Bills Committee on Companies (Amendment) Bill 2002

 

COMPANIES (AMENDMENT) BILL 2002

COMMENTS

1. Subject to the specific comments below, we are in general
support of the proposed amendments.

2. We note the proposed s. 23(1A) aims to expressly spell
out the right of every shareholder to enforce the terms of the memorandum
and articles of association. However, it seems to us that the existing
s. 23 already clearly states that the memorandum and articles bind the
company and the members as if signed and sealed by each member and contain
covenants on the part of each member to observe all its provisions. In
other words, s. 23 clearly provides that there is a contract between the
members and the company. We would accordingly query the need to spell
out the members' and company's right to enforce the terms of such a contract.

3. We note that the reason for the proposed repeal of
s. 8, which currently allows shareholders holding not less than 5% in
the nominal value of the company's issued share capital or any class thereof
to apply to the court to annul a special resolution to amend a company's
objects clause, is the concern it may impede fundamental business decisions.
In particular, it is said that dissenting members of a public company,
if dissatisfied, can always sell their stake in the company. We have reservations
about this rationale because this could in principle be said for many
other provisions of the Ordinance with regard to public companies.

4. Further, we doubt whether the power conferred by s.8
on dissenting shareholders will impede business decisions because although
dissenting shareholders can apply to court, it does not necessarily mean
the court will grant an order of annulment. The court can properly come
to a view whether the application is made in good faith and make such
order as it thinks fit.

5. We note that the proposed s.153B makes a director vicariously
liable for the acts of an alternate director appointed to act in his place.
However the proposed s.153B does not bear out paragraph 8 of the Brief
that the director should be vicariously responsible for the acts and omissions
of his alternate except in relation to an offence. The proposed s.153B(1)(a)
makes a director who appoints an alternate director vicariously liable
for any tort committed by the alternate director while acting in the capacity
of alternate director.

6. Further, we note that the proposed s.153B as drafted
does not confine itself to torts committed by the alternate director against
the company and hence might be said to cover for example an assault by
the alternate director against another director during a board meeting.
If the object of the amendment is to improve corporate governance then
it may be considered that s.153B should be limited to torts against the
company. On the other hand, we note that s.153B as drafted does not apply
to other wrong-doing such as misfeasance and breach of fiduciary duties.
We assume that a deliberate decision has been made to specify "tort"
as the only kind of wrong-doing of the alternate for which the principal
director may be responsible.

Prepared by:

Mr. Aarif Barma, SC

Mr. Godfrey Lam



22nd October 2002