Explainer | From Peregrine to Next Digital: Hong Kong invokes rarely-used powers in company law
- The government can only appoint a special inspector under the Companies Ordinance when public interest is at stake
- The biggest of all cases involved the Allied Group in 1992 that cost taxpayers HK$46 million after a 12-year legal battle
It marks the first time in 22 years the government has invoked a clause in the city’s Companies Ordinance that empowers the financial secretary to order an investigation into a public company for misconducts and intent to cheat creditors.
Several such appointments have been made since the early 1970s, although only three have taken place in the 1990s. Such rare occurrences suggest the clause is reserved for extraordinary situations. They also come at a big cost to taxpayers and often lead to further enforcement actions.
Here is what you need to know about the history of such probes and the latest case.
How does the government appoint a special inspector?
Under Sections 841 (2) and (3) of the Companies Ordinance, the financial secretary may appoint a person to investigate a company’s financial affairs for conduct deemed prejudicial to its shareholders, or with intent to defraud its creditors.