and resources for directors and associations with equivalent bodies internationally.

Recent Developments in Corporate Governance in Hong Kong and the PRC

Hong Kong

The Statutory Hong Kong Company Structure

In Hong Kong, the minimal basic statutory structure required of a company pursuant to the Companies Ordinance of Hong Kong is as follows:

Recent developments in corporate governance in Hong Kong and the PRC

  1. A company is an artificial person with a separate legal identity. It is separate from its shareholders and can enter into contracts, sue and be sued, or own property as a natural person. In Hong Kong, a company is required to have a minimum of two shareholders.
  2. Every Hong Kong company must have at least two directors. However, the articles of association of the company may provide otherwise, as long as the minimum number of directors does not fall below two. It is however not a requirement under the Companies Ordinance for a company to retain a supervisor.
  3. The company secretary is regarded as the chief administrative officer of the company, with power to bind the company in matters dealing with administration (Case of Panorama Developments (Guildford) Limited). Although the company secretary is an agent of the Company, whether, and to what extent, the secretary has power to act on behalf of the company is a question of fact.
  4. Every Hong Kong company is required to keep proper books of accounts which give a “true and fair view” of the company’s financial position. Unless the company is a dormant company, audited accounts must be presented to the members of the company at an annual general meeting within a certain time.

Corporate Governance in Hong Kong

The failure of a number of prominent corporations, both close to home and overseas, in recent years has put the spotlight on the serious consequences of lapses in corporate governance. Consequently corporate governance has been put very much at the top of the agenda, both in government policy discussions and in the minds of investors.

Hong Kong’s business community has continuously been urged to seek improvements in corporate governance and to uphold the highest professional ethics and integrity. A number of important corporate governance initiatives have been carried out or are under way. The Hong Kong government and other corporate regulatory bodies, such as the Stock Exchange of Hong Kong (the “HKEx”) and the Securities and Futures Commission (the “SFC”), are making good progress in bringing good corporate governance standards into effect. Steps taken include:

  • the government, together with the SFC and the HKEx, has drawn up an action plan for 2003 to further improve corporate governance in Hong Kong – the “Corporate Governance Action Plan”;
  • the publication by the HKEx of the Consultation Conclusions on Proposed Amendments to the Listing Rules Relating to Corporate Governance Issues in January 2003 (the original consultation paper was published in January 2002);
  • the effective implementation of the Securities and Futures Ordinance in April this year;
  • the release of two consultation papers in May with proposals to enhance the investor protection regime: one on the regulation of sponsors and independent financial advisers (released jointly by the SFC and the HKEx) and the other on empowering the SFC to take derivative actions for minority shareholders of a listed company (released jointly by the SFC and the Financial Services and the Treasury Bureau (FSTB));
  • the introduction of the Companies (Amendment) Bill 2003 to the Legislative Council to implement some of the proposals for improving shareholder remedies made under Phase I of the Corporate Governance Review (the consultation paper for the Review was released in July 2001); and
  • the release of recommendations in Phase II of the Corporate Governance Review by the Standing Committee on Company Law Reform for public consultation.
Skills

Posted on

2003-09-21