One of the many effects of the COVID-19 pandemic has been the rise in the use of virtual meeting software in the context of shareholders’ meetings of companies. The practice of holding meetings in this way has become an everyday occurrence, but this has not always been entirely in sync with the relevant legislation.
This article outlines some examples of the shortcomings of the existing Companies Ordinance (Cap. 622) (the “Ordinance”), and how upcoming changes to the Ordinance will imminently plug these gaps between law and practice.
According to the provisions of the Ordinance existing as at the time of writing, when preparing a notice of meeting to be circulated to the shareholders, it is necessary to specify the place where the meeting will be held. If the meeting is to be held in two or more places, the “principal place” of the meeting also needs to be specified. This can create a fiction of sorts, where in fact, all the attendees join the meeting from separate places via, say, telephone conference, and the location of one of them is arbitrarily regarded as the principal place of the meeting.
It has become increasingly commonplace for meetings to be held (in whole or in part) via web-based conferencing software, such as Zoom, Teams, VooV and so on. Apart from connecting to a virtual meeting using a computer, tablet or smartphone, these technologies also allow users to ‘dial in’ via a conventional telephone. So it is not unusual these days for people to take calls and join meetings while on the move. As a consequence of this, a meeting participant may not stay in any one place for the duration of the meeting, or they may temporarily be in a location that is not accurately recorded. This can further complicate what the “principal place” of a meeting might be for the purposes of keeping records.
With a view to keeping with the times, the Companies (Amendment) Ordinance 2023 (the “Amendment Ordinance”) was published in the Hong Kong Government’s Gazette on 27 January 2023 regarding various updates to the Ordinance that will become effective on 28 April 2023.
The main update under the Amendment Ordinance is that there is now an express clarification that shareholders’ meetings may take place either as a physical meeting, as a virtual meeting, or as a hybrid between the two.
The requirement for specifying the principal place of the meeting in a notice of meeting remains, however, only where the meeting is proposed to be held in two or more physical venues.
For those who prefer not to use virtual meeting technology to hold shareholders’ meetings at all, the Amendment Ordinance contains a saving provision that allows a company’s articles of association to expressly preclude the holding of a shareholders’ meeting by using virtual meeting technology, or expressly requiring meetings to be held at a physical venue.
In addition to updating the Ordinance, the Amendment Ordinance also features updates to the Model Articles to cater for the holding of meetings via virtual meeting technology.
The Model Articles were prescribed by the Companies (Model Articles) Notice (Cap. 622 sub. leg. H) in 2014 and are regarded as the standard form articles of association available for adoption by Hong Kong companies. While a Hong Kong company may adopt its own tailored articles of association, the Model Articles are frequently referred to as a reference standard.
The updates to the Model Articles concern practical considerations relating to shareholders’ meetings and introduces some new administrative arrangements.
The updates to the Model Articles do not affect the existing articles of association of a Hong Kong company. An existing company whose articles of association make reference to the Model Articles refer to the version in force as at the date of adoption of the articles of association.
A company wishing to take advantage of the provisions as appearing in the updated Model Articles will need to amend its articles of association to make corresponding updates. This can be either to include references to the updated Model Articles or to directly incorporate new provisions into the company’s articles of association.
Should you require further information on this topic, please do not hesitate to contact Chris Williams (+852 2803 3622 / [email protected]) or Ronald Wan (+852 2803 3637 / [email protected]).
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Disclaimer: The information contained in this article is intended to be a general guide only and is not intended to provide legal advice. Please contact [email protected] if you have any questions about the article.