appears to have otherwise been guilty of any fraud in relation to the company or of any breach of his duty to the company.
The period of time, however, is limited to a maximum of 5 years, after which time the individual concerned would be free to become a director of a publicly-listed company.
And under Section 157F of the Companies Ordinance, a former director of at least 2 companies which have succes- sively gone into liquidation, while insolvent within a 5-year period, may be banned from any involvement in the manage- ment of another company.
The ban would also be limited, however, to a maximum of 5 years.
Shareholders' Recourse
The occasion may arise where shareholders of a company would like to get rid of a certain director.
The removal of a director from a company is governed by the Companies Ordinance, which overrides any agreement made in a company's articles or any agreement made be- tween the company and a director.
The purpose of the provision in the Companies Ordi- nance is to protect the cestuis que trust from unsatisfactory
management.
Under Section 157B of the Companies Ordinance, the removal of a director can only be brought about by special resolution requiring the support of 75 percent of the share- holders' votes present at an Extraordinary General Meeting (EGM).
In Hongkong, however, according to Ms Pauline Wallace's book, 'Company Law in Hongkong', it is usually possible for directors to corner 25 percent of the votes if not by themselves, then through proxies.
This makes it, in practice, impossible for shareholders to get rid of any unwanted directors because shareholders would never be able to obtain 75 percent of the vote of members present at the EGM.
To remove a director successfully, shareholders, collec- tively, must be completely bent on doing so, probably with the support of other directors.
Even if shareholders triumphed and removed a director, they may still have to cough up compensation or damages in respect to the director's loss of office.
This could prove, in some cases, to be costly.
The Director's Return
While some people may question the integrity of certain
directors, and may question whether or not they should be directors, there are others who argue that it is unfair to penalize a person wishing to be a director who has 'done his time'.
If a person who has been convicted of a criminal offence attempts to become a director of a publicly-listed company, there are those who feel that it is unreasonable to persecute that person if he/she has paid the penalty.
It is a question of rehabilitation, say legal experts. Torehabilitate means to restore (as something damaged or decayed) to a state of efficiency and good management'. A convicted criminal may emerge from the end of a sentence a new person.
But 'you cannot teach an old dog new tricks' goes the saying --and so say some observers.
Legal experts, however, claim that rehabilitation does work and they claim that many 'jailbirds' who have served
their time and who are back on the ‘outside' have seen the
error of their former ways.
One legal expert consulted by TARGET thought that it is not unreasonable that there are no rules in the Companies Ordinance that restrict a person, or a former director, from becoming a director of a publicly-listed company.
The legal expert reckoned that to impose a lifetime ban, for instance, on a person, or a former director, from becom- ing a director following a conviction resulting from a breach of the Companies Ordinance would be both unfair and unjustifiable.
If the person convicted was completely rehabilitated at the end of his/her sentence, then it would be unreasonable to prevent that person from becoming a director, said the
expert.
The Stock Exchange of Hongkong Ltd has no extra rules outside the Companies Ordinance that may restrict a person from becoming a director of a publicly-listed company.
ties.
Neither does the Office for the Commissioner of Securi-
However, a corporate expert close to the Office for the Commissioner of Securities was of the personal opinion that something more should be done to regulate who should, or should not, be a director of a publicly-listed company.
He said that the introduction of more regulations would
'make life a bit easier'.
The corporate expert also pointed out that a person who has previously been convicted of an criminal offence is not required at law to have been rehabilitated in order to become a director of a publicly-listed company.
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