Three categories of procurements

The definition of procurement under the original provisions of BMO would be revised and separated into type 1 and type 2 high-value procurement. The basis of calculation of threshold would be changed from "annual budget" to "average annual expenditure in the last three financial years". This is to prevent deliberate inflation of annual budgets by OC members to circumvent the BMO obligations.

Type 1 high-value procurements are procurements of any supplies, goods or services with a value exceeding or likely to exceed HK$200,000 but not exceeding or likely to exceed 20% of the average annual expenditure in the last three financial years.

Type 2 high-value procurements are procurements of any supplies, goods or services with a value exceeding or likely to exceed 20% of average annual expenditure in the last three financial years.

In addition to the two types of high-value procurement, the Ordinance seeks to introduce large-scale maintenance procurement as a new category of regulated procurements.

Large-scale maintenance procurements are procurements of any supplies, goods or services required for the repair, replacement, maintenance or improvement of any common parts of the building with project value exceeding or likely to exceed HK$30,000 per flat in the building. They exclude procurements of cleaning, security services and building management services.

In calculating the per-flat value, any garage, car park or car port would not be counted as a flat unless they are the only constituents of the building.

In-person voting at OCs

The Ordinance requires that a resolution for large-scale maintenance procurement could only be passed if at least 5% of the owners or 100 owners (whichever is the fewer) have voted in-person. This is to prevent situations where resolutions for procurement are passed with the presence of just a few owners.

An owner would be deemed to have satisfied the voting-in-person requirement if they attend a meeting concerned in-person and marks their votes on the ballot paper in-person. There are no requirements that the owner needs to be present throughout the entire meeting.

The minutes of the relevant meetings should record the respective number of votes cast in person and by proxy.

Authorisations of natural persons to act on corporate flat owners' behalf

To complement the voting-in-person requirement, the Ordinance also provides for a new mechanism to permit nomination and authorisation of natural person representatives by corporate flat owners to act on their behalf at the meeting. As long as the authorised person votes at the meeting on the corporate flat owner's behalf in the manner described above, the corporate flat owner would be deemed to have voted in-person.

For due authorisation, the corporate flat owner has to give a signed and sealed authorisation notice in specified form to the secretary of the management committee (MC) at least 48 hours before the meeting.

Tendering obligations

Under the Ordinance, all three regulated categories of procurements should be conducted by an invitation to tender. Such invitation to tender could be publicised in local newspapers and must be displayed in prominent places within the building. However, the invitation must be specifically issued to a minimum number of suppliers for the procurement according to the type of procurement concerned. There shall not be any acceptance of tender after deadline, subject to legitimate extensions.

For type 1 procurement, the minimum number of invitation requirements could be waived by resolution of the MC. For type 2 procurement, resolution of the OC is needed.

To enhance transparency, new procurements from an existing supplier are also subject to the same requirements.

Declaration of interests

The Ordinance requires responsible persons (i.e. managers of the building and those instructed by the managers in connection with substantive matters of procurements) and MCs' participants (i.e. members, secretary or treasurer of MCs) to declare any pecuniary or personal interests in a tender. The responsible persons and MC participants shall also declare any personal connection with the bidders.

A copy of declaration must be tabled at the first MC meeting relating to the procurement after the declaration is made.

For an interested MC participant, they would be prohibited from attending MC meetings and participating in procurement activities after the declaration, while for an interested responsible person, they would only be prohibited to participate in procurement activities. These restrictions could be waived by an MC or an OC resolution. However, the declarants would not be counted towards the quorum, nor would they be allowed to vote in relation to the procurement. The declarant must also be excused from the meeting during the voting.

Audited account

The current regime requires only financial statements of OCs of buildings with more than 50 flats to be audited. This has exempted OCs of low-density buildings with substantial income and expenditure from the audit requirement. As a result, the Ordinance changes the threshold from flat-based to income-based. Regardless of the number of flats, financial statements of buildings with total annual income or expenditure exceeding HK$500,000 shall be audited.

Copies of the audited accounts shall be displayed in a prominent place in the building once available for at least seven consecutive days. Upon written request, copies shall be supplied to owners and tenants within 28 days after the request is made.

Criminal offence on improper record-keeping and inspection

To enhance transparency, the Ordinance includes requirements for record-keeping and open inspection of several OC documents.

The Ordinance criminalises convenors of meetings and MCs' participants for failure to keep financial accounts, meeting minutes, tender documents and proxy instruments.

An MC participant would only be prosecuted if they are an accountable participant by assuming responsibility as a participant of the meeting at the time the failure of document-keeping occurs. The other existing offence-creating provisions would be amended accordingly.

Upon conviction, the relevant persons would be liable to an HK$25,000 level-4 fine.

It is a defence if the defendant could satisfy the evidential burden to raise an issue and establish that they have exercised all due diligence that they ought to have exercised in the circumstances to prevent the failure of record-keeping, and the contrary is not proved by the prosecution beyond reasonable doubt.