Full review of Companies Ordinance is launched
SECRETARY for Financial Services Michael Cartland says that while it is premature to determine if the Companies Ordinance needs an extensive overhaul or simply minor modifications, a thorough review is necessary to ensure it reflects today's business environment.
Mr Cartland said yesterday that while the number of registered companies in Hong Kong had jumped from 26,000 to 416,000 in the past 22 years, the Companies Ordinance had last been reviewed in 1984.
However, he said that review was skewed because it was based on changes which were 10 to 20 years old.
''We have updated legislation covering listed companies and banks and there are elaborate regulatory systems, but most companies fall out of this net and half of the listed companies are incorporated overseas,'' he said.
Mr Cartland said it was also important to remember that new legislation covering listed companies and the banking sector had been a result of major crises - the 1987 stock market crash and the banking system's collapse in the mid-'80s.
As a result, it was important to make improvements to guard against this type of events rather than reacting when they occurred, he said.
At more than 400 pages, the Companies Ordinance is among the largest pieces of legislation in Hong Kong, and has been extensively amended over the years.
Mr Cartland said he could not recall a time when an amendment had not been before the Legislative Council.
He said: ''These amendments have overlaid the original structure and one has to ask whether the Ordinance is consistent and if there's a need to streamline,'' he said.
A review of the Companies Ordinance will kick off with the appointment of one or two experts and the elaboration of its terms of reference.
Mr Cartland said this process had already started and the Government hoped to make an announcement in the next two or three months.
''It is a very big undertaking and will take the reviewers one or two years to come back with the product,'' he said, adding the reviewers might be able to produce progress reports to the Standing Committee on Public Law Reform.
After the review was completed, Mr Cartland said it would then face an extensive period of examination from various industry members.
He said the Government had no preconceived ideas about where the review would end up but emphasised it would be a thorough exercise.
Among the leading issues the review must deal with, Mr Cartland said, was whether Hong Kong's 400,000 registered companies actually required a regulator.
Mr Cartland said the review would also look at corporate governance, which had become a key issue as Hong Kong attempted to become a major international finance centre.
A review of the Companies Ordinance was proposed by Financial Secretary Sir Hamish Macleod during his Budget speech on March 2.
Sir Hamish made his comments while referring to Hong Kong's need to make continual improvement to its regulatory systems.