Hong Kong's corporate governance has taken a step forward with the proposal by the Securities and Futures Commission (SFC) to lower the corporate takeover trigger from 35 per cent to 30 per cent. The trigger is the level of ownership at which investors who want to buy a company have to make an offer to all the target's shareholders. Following the change, any proposed buyer who goes above the 30 per cent threshold by law will have to make a general offer at the same price to all other shareholders. That should mean a fairer deal for smaller shareholders who in the past have sometimes been denied the same terms as those offered to controlling shareholders. The proposal, the consultation for which began yesterday and will continue until the end of May, is aimed at bringing Hong Kong in line with Chinese and other financial markets. The 30 per cent level has applied in the mainland since 1998, while the UK adopted the figure in 1974. Some places have gone even further - Singapore sets its trigger at 25 per cent. The SFC is also proposing to reduce the creeper level - within which a controlling shareholder may increase his shareholding without triggering a mandatory offer - to two per cent in a 12-month period, from the current five per cent. Existing shareholders with a holding of between 30 and 34.99 per cent in a company on the implementation date should abide by the existing 35 per cent trigger, the SFC said. However, these shareholders will be asked to register with the commission. In an increasingly global environment and with stronger competition day by day from other financial capitals such as Shanghai, Hong Kong has to present itself as one of world's most open and transparent places for business. The proposed measures mark an important step along that road, offering greater potential for smaller shareholders to share in the spoils of a company takeover. But it is only a first step. Amending regulations is noble in itself, but more must be done to push Hong Kong forward. What is needed from the Government, the SFC, Hong Kong Exchanges and Clearing and from the business community itself is the fostering of a culture that will persuade future investors that Hong Kong is one of the best and most transparent places to put their money. That means better company reporting regulations, firmer action by the authorities against companies when they commit misdemeanours and more comprehensive annual company reports. Critically, it also means an acceptance of the importance of a climate in which individual shareholders feel they have a real voice in a company's future. If the proposals are adopted, they would take effect next year. The SFC's move is to be applauded for recognising that Hong Kong cannot afford to sit back and rest on its laurels. It needs to change to thrive. It is to be hoped that the authorities keep up the pressure for a more transparent and fairer system in other areas of corporate governance.