New companies law will boost Hong Kong's competitiveness

After years of joint efforts by the government and the market, the new Companies Ordinance will come into operation on Monday. It is the right time to revisit what it means to Hong Kong and to businesspeople looking to form a company, to a director, a shareholder or a member of the public.

The ordinance will bring about changes to enhance corporate governance, ensure better regulation, facilitate business and modernise the law.

Hong Kong is now home to well over 1.1 million companies, and an average of 700 are being formed each day.

All these companies, as well as countless members of the public dealing with them, will benefit from the modernised regime.

For a businessman looking to incorporate a company, the new ordinance will make the process more convenient. A common seal will no longer be mandatory, and there will be model articles of association for different types of companies to adopt. This will save time and effort for founders as they pursue business opportunities.

For existing and new companies, the legislation will reduce their compliance cost. For example, companies may dispense with annual general meetings with unanimous shareholders' consent. More companies will be eligible for simplified financial reporting. And there will be comprehensive rules to facilitate electronic communications between companies and their shareholders. There will be a new requirement for larger companies to feature an analytical and forward-looking business review in their directors' reports, to give shareholders more information on the significant issues, including environmental and staff matters.