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Headcount Test

(I) Introduction

 
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Pursuant to section 674(2) of the new Companies Ordinance ("the new CO"), the "headcount test" in a scheme of arrangement that involves a general offer or a takeover offer is replaced with the requirement that the votes cast against the scheme do not exceed 10% of the voting rights attached to all disinterested shares.

 
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The new test that replaces the "headcount test" upholds the "one share, one vote" principle whilst at the same time provides an added safeguard to protect minority shareholders' interests.

 
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For creditors' schemes and members' schemes that do not involve a general offer or takeover offer, the headcount test is retained. The Court is given a new discretion to dispense with the headcount test for a members' scheme that retains the test.

 
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A dissenting member may be ordered to pay legal costs under section 676(5) of the new CO only if his opposition to the scheme is frivolous or vexatious.

 

(II) Relevant Provisions of the new CO

 
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Sections 674 and 676

 

(III) Transitional Arrangements

 
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The relevant provisions in the old Companies Ordinance (Cap. 32) (“the old Ordinance”) (i.e. sections 166, 166A and 167) and the Companies (Winding-up) Rules (Cap. 32H) (i.e. rule 117) continue to apply in relation to a scheme if an application to the Court under section 166(1) of the old Ordinance is made before the commencement date of the new provisions.

 

Frequently Asked Questions