Advertisement

Disliked headcount rule to be replaced

Reading Time:2 minutes
Why you can trust SCMP
0

The government has decided to abolish the unpopular 'headcount rule' governing the process of taking a company private.

It will replace it with a new requirement that will safeguard the interests of small shareholders, a government official told the South China Morning Post yesterday.

For a privatisation scheme to succeed, the new '10 per cent objection rule' will require that no more than 10 per cent of votes from its independent shareholders oppose it.

The so-called headcount rule in the Companies Ordinance states that a privatisation deal must be approved by 50 per cent of shareholders attending a shareholders' meeting. The majority it requires is based on the number of shareholders, not their shareholding value.

The rule has been under the spotlight since 2009, when the Court of Appeal overturned an attempt by Pacific Century Regional Developments, controlled by Richard Li Tzar-kai, to privatise telecommunications firm PCCW. The court said the vote had been manipulated by distributing shares among various parties to create a higher headcount.

The government decision to scrap the headcount rule will remove the final hurdle to obtaining lawmakers' approval of the Companies Bill, which they have been discussing for 18 months. If the bill can be passed by the bills committee tomorrow and then by all lawmakers at the end of next month, detailed subsidiary legislation can be drafted and the law implemented in 2014.

The bill would also require a privatisation scheme to be endorsed by a court acting as a referee to ensure its fairness to all shareholders.

Advertisement