Companies Bill – Consultation on the Qualifying Criteria for Private Companies to Prepare Simplified Financial and Directors’ Report

The Companies Bill was introduced into LegCo in January 2011 and is being scrutinized by a Bills Committee. Currently, s 141D of the Companies Ordinance (Cap 32) provides that any private company, irrespective of its size, may prepare simplified accounts and simplified directors’ reports in respect of a financial year with the written agreement of its shareholders. In place of s 141D, Part 9 of the Bill proposes to ‘automatically’ exempt only ‘small’ private companies and holding companies of groups of ‘small’ private companies meeting certain ‘size’ criteria from the full reporting requirement. At the Bills Committee’s request, the Administration conducted a consultation exercise putting forward three options to solicit views on the extent that ‘large’ private companies/groups should also be allowed to adopt simplified reporting. The Law Society takes the view that as financial reports of a private company are prepared primarily for its members, there are no overriding reasons to disallow ‘large’ private companies from preparing simplified reports if members agree that they do not need to review full reports. On this basis, submissions were made in favour of Option 2 set out in the Consultation Paper, namely, that large private companies/groups should be permitted to opt for simplified reporting if shareholders holding at least 75% of the voting rights so resolve and no other shareholder objects. The submissions can be found at the Law Society’s website at: www.hklawsoc.org.hk/pub_e/news/submissions/20120118.pdf.

Consultation Paper on ‘Review of Patent System in Hong Kong’

To ensure that the Patent System in Hong Kong, which has been in place for more than a decade, continues to meet present-day circumstances and that its future positioning is in alignment with the Government’s vision to develop Hong Kong into a regional innovation and technology hub, the Commerce and Economic Development Bureau and the Intellectual Property Department published a Consultation Paper on 4 October 2011 to conduct a comprehensive review of the system. The Council reviewed the Consultation Paper with the assistance of the Intellectual Property Committee and
the Law Society has made comprehensive comments in response to the consultation. In gist, the Law Society is of the view that the current patent system with both standard and short-term patents provides a reliable, well-structured and cost effective system to the advantage of Hong Kong, its investors and entrepreneurs. Whilst some improvements in the system should be made, the Law Society is not convinced that an original grant patent system is necessary for Hong Kong or that the present system should be fundamentally changed. Hong Kong is a very small part of the global market and it is
unlikely that major users of the Hong Kong patent system (ie overseas businesses) would wish to apply for an original Hong Kong patent alone. As such, the small number of patent applications will not justify the high cost of establishing a technical information centre and of staffing the patent office to conduct search and examination. However, some improvements in the system are called for including allowing extensions of time for applications, simplifying the procedure for amending patents, expanding the number of countries whose patents can be ‘designated patents’ for the purpose of filing standard patents, etc. The Law Society expresses concern on the potential confusion over the use of titles ‘patent agents’ and ‘patent attorneys’ to the public in Hong Kong and overseas. Solicitors who conduct patent work and patent attorneys and patent agents employed by law firms are regulated by the Legal Practitioners Ordinance (Cap 159), the Law
Society Rules and the Hong Kong Solicitors’ Guide to Professional Conduct. Clients who engage them have the protection of professional indemnity insurance taken out by law firms but there is a significant group of patent practices which are set up or operated by non-lawyers which are unregulated and which do not take out any professional insurance. As patents are technical matters, to improve patent quality and to protect public interest, the Law Society supports the idea to have an accrediting body and a regulatory regime for ‘qualified’ patent practitioners. The Law Society’s submissions are available at: www.hklawsoc.org.hk/pub_e/news/submissions/20120118a.pdf.