Inspectors to be given more power for company probes
The government is proposing to expand the investigative power of the financial secretary's appointed inspectors and impose prison terms on people who refuse to co-operate with investigations.
Under the proposed law change, which is part of the effort to update the city's Companies Ordinance, people who give false information to inspectors appointed by the financial secretary may face a maximum of seven years in jail and a fine of HK$1 million. Refusing to co-operate with inspectors could lead to one year in jail and a HK$200,000 fine.
The current Companies Ordinance does not spell out the penalty for lying to inspectors looking into whether companies have engaged in serious misconduct.
The new proposals also allow inspectors and a company's appointed auditor to acquire more books and records from a wide range of employees at a company in conducting their investigation.
Meanwhile, accounting firms would have to make their reasons clearer when they resign as auditors for a company. Auditors who intentionally failed to do this could be fined HK$150,000.
The changes would also require companies, including both listed and large privately owned companies, to give forward-looking statements in their directors' report to analyse their businesses. Directors who fail to do so would face a maximum HK$150,000 fine or six months in jail.
Listing rules already require companies to give such forward-looking statement, but the penalty for failing to do so is only a public reprimanded.
John Leung Chi-yan, the deputy secretary for Financial Services and the Treasury, said the proposed changes to the Companies Ordinance would bring the city in line with international standards, especially with rules in Britain, Australia, Singapore and New Zealand. 'This is to enhance the corporate governance and disclosure culture of the local market,' Leung said.
However, the proposals drop a requirement for companies to give remuneration reports about the salaries of senior executives and directors, which Leung said was too troublesome for small companies.
The government in the past few years has had consultation excercises on different parts of the Companies Ordinance that are considered outdated.
After a three-month consultation on the proposed changes, Leung said all amendments of the Companies Ordinance should go before the Legislative Council at the end of the year. After be debated and voted on by lawmakers they could be implemented in 2013.
Paul Chan Mo-po, legislator for the accountancy sector, said the planned changes should enhance the transparency of the Hong Kong market. But he said the proposal to jail directors of both listed firms and large private companies who failed to provide a business outlook may be too harsh.
'This proposal should only apply to listed companies, as they have a bigger public interest than the private companies,' Chan said.