Section 728(4)(b) of the Hong Kong Companies Ordinance outlines the legal limits for Hong Kong companies to conduct their businesses. The directors of any given company in Hong Kong owe a fiduciary responsibility under the position they serve. These leaders must perform their duties diligently, demonstrating the highest level of loyalty and working in good faith for the company’s benefit. The Hong Kong Companies Ordinance expresses this complex task in three duties.
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The first duty is to act bona fide, implying that they should only use their power for the right reason. It is the obligation of a leader in this post to be honest and take measures for the organization’s best interests. The third mandate is to cease conflicting interests and generate hidden profits. Furthermore, they must ensure that they do not exploit the resources and opportunities of the company for their benefit.
Ted, the director of Datacon Limited, has, in this case, breached the duty to act bona fide for the benefit of Datacon Limited. Ted joined Input Limited’s board, a competitor company, in a private capacity. As an adviser and consultant, Ted assisted Input Limited in arranging for a public launch of a new product by signing some of Datacon’s customers. The company’s head has also failed to meet his obligation of confidentiality about the company strategies and has used them to launch a new product for a competing company.
Ted has also contravened the law to cease conflicting interests and generate hidden profits. Therefore, Ted has permitted a dispute between his personal goals and his company director’s mandate. The company’s contract demands that persons holding this position state their direct and indirect material interests. In addition, Ted has violated this law by signing a contract with a competitor company.
According to the Hong Kong Companies Ordinance, a director may be held liable to criminal or civil litigation and removed from his position. One of the remedies that the board of Datacon can use against Ted is removing him from the post. The ordinance provides that the leader can be removed from his position prior to the end of the contract. The board of Datacon must understand that the shareholders’ written resolution should not pass this resolution. Instead, the board of Datacon should call for a shareholder’s general meeting in the presence of Ted, where he can explain his actions.
The proposal of a resolution by the shareholders to terminate the director’s contract must allow at least 28 days for the company. On the other hand, the company is then required to allow the shareholders at least 14 days prior to the general meeting. Nevertheless, the Hong Kong Companies Ordinance maintains that the shareholders can sanction a head’s breach of trust or duty associated with the company’. In this case, the votes of other heads and institutions associated with the company should be disclosed. The other remedy that the board of Datacon can use against Ted for breach of his duty is compensation by paying for the damages incurred by the company. Datacon Limited may have incurred a loss of revenue following that the director, Ted, shifted some of the clients to the other company. Therefore, Ted can be held liable to a court proceeding where he can be asked to pay for the damages in monetary terms.