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A Critical and Comparative Assessment of the Utilisation of Losses in Company Amalgamations

With the coming into force of the new Companies Ordinance (Cap. 622) (NCO) on 3 March 2014, Hong Kong finally acquired a court-free, simplified amalgamations regime. The relevant governing provisions are found in Part 13, Division 3 of the NCO.1 Companies may amalgamate vertically 2 as, for example, may occur between a parent company and its wholly owned subsidiary, or horizontally,3 as between, for example, two wholly owned subsidiaries of the same third company. It is envisaged that the introduction of a court-free system of amalgamation will simplify and accelerate corporate group reconstructions. Whereas the old Companies Ordinance (Cap. 32) (OCO) contained an amalgamations regime,4 an amalgamation under the OCO required court approval and therefore in practice operated more as a scheme of arrangement, being regarded as too onerous and time-consuming to be an effective instrument for restructuring.