Removing directors by Companies Ordinance rules in Hong Kong
The Companies Ordinance (Cap. 622) in Hong Kong provides a mechanism for shareholders to remove a director from office before the end of their term, even if the company's articles of association or any agreement with the director might suggest otherwise. This can be done through an ordinary resolution passed at a general meeting of the company.
Here's a breakdown of the key steps involved:
Requirements for removal:
Ordinary resolution: A simple majority of the votes cast by members present and voting at the general meeting is required.
Special notice: A member proposing the removal must give the company a special notice at least 28 days before the general meeting.
General meeting: The company must call a general meeting to consider the resolution, giving at least 14 days' notice to shareholders.
Rights of the director:
Right to be heard: The director has the right to speak at the meeting to defend themselves.
Right to make representations: The director can submit written representations to the company, which must be circulated to all shareholders or read out at the meeting.
Important considerations:
Private companies: In private companies, directors may be removed without cause, subject to the procedural requirements outlined above.
Listed companies: Listed companies may have additional rules and regulations governing the removal of directors, often outlined in their listing rules.
Director's contract: Any removal of a director may trigger contractual obligations, such as compensation or notice periods.
In Hong Kong, a director's contract can include provisions that outline the potential consequences of their removal, such as compensation or notice periods. These provisions are typically negotiated and agreed upon between the company and the director when the contract is initially drafted.
Here are some key points to consider:
Compensation: The contract may specify a severance package or other forms of compensation that the director is entitled to upon termination, including removal. This could involve a fixed sum, a certain number of months' salary, or other benefits.
Notice Periods: The contract may require the company to give the director a certain amount of notice before removing them, or vice versa. This allows both parties to plan for the transition and avoid potential disruptions.
Cause vs. No Cause Termination: The contract may distinguish between termination "for cause" (e.g., misconduct) and termination "without cause." The level of compensation and notice periods may differ depending on the reason for termination.
Dispute Resolution: The contract may include provisions for resolving disputes related to termination, such as mediation or arbitration, to avoid costly and time-consuming litigation.
It is important to note that the specific terms of a director's contract can vary widely depending on the circumstances of the company, the role of the director, and the agreement between the parties.
For further information, you may refer to the following resources:
Companies Ordinance (Cap. 622): https://www.elegislation.gov.hk/hk/cap622
Companies Registry: https://www.cr.gov.hk/
By following the prescribed procedures and considering the legal implications, shareholders can effectively exercise their rights to remove a director if necessary.
How Bestar can Help
Removing directors by Companies Ordinance rules in Hong Kong
Bestar can be invaluable in the process of removing a director from a Hong Kong company, especially for listed companies due to the complex legal and regulatory landscape. Here's how Bestar can assist:
1. Understanding Legal Requirements:
Companies Ordinance: Bestar can interpret the Companies Ordinance and its relevant sections on director removal, ensuring compliance with all legal procedures.
HKEX Listing Rules: For listed companies, Bestar can navigate the specific rules and regulations of the HKEX, which often have additional requirements for director removal.
Company's Articles of Association: Bestar can review the company's articles to identify any provisions that might impact the removal process.
2. Drafting Necessary Documents:
Special Notice: Bestar can draft the required special notice, ensuring it meets all legal requirements and provides sufficient information.
Resolutions: Bestar can draft the necessary resolutions for the general meeting, including the resolution to remove the director.
Other Legal Documents: Bestar can prepare any other necessary legal documents, such as board resolutions or shareholder agreements.
3. Advising on Procedural Requirements:
Timing and Notice Periods: Bestar can advise on the correct timing for calling the general meeting and giving notice to shareholders.
Meeting Procedures: Bestar can guide on the proper conduct of the general meeting, including the director's right to be heard and make representations.
Voting Procedures: Bestar can ensure that the voting process is conducted fairly and in accordance with the company's articles and the Companies Ordinance.
4. Managing Legal Risks:
Contractual Obligations: Bestar can assess any potential contractual obligations, such as compensation or notice periods, that may arise from the removal.
Regulatory Compliance: Bestar can ensure that the entire removal process complies with all relevant regulations and avoids potential legal issues.
By engaging Bestar, you can ensure that the director removal process is conducted smoothly, legally, and minimizes potential risks to the company.
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