COMPANY and securities laws may be divided, and include separate supervision for different types of enterprises, following a review by government-appointed company law reformer Ermanno Pascutto. Mr Pascutto said that changes would reflect developments in other Commonwealth countries. Mr Pascutto was appointed in November last year to review Hong Kong's Companies Ordinance, and has started by comparing Hong Kong law with that of other jurisdictions. It is the first part of his five-step, two-year plan. He will look at what company law should encompass and whether it should regulate listed companies. Points of reference will be drawn from Commonwealth models. Like Hong Kong, Commonwealth company legislation, such as in Canada and Australia, is based on British law. 'Some of these Commonwealth jurisdictions that grew out of a British model have updated their legislation to a 21st century model,' he said. 'That is what happened in Canada in the 1970s and in New Zealand last year.' These countries decided to separate company law from securities law. Company law tends to focus on companies incorporated in that jurisdiction with some provisions on supervising overseas companies. On the other hand, securities law is for locally-listed companies regardless of their places of domicile. 'Hong Kong's company law still touches on areas which primarily belong to securities law or the insolvency law in other countries,' he said. However, he said that Hong Kong was actually moving in a similar direction, towards clearer segregation. 'Some powers have been shifted from the Registrar of Companies to the SFC [Securities and Futures Commission] in recent years,' he said. Issues such as the formality of company law, share holders' rights, directors' responsibilities and miscellaneous items left over, in particular, the supervision of overseas companies, will be included in the review. The formality of company law refers to the different kinds of incorporation and capital structure. It will address issues such as the simplification of the lengthy Memorandum and Articles of Association. An industry consultation will be conducted at the end of each step. On the hot topic of corporate governance, Mr Pascutto reckoned most of the issues were related more to enforcement than to new legislation. 'A large part of these issues is really for the SFC and the stock exchange,' he said. Issues such as the company directors' duties and rights of shareholders to take directors to task if they do not act appropriately are codified in the law. It is up to the court to interpret the rules. But companies that are listed and have access to public funds should accept additional responsibilities and be subject to regulation by securities legislation. 'Company law should not be a dense body of regulation,' he said. 'It should be digestible by businessmen and practitioners.' Mr Pascutto is soliciting support from industry in his task. A letter was sent to over 20 professional bodies that might be interested in the Companies Ordinance, informing them of the review and clarifying some misconceptions. 'I want to reassure the business community that company law will not move in a direction of social engineering,' he said. Working groups will be set up with representation from constituencies with an interest in company law to advise on various aspects of the review. 'I want the review to be as open as possible,' he said. 'By the end of 1996, I will finish a proposal indicating the direction in which Hong Kong's company law should be going. I expect the full process to take five years.'
