New Hong Kong Companies Ordinance: Situations where companies are not required to hold AGMs

01 Dec 2013 | Newsletter/briefing

WHEN IN FORCE: 3 March 2014

COMPANIES AFFECTED: All Hong Kong incorporated companies

1. DISPENSING WITH AGMS

NEW PROVISIONS: Part 12 of new CO: ss613-614;
Part 9 of new CO: ss396, 403 and 430 on circulation of financial statements and reports and (re) appointment of auditors

SUMMARY OF CHANGES

  • a company may, by passing a written resolution or a resolution at a general meeting, with unanimous shareholders’ consent dispense with the requirement to hold an annual general meeting ("AGM")
  • no future AGM need be held unless a member gives notice to the company requesting an AGM to be held for a particular financial year. The notice must be in hard copy or electronic form. The notice must be given no later than three months prior to the last day that the company would otherwise be required to hold an AGM for the relevant financial year
  • a resolution dispensing with the AGM may be revoked by shareholders passing an ordinary resolution to that effect. After revocation, a company is required to hold an AGM every financial year. A company is, however, not required to hold an AGM for the current financial year if the resolution of revocation is passed within three months prior to the last day that the AGM would otherwise be required to be held

CONSEQUENTIAL CHANGES

  • the financial statements and reports originally required to be laid before an AGM and sent to shareholders must still be sent to shareholders. The time period for sending the financial statements and reports (which depends upon the type of company) is set out in s430
  • where a company has dispensed with the requirement to hold an AGM, the usual requirement to appoint an auditor for a financial year by way of resolution passed at the AGM does not apply. In such circumstance, the default position - subject to a number of exceptions - is that the then current auditor is deemed reappointed for the next financial year (s403). This default position does not apply where the then current auditor was appointed by the directors of the company (whether as the company’s first auditor or in order to fill a casual vacancy) or where the company’s articles provide otherwise

2. PASSING A WRITTEN RESOLUTION IN PLACE OF HOLDING AN AGM

NEW PROVISIONS: Part 12 of new CO: ss548-561 and 612(1)

SUMMARY OF CHANGES

  • in the same way as under the existing legislation, a company is not required to hold an AGM if everything that is required or intended to be done at an AGM is done by a written resolution
  • a copy of each document such as the financial statements and reports that would otherwise be required to be laid before the company or produced at the AGM must be provided to each member on or before the circulation date of the written resolution
  • written resolutions must follow the new statutory rules and procedures in order to be valid. These are considered further in a separate practitioner alert

3. COMPANIES THAT ARE EXEMPT FROM THE REQUIREMENT TO HOLD AGMS

NEW PROVISIONS: Part 12 of new CO: ss611 and 612(2)(a)

SINGLE-MEMBER COMPANIES

  • a single-member company is exempt from the requirement to hold AGMs under the new CO
  • for a single-member company, the requirements on the circulation of financial statements and reports and on (re)appointment of auditors are the same as those imposed on a company which has dispensed with the requirement to hold an AGM as discussed above

DORMANT COMPANIES

  • in the same way as under the existing legislation, a dormant company is exempt from the requirement to hold AGMs
  • a dormant company is also exempt from the requirements: (i) to prepare financial statements and reports (which normally must be laid before an AGM and be sent to shareholders); and (ii) to appoint an auditor for a financial year
  • these exemptions will cease to have effect on or after the date when the dormant company enters into a transaction (subject to certain exceptions specified in the new CO)

Contacts

Peter Brien (partner), Lisa Chung (partner), Peter Lake (partner)


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