Early release for company laws
HONG KONG will not have to wait as long as expected for details of a planned revamp of the Companies Ordinance.
The Canadian lawyer and former Securities and Futures Exchange Commission executive director, Ermanno Pascutto, appointed last November to overhaul the hotch-potch of laws which cover Hong Kong's companies, said yesterday he intended to make recommendations progressively.
It had been expected he would issue one preliminary report and a final report would emerge before the end of next year. Now he is planning to present a series of progress reports.
'Instead of having one preliminary and one final report, so you don't see much from the review until end of '96, we will bring in a series of five modules, so we start getting some results earlier than in two years' time,' he said.
The first report would identify the aims and objectives of company law and try to get agreement on a core company law, removing areas more appropriately covered in other parts of legislation, Mr Pascutto said.
His target was to make Hong Kong regulation lighter and more appropriate to the companies which it governs.
By stripping out legislation which should only apply to listed companies, he reckons the ordinance can be made to be much more user-friendly to the 450,000 private companies which represent more than 99 per cent of all enterprises in Hong Kong.
Mr Pascutto will be looking at strengthening the rights of minority shareholders and finding easier ways for wronged investors to take action.
'For a shareholder to bring an action against a director in Hong Kong is completely impractical,' he said. 'The cost far outweighs the investments that any investor has.' There should be a more user-friendly mechanism for shareholders to bring a company, or director, to task, he said.
One of the controversial proposals he is considering is the introduction of a fitness test for directors based on knowledge of the responsibilities as a member of the board of a listed company.
There is already growing opposition to the suggestion, but Mr Pascutto says that there may be no reason why directors of listed companies should not have to prove the same competence already required in the securities industry.
'What we are talking about is billions of dollars of other people's money, access to enormous amounts of public money and if we are going to have investor confidence, and have investors willing to put money into the market place and improve Hong Kong's position as a financial centre, it is crucial that investors have confidence that directors as a whole live up to their obligations and when they don't, regulatory authorities bring the rules to bear,' he said.