Proposed Companies (Residential Addresses and Identification Numbers) Regulation

As part of moves to implement the revamped Companies Ordinance, the government is putting in place various subsidiary legislation, one of which – “Companies (Residential Addresses and Identification Numbers) Regulation” –  has recently garnered a lot of public criticism.

Under the proposed new law, personal information of directors and individuals (i.e. alternate directors and company secretary) will not be made available for public inspection. For those that have already filed these details with the Companies Registry (“CR”), the directors can apply to the CR to withhold their personal information from public inspection.

To access the restricted information, an application will need to be made for disclosure but the applicants will be limited to the directors themselves, entities duly authorised by the directors, shareholders of the company, public officers, public regulatory bodies, liquidators of companies and trustees of the property of a bankrupt.

Company and director searches have been an important tool and source of information for insolvency practitioners and forensic accountants in their investigations.

Whilst it is proposed that liquidators will still be able to access personal information of the directors whose company is in liquidation, there are many other cases in which the liquidators would need to access the information of directors whose companies are not in liquidation. For example, the liquidators may wish to ascertain the identity of the creditors who were paid off just prior to the commencement of the liquidation, or the liquidators may wish to verify whether purchasers of the company’s assets prior to the liquidation are related to the company’s directors.

Meanwhile, the proposal does not set out the detailed procedures of how the application for disclosure of information would be made. We are concerned that this might increase the costs of the liquidations and limit the scope of a liquidator’s investigations, which will not be in the interests of the creditors in general.

The new legislation also does not seem to be helpful at all for forensic and investigative accountants especially in their asset-tracing work. It is proposed that law enforcement units or public officers would be allowed to access directors’ information but it does not appear to have provided similar rights to assist civil investigations which are usually initiated by creditors or minority shareholders.

We understand the new law is intended to enhance protection of the privacy of directors. Indeed we have heard from innocent directors of companies in liquidation complaining of harassment by disgruntled creditors with threatening letters and annoying visits. But these are infrequent. If the directors are innocent, there is always the law to protect them from such intrusion. Directors owe fiduciary duties to all corporate stakeholders. Restriction of public access to directors’ information does not appear to be in the best interests of the public.

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