Loopholes in Hong Kong’s newly amended company law allow offshore-registered listed companies to skirt disclosure requirements and avoid liability, the Hong Kong Economic Journal reported Wednesday, citing industry experts.
The changes to the Companies Ordinance which came into force in March, require Hong Kong-incorporated companies to have at least one natural person as a director but there is no such stipulation for offshore-registered businesses and their non-locally registered subsidiaries.
That leaves more than 1,500 non-Hong Kong-registered listed companies beyond the reach of the ordinance.
The gray area allows these companies to use corporate directors, instead of natural persons, putting Hong Kong-incorporated companies at a disadvantage, the report said, citing Kwok Siu-man, head of corporate secretarial at Boardroom Corporate Services (Hong Kong) Ltd.
Corporate directors are subject to less stringent disclosure rules than natural persons. Also, their liability is limited.
Only 210 of 1,711 listed companies in Hong Kong were locally registered as of July.
Lawmaker Kenneth Leung, who represents the accounting constituency, said extending the ordinance to other jurisdictions is not feasible.
However, he said Hong Kong can make relevant legislation to plug the loopholes.
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