Hong Kong Company Law
As far as the case of Mr. Paul is concern, Mr. Paul is carrying out the act of insider trading. Insider trading entails the use of company information to gain an advantage over others. The fact that the wife of Paul is one of the directors of company Y that bought the BB hotel holdings and sold to company X at a high price was quite unconstitutional (Stott, 2008, p.271). The other directors can sue Paul for using insider trading to gain more advantage over them. It is the role of the directors to protect the interest of the company in which they are the directors. The fact that the wife of Mr. Paul has direct control of the company makes Paul gain control of the decisions made by that company. I would therefore recommend that the other directors should take legal actions against for not acting in utmost good faith to the company for which he swore to protect at all cost. Additionally, there is the power of the constitution of a given company which is outlined to be strictly followed by those bound by the company to carry out such obligations. The company act also gives a clear jurisdiction and stipulations on the various laws that are deemed to be quite important in making sure that the company gets the best protection by the law (Tricker, 2015, p.132).
Directors of a company have various duties and roles as stipulated in the company ordinance. The director has the duty of acting in accordance with the constitution of the company. Additionally, they are required to promote the success of the company and hence protect the interest of others as well. They are also expected to exhibit high level of independent judgment on various pertinent issues affecting the firm. They are also to avoid the various conflict s of interest that arises from other business ventures. The doctrine of separate legal entity as stipulated in the chapter 32 of the company law act, the company is deemed to an artificial body which operates on its own. In this light, the company once registered is able to sue and be sued by the other parties aggrieved. Additionally, the activities of the company is now perceived as being done in an autonomous way such that the parties concern now treat the company on legal entity that can transact in various stances (Goo, Carver, & Whitman, 2003, p.182). It is therefore important to note that the company is held accountable for any actions it takes and will be reasoned on the basis that the company has acted ethically or unethically. It also means that in the event that the managers r the employees of a company transacts on the behalf of the company, their transactions will be assumed to be that of the company and therefore it shall be taken that they will be acting in full capacity on behalf of the company (Stott, 2008, p.291). The owners of the company are therefore barred from mixing their personal transactions with that of the business. In this prospect, the owners’ contributions are viewed as capital given to the company by the owners. The use of these funds is not controlled by the owners but the management who are charged with the responsibility of acting on behalf of the company (Ringe, 2015, p.251).
In the initial stage of the formation of a company, there are various vital documents that are required to be submitted to the registrar of companies as stipulated by the company Act. One of them is the memorandum of association. The document outlines the relationship of the company with those outside stakeholders. The outside stakeholders include the suppliers, the shareholders, the government the labor unions among others. There are various clauses that are contained in this memorandum which brings on board the advents of understanding of how the company operates within its environment (Dignam, & Lowry, 2014, p.187). Some of the clauses entail the name clauses which outline the name of the company which should end with the word ‘limited’. There is also the object clause which outlines the objectives of the company in respect to the dealings that it is carrying out, the location clause indicates the locations of the company while the capital clause indicates the amount of capital contributed by each shareholders for the operation of the company. In addition to this memo, there is another document called the articles of association which outlines the relationship between the company and the internal environment such as the employees the work structure and the debtors among others. The law creates a platform where these parties affiliated to the company transact in a more ethical manner (Tricker, 2015, p.212).
In the building of the constitution of any company, the powers that are bestowed upon various members of the company are derived from the constitution. For example, the managing director has the power to make various strategic decisions that would ensure the sustainability of the company. The constitution is usually made by those promoters of the company who have the strategic goal of seeing the company move forward. Every stakeholder has a role within the constitution of any company which they are expected to fulfill (Tomasic, Tyler, & Stott, 2007, p.42). Within the constitution, the duties, roles and obligations of the parties such as the directors, the company auditors and the company secretary are outlined. These forms the obligations under which these parties are supposed to act. The organizational structure provided in the constitution with proper outlining of the authority and power of each position in the structure gives the members who fill these positions a positional power and authority for which they are expected to act as per the regulations stipulated in the constitution (Stott, 2008, p.91).
On the account of share capital, there are various stipulations that have been outlined and well accentuated in the companies Act which the promoter of a company must me well aware. Firstly, in the memorandum of association, the promoter must clearly declare the number of shareholders in that would form the company. Additionally, there is need to bring on board the amount of shares that each of them have and the par value of the shares as well. This declaration is very critical in the event of understanding the ownership and control of the firm (Tomasic, Tyler, & Stott, 2011, p.198). It should be noted that according to the law, if a shareholder has more than 49% of the shares then, it is deemed that the person has a controlling stake on the operations of the company. It would mean that his decision as one of the shareholders needs to be listened. The managers of a company are not allowed have higher amounts of shares in the company that they head since this move is tantamount to conflict of interest which might bring on board the advents of insider trading and possible agency problem. Insider trading occurs when significant information is leaked out to favor a few shareholders while others are not given such information (Tricker, 2015, p.32).
According to the company law, there are various meetings that the company members are obliged to hold. The most official meeting is the annual general meeting that is deemed to be quite substantial in ensuring that the various stakeholders have a say in everything that is happening about the company. The chairman of the AGM is deemed to be the managing director of the company (Dignam, & Lowry, 2014, p.197). During this meeting, some of the points that are being discussed are the performance of the company in terms of profitability. Additionally, the election of the officials of the company is very vital at this stance to help in making sure that the best officials are the one out in the office to help drive the agenda of many. Other official meeting that is usually recognized is the meeting of the directors to deliberate on the strategic move of the company and give it the direction it deserves (Stott, 2008, p.401).
In summary the, Company law is the law that involves the governing of the companies with keen concern on the board of directors, the incorporation of the company as legal entity and the place of the shareholders in the management of the company. The precepts surrounding the registration and the management of any company are outlined and governed by the stipulations embedded on the Companies ordinance chapter 32 in Hong Kong. The doctrine of separate legal entity as stipulated in the chapter 32 of the company law act, the company is deemed to an artificial body which operates on its own. In this light, the company once registered is able to sue and be sued by the other parties aggrieved. Additionally, the activities of the company is now perceived as being done in an autonomous way such that the parties concern now treat the company on legal entity that can transact in various stances.
Dignam, a. J., & Lowry, J. P. 2014. Company law. Oxford: Oxford University Press.
Goo, S. H., Carver, a., & Whitman, J. 2003. Corporate governance: the Hong Kong debate. Hong Kong, Sweet & Maxwell Asia.
Ringe. 2015. Deconstruction of reality. [Place of publication not identified], Oxford Univ Press.
Stott, V. 2008. Hong Kong company law. Hong Kong, Longman Hong Kong Education.
Tomasic, R., Tyler, E. L. G., & Stott, V. 2007. Hong Kong company law handbook: Companies Ordinance (Cap 32) = Gong si tiao li (di 32 zhang). Hong Kong, LexisNexis.
Tomasic, R., Tyler, E. L. G., & Stott, V. 2011. Butterworths Hong Kong company law handbook: Companies Ordinance (Cap 32) = Gong si tiao li (di 32 zhang). Hong Kong, LexisNexis Butterworths.
Tricker, R. I. 2015. Corporate governance: principles, policies, and practices. Oxford: Oxford University Press.