9
Companies (Amendment) Bill
Following is the speech by the Secretary for Financial Services, Mr Rafael Hui, in moving the second reading of the Companies (Amendment) Bill 1996 in the Legislative Council today (Wednesday):
Mr President,
I move the second reading of the Companies (Amendment) Bill 1996.
The Bill proposes a number of changes to the Companies Ordinance, notably the abolition of the doctrine of ultra vires, and the related doctrine of constructive notice, both of which have outlived their usefulness.
The doctrine of ultra vires, whereby a company's contractual capacity is limited by the objects and power clauses contained in its memorandum of association, was applied by English courts in the nineteenth century and was intended as a protection for its members and creditors. However, it has since become an obstacle for companies, which may commence new businesses without realising that a change in objects is necessary, and a trap for unwary third parties, as their contractual dealings with a company may be unenforceable. The ultra vires doctrine has been abolished by statute in a number of common law jurisdictions such as Australia, New Zealand and Canada and instead companies have been given the capacity of an individual or a natural person. Under the proposals, a company may still choose to limit its objects and powers in its memorandum and any such limitations will bind its directors and management. However, third parties will still be protected in their dealings with the company.
Changes are also made to the related doctrine of constructive notice. Under this doctrine a person is deemed to have knowledge of the contents of any documents concerning a company that have been filed and are available for public inspection. The Bill abolishes this in so far as it relates to companies' memoranda and articles of association.
Other significant proposals contained in this Bill are briefly as follows:
The statutory forms contained in the Fifth Schedule of the Ordinance and the 48 statutory forms set out in the Companies (Forms) Regulations will be deregulated. Instead, the Registrar of Companies will be given more flexibility to determine the content and format of the forms. This will enable the Registrar to improve and update them more readily.
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