Frequently Asked Questions

• Update the definitions of “holding company” and “parent undertaking” to reflect the current accounting standards, to avoid inconsistency between the Companies Ordinance and the current accounting standards; and

• Adopt control as the basis for determining whether an entity is a “subsidiary” of the “parent undertaking”.

An undertaking has control over another undertaking if it has the power to govern the financial and operating policies of that other undertaking so as to obtain benefits from that other undertaking’s activities. An undertaking is presumed, unless the contrary is proved, to have control over another undertaking if –

• it holds a majority of the voting rights in that other undertaking;

• it has the power to exercise a majority of the voting rights in that other undertaking by reason of an agreement with other members of that other undertaking;

• it has the right to appoint or remove a majority of the board of directors, or an equivalent governing body, of that other undertaking; or

• it has the power to cast a majority of votes at meetings of the board of directors, or an equivalent governing body, of that other undertaking.

Under the new CO, private or guarantee companies and holding company of a group of companies (other than certain companies specifically excluded) that meet the specified size criteria are referred to as companies falling within the “reporting exemption”. Other private companies (not being a member of a corporate group) with unanimous members’ written agreement may also benefit from the reporting exemption. Companies that fall within the reporting exemption can prepare simplified financial statements and is subject to less stringent requirements for the preparation of auditors’ reports and directors’ reports. For details about reporting exemption, please refer to Q3 to Q10 of the FAQs on Accounts and Audit.

1. holding companies of corporate groups comprising small private companies or eligible private companies and small guarantee companies (mixed groups); and
2. holding companies of groups of small private companies, eligible private companies, small guarantee companies, or mixed groups described in paragraph (i) above, with non-Hong Kong subsidiaries.

• expanding the scope for simplified reporting (Please see Q6 above);

• providing an option for a holding company which is also a wholly owned subsidiary to prepare consolidated financial statements;

• allowing a partially owned subsidiary to prepare its own accounts instead of consolidated financial statements if all members agree;

• providing that for a group of eligible private companies, the adoption of simplified reporting will require a resolution by members of the holding company only;

• providing that the financial year may be shortened or lengthened by a period not exceeding 7 days;

• providing alternative means for a holding company to disclose the names of the directors of all its subsidiary undertakings on its website, or by keeping such a list at its registered office and making it available for inspection;

• expressly allowing a company’s articles to be in electronic form;

• allowing a company with both an English registered name and a Chinese registered name to display either its English name or Chinese name (but both names must be stated in the articles);

• providing for an exemption from general registration requirement for alteration of articles if such alteration is in respect of a change of company name only, as a separate registration requirement already applies to a change of company name;

• providing for an exemption from the requirement to notify the Registrar of Companies of a change in place where copies of instruments creating charges are kept if the relevant change only relates to a change of the address of a company’s registered office or the address of a registered non-Hong Kong company’s principal place of business in Hong Kong;

• providing that if all members in a class agree to a variation of the class rights, the variation will have effect as agreed;

• specifying the primary accounting reference date for a dormant company that has ceased to be dormant;

• clarifying that the court-free procedure for horizontal amalgamation is also available for subsidiaries of a holding company incorporated outside Hong Kong so long as the merging companies are Hong Kong companies;

• clarifying the conditions for granting applications for administrative restoration of companies; and

• clarifying in the Model Articles that an ordinary resolution of a company is required only for certain types of alteration of the share capital of the company.

1. if the holders of shares or members in a class all agree, by written consent or resolution, to a variation of the class rights, the variation may take effect on the date of, or as specified in, the consent or resolution. No holder of shares or member in the class may apply to the court to have the variation disallowed in such circumstances; and
2.  if the variation is not with the consent of all holders of shares or members in the class, the variation of class rights takes effect –
1. where no application to the Court to have the variation disallowed is made under section 182 or section 190 (as the case may be) within 28 days after the date on which the variation is made, at the end of the 28 days’ period; or
2. where an application to the Court to have the variation disallowed is made within the 28 days’ period, at the time the application is withdrawn or finally determined (unless the variation is disallowed).

1. an office or a place in Hong Kong where the company carries on its business and that is open to the public; or
2. the principal place of business of the company in Hong Kong.

• A non-Hong Kong company in liquidation, when displaying or stating its name, must –

  1. if its name is in a language other than Chinese, add “(in liquidation)” after the name;
  2. if its name is in Chinese, add “(正進行清盤)” after the name; or
  3. if its name is in Chinese and in a language other than Chinese, add “(正進行清盤)” after the name in Chinese; and add “(in liquidation)” after the name in that other language.

• A non-Hong Kong company in liquidation must, in every advertisement of the company in Hong Kong –
   
  1. state in legible characters its name and its place of incorporation; and
  2. where applicable, state in legible characters that the liability of its members is limited.