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Restricting Corporate Directorship in Private Companies

(I) Introduction

 
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The new Companies Ordinance (Cap. 622) ("the new CO") requires every private company to have at least one director who is a natural person, to enhance transparency and accountability.

 
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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.

 
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Pursuant to section 458 of the new CO, the Registrar of Companies may direct a 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.

 

(II) Relevant Provisions of the new CO

 
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Sections 457 and 458

 
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Part 10, Section 89 of Schedule 11

 

(III) Transitional Arrangements

 
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For private companies registered under the old Companies Ordinance (Cap. 32), there is a grace period of 6 months after the commencement date of the new CO for the companies to comply with the new requirement.

 
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Appointments of new directors should be reported to the Registrar of Companies in the specified form within 15 days pursuant to section 645 of the new CO.

 

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