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Restricting Corporate Directorship in Private Companies

 
Q1.

Is there any new restriction on the appointment of directors for private companies after the new Companies Ordinance (Cap. 622) ("the new CO") comes into operation?

 
Q2.

What is the purpose of introducing the new requirement for private companies to have at least one director who is a natural person?

 
Q3.

When will the new requirement for a private company to have at least one director who is a natural person take effect?

 
Q4.

Is there any grace period for existing private companies registered under the old Ordinance to comply with the new requirement to have at least one director who is a natural person?

 
Q5.

For private companies incorporated under the new CO, do they also have 6-month grace period to comply with the requirement to have at least one director who is a natural person?

 
Q6.

What will be the consequence if a private company fails to comply with the requirement to have at least one director who is a natural person?

 
Q7.

Is there any new restriction on corporate directorship under the new CO?

 
Q8.

Can a body corporate continue to act or be appointed as a director of a private company after the implementation of the new CO?

 
Q9.

Is the requirement for a private company to have at least one director who is a natural person applicable to a company which is deemed to be a dormant company under section 344A of the old Ordinance on implementation of the new CO?

 
Q10.

Does the new requirement for private companies to have at least one director who is a natural person apply to non-Hong Kong companies registered in Hong Kong?

 
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Q1.

Is there any new restriction on the appointment of directors for private companies after the new Companies Ordinance (Cap. 622) ("the new CO") comes into operation?

 
Answer:

Yes. Section 457(2) of the new CO requires that every private company must have at least one director who is a natural person (i.e. an individual).

 
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Q2.

What is the purpose of introducing the new requirement for private companies to have at least one director who is a natural person?

 
Answer:

The new requirement on directors of private companies will enhance transparency and accountability of directors.

 
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Q3.

When will the new requirement for a private company to have at least one director who is a natural person take effect?

 
Answer:

The new CO has come into operation on 3 March 2014. The new requirement is applicable to all private companies registered under the new CO. Regarding the position of private companies registered under the old Companies Ordinance (Cap. 32) ("the old Ordinance", see Answer to Q4 below.

 
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Q4.

Is there any grace period for existing private companies registered under the old Ordinance to comply with the new requirement to have at least one director who is a natural person?

 
Answer:

Pursuant to sections 89(1) and (2) of Schedule 11 to the new CO, there is a grace period of 6 months after the commencement date of the new CO for companies registered under the old Ordinance to comply with the new requirement. Appointment of new directors should be reported to the Registrar of Companies ('the Registrar") in the specified form within 15 days pursuant to section 645 of the new CO.

 
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Q5.

For private companies incorporated under the new CO, do they also have 6-month grace period to comply with the requirement to have at least one director who is a natural person?

 
Answer:

No. The grace period only applies to private companies registered pursuant to the old Ordinance. All private companies registered under the new CO must have at least one natural person as director on incorporation.

 
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Q6.

What will be the consequence if a private company fails to comply with the requirement to have at least one director who is a natural person?

 
Answer:

Pursuant to section 458 of the new CO, the Registrar may direct the company to appoint a director who is a natural person in compliance with the requirement. If a company fails to comply with the direction, the company and every responsible person of the company commit an offence, and each is liable to a fine of $100,000 and for a continuing offence, a further fine of $2,000 for each day during the period.

 
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Q7.

Is there any new restriction on corporate directorship under the new CO?

 
Answer:

Section 456 of the new CO maintains the restriction on corporate directorship in public companies, companies limited by guarantee and private companies which are members of a group of companies of which a listed company is a member. This restriction, however, does not apply to other private companies which are required to have at least one director who is a natural person to enhance transparency and accountability.

 
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Q8.

Can a body corporate continue to act or be appointed as a director of a private company after the implementation of the new CO?

 
Answer:

So long as the private company is not a member of a group of companies of which a listed company is a member, a body corporate can continue to act or be appointed as its director. However, section 457 of the new CO requires that every private company must have at least one director who is a natural person.

 
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Q9.

Is the requirement for a private company to have at least one director who is a natural person applicable to a company which is deemed to be a dormant company under section 344A of the old Ordinance on implementation of the new CO?

 
Answer:

No. An existing dormant company will only need to comply with the requirement to have at least one director who is a natural person when it ceases to be a dormant company pursuant to section 5(5) of the new CO. Please refer to sections 89 (3) and (4) of Schedule 11 to the new CO.

 
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Q10.

Does the new requirement for private companies to have at least one director who is a natural person apply to non-Hong Kong companies registered in Hong Kong?

 
Answer:

No. The new requirement only applies to local private companies.

 
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Note
 

Please also see FAQs – Local Limited Companies

Documents relating to Directors / Company Secretary

 
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