The Hong Kong Government is introducing measures to encourage companies to merge as part of wider efforts to help struggling Hong Kong corporates stay afloat. A number of amendments to the Companies Ordinance were unveiled yesterday, including the introduction of 'merger-relief' measures, which the Government hopes will facilitate merger activity in Hong Kong. Principal assistant secretary for Financial Services Julina Chan said the measures would encourage companies to restructure locally, rather than going offshore where legal restraints might be onerous. She said the measures would 'enable related companies to pool resources more effectively and efficiently, which is of particular importance at a time of economic downturn'. Presently, the pre-acquisition profits of an acquired company are required to be frozen in a special share premium and cannot be distributed to the shareholders of the new group. Under the new arrangement, entities could be accounted for as if they had always been combined. So-called merger relief will be allowed when a reconstruction between a parent and wholly owned subsidiary does not result in a material change in the shareholding structure of the group or cause assets to leave the group and, secondly, when an issuing company secures at least a 90 per cent holding in the targeted company. Other measures unveiled yesterday included new statutory procedures for de-registering solvent and defunct private companies, and removal of the requirement for listed companies to report other directorships of their directors. In December the Financial Services Bureau unveiled proposals aimed at introducing 'provisional supervision' to help struggling firms stave off liquidation by giving them relief from creditors while an administrator compiled a rescue plan. The efforts to update Hong Kong's corporate ordinances come against a backdrop of rising corporate failures and rising unemployment. The Companies (Amendment) Bill 1999 will be introduced into the Legislative Council on March 10. Most of the proposals in the bill have been discussed and supported by the Standing Committee on Company Law Reform.