Briefingnotes Part10 e
Briefingnotes Part10 e
INTRODUCTION
(b) clarifying the standard of directors’ duty of care, skill and diligence
(paragraphs 9 to 13); and
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4. Apart from the above major changes, this Part also restates a
miscellany of provisions in the Companies Ordinance (Cap. 32) (“Cap. 32”)
concerning directors and company secretaries, including directors’ vicarious
liability for the acts of their alternates (section 478), the avoidance of acts done
by a person in a dual capacity as director and company secretary (section 479),
prohibition of undischarged bankrupt from acting as director (section 480) and
the keeping of minutes of proceedings at directors’ meetings (sections 481 and
482).
5. The details of the major changes in Part 10 are set out in paragraphs 6
to 22 below.
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Clarifying the standard of directors’ duty of care, skill and diligence
(Sections 465 and 466)
10. With a view to providing clear guidance to directors, the standard for
company directors’ duty of care, skill and diligence is clarified in the new CO
to incorporate a mixed objective and subjective test.
11. Section 465(2) sets out a mixed objective and subjective test for the
standard in carrying out a director’s duty to exercise reasonable care, skill and
diligence under section 465(1). The test requires the acts of a director to be
judged both objectively and subjectively. In deciding whether a director of a
company has breached the duty of care, skill and diligence owed by him to the
company, his conduct is compared to the standard that would be exercised by a
reasonably diligent person having –
(a) the general knowledge, skill and experience that may reasonably be
expected of a person carrying out the functions carried out by the
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director in relation to the company (objective test in section
465(2)(a)); and
(b) the general knowledge, skill and experience that the director has
(subjective test in section 465(2)(b)).
12. Section 465(4) further provides that the duty has effect in place of the
corresponding common law rules and equitable principles. Section 465(5)
provides that the duty applies to a shadow director. It is considered
appropriate to subject shadow directors to the same duty as a duly appointed
director, because anyone who interferes in the affairs of a company to the
extent that makes him fall within the definition of a shadow director must take
on the same responsibilities and duties as those of a director.
13. Section 466 preserves the existing civil consequences of breach (or
threatened breach) of the duty. The remedies for breach of the duty will be
exactly the same as those that are currently available following a breach of the
common law rules and equitable principles that the said duty replaces.
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Position under the new CO
17. Cap. 32 requires a private company to have at least one director and a
public company at least two directors. In the event of contravention, the
company and every officer in default are liable to a fine. In addition, every
company should appoint a company secretary though there is no offence
provision for failure to appoint one.
19. Sections 458 and 476 give the Registrar the power to issue a direction
to a company where it appears to the Registrar that any of the requirements in
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section 453(2), 454(1) or 457(2) regarding the appointment of director or in
section 474(1) or (4) or 475(2) or (3) regarding the appointment of company
secretary is contravened. Non-compliance with the direction is an offence.
The company and every responsible person of the company will be liable to a
fine.
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TRANSITIONAL AND SAVING ARRANGEMENTS
Companies Registry
March 2013
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