It has been announced that the proposed amendments to Hong Kong’s Companies Ordinance introducing measures to deal with ‘shadow companies’ will come into effect on 10 December 2010. Details of these amendments are contained in our Alert 367. In brief, they strengthen the powers of the Companies Registry to deal with abuses caused by ‘shadow companies’: companies registered with names that are deceptively similar to third party brand or company names, which are often established in Hong Kong to give support to infringing activity on mainland China.

At present, existing companies have 12 months to object to the Companies Registry in respect of newly registered companies with names that are “too like” their own, or can at any time seek a court order against companies named uncomfortably close to their brands. But under the existing law, it has been difficult to deal with them, as company name changes can only be made by shareholder resolution, and very often the shareholders ignore court rulings and are based outside Hong Kong. The Companies Registry can direct a company to change its name, but it has no means of ensuring that a name change actually takes place.  Under the amended law it will now have the power, in certain circumstances, to implement a name change itself.

The amendments should greatly reduce the cost for rights owners to deal with the problem of ‘shadow companies’.