Lawmakers yesterday passed the controversial Companies Bill under which auditors will be held criminally liable if they fail to declare problems with the financial statements of a client company - but junior accountants will not face criminal liability.
After a marathon 18-month trudge through a Legislative Council committee examination, the 2,000-page Companies Bill finally passed following eight days of filibustering in Legco. It will replace the Companies Ordinance, which was first drafted in 1932. The new law introduces new rules to improve corporate governance, including the controversial criminal liability clause for auditors.
The criminal liability would be limited to a HK$150,000 fine and would not involve a jail term.
Despite intensive lobbying by the accounting sector against the clause, legislators rejected an amendment proposed by accountancy legislator Paul Chan Mo-po, who wanted the bill changed so accountants would only face criminal liability if they failed to make the declaration 'knowingly' and not 'recklessly' as stipulated in the bill.
Other lawmakers overruled Chan, saying accountants played a key role in safeguarding investors' interests, and the clause now imposes the criminal liability if accountants have acted 'knowingly or recklessly'.
'In my opinion, we had to vote for the criminal liability provision,' said legislator Andrew Leung Kwan-yuen, for the industrial sector. 'Accountants are highly respected professionals, and we trust them to safeguard the interests of shareholders.'