No good can come of new company director rule
Gordon Jones says the reasons for withholding information on company directors are weak to begin with, and the consequences of such action will be worse than expected for Hong Kong's international reputation
The proposals to restrict disclosure of directors' residential addresses and identity card numbers will compromise the principle of limited liability, which has been a central principle of modern company law since 1855.
Statutory limitation of an individual's personal liability for corporate debt gives directors the assurance that they would not be personally bankrupt in the event of a business failure. In return for this protection, however, directors have to disclose key information about themselves, in particular their identity and how they can be contacted. This protects the interests of creditors, investors and all others who have dealings with the company. The consequence of having the protection of limited liability is that directors have to surrender some personal privacy.
For many years, the Companies Ordinance has required the directors of Hong Kong companies to make publicly available their residential addresses and identity card numbers. This requirement was reviewed during a consultation exercise that began in late 2009, as part of the government's efforts to update the law.
In the survey of opinion, 46 of the 68 respondents, including some commercial organisations and professional bodies, said that directors' residential addresses should not be disclosed, mainly for reasons of privacy and risk of abuse. But 20 respondents, including several major professional organisations, favoured maintaining the status quo.
On the question of whether identification numbers should be made public, 43 of the 46 respondents said some of the digits should be masked to better protect personal privacy. But 10 respondents, including trade unions, major professional and business bodies, and some accountancy and law firms, objected. They argued that such information provided a unique identifier of individuals, and noted that disclosure so far has not created a major problem of abuse.
The consultation paper did not consider the fundamental issue of being able to adequately identify and contact directors as part of the limited liability deal. In this respect, residential addresses are a faster and more precise way of contacting directors than service addresses. Furthermore, identity card numbers provide the only unique identifiers for directors. This information is not confidential.
It's worth noting that among the majority that favoured "restricting" this information were corporate members that were clearly not disinterested parties. Conversely, the dissenting voices were heavily involved in policing companies and dealing with corporate fraud.
