Hong Kong

5 Chapter Corporate Laws

    • Introduction

      A comprehensive exercise to rewrite the Companies Ordinance (Cap. 32) was launched in mid-2006 with the aim of modernising Hong Kong's company law and further enhancing Hong Kong's status as a major international business and financial center. Following five rounds of public consultations and numerous discussions during a series of public forums and seminars over the years, the Companies Bill was finalised and introduced into the Legislative Council ("LegCo") on 26 January 2011. A Bills Committee to scrutinise the Bill was formed in February 2011. After 44 meetings lasting a total of over 120 hours and consideration of over 200 papers or submissions (available on the website of the Legislative Council), the Bills Committee completed its scrutiny of the Bill in June 2012. On 12 July 2012, the Companies Bill was passed by LegCo.

       

      The new Companies Ordinance (Cap. 622) ("the new CO"), which consists of 921 sections and 11 schedules, provides a modernised legal framework for the incorporation and operation of companies in Hong Kong. It aims to achieve four main objectives, namely, to enhance corporate governance, ensure better regulation, facilitate business and modernise the law. A summary of the major initiatives for achieving the four main objectives of the new CO and an outline of each part of the new CO are set out as follows:

       

      To facilitate implementation of the new CO, 12 pieces of subsidiary legislation have been made to provide for the relevant technical and procedural matters. In parallel, the Companies Registry has enhanced its information system, carried out an overall review of its policies and procedures and specified new forms for the implementation of the new legislation.

       

      The new CO and the subsidiary legislation have commenced operation on 3 March 2014, save for the provisions relating to the restricted disclosure of residential addresses of directors and full identification numbers of individuals (Note 2) and the scripless regime.

       

      Comprehensive information on the new CO, including briefing materials, highlights of major changes and answers to Frequently Asked Questions, are available at this thematic section. Up-to-date information in respect of the requirements for registration of documents under the new CO is available at the respective sections on this website.

      The rewrite aims to achieve four main objectives, namely, enhancing corporate governance, ensuring better regulation, facilitating business and modernising the law. The comprehensive rewrite of the Companies Ordinance (Cap. 32) allows Hong Kong to leverage the developments of company law in other comparable jurisdictions and further enhance its competitiveness and attractiveness as a major international business and financial center.

    • Companies Formed Under the Companies Ordinance

      Here are the types of companies that may be formed under the Companies Ordinance—      

      (a)  a public company limited by shares;

      (b)  a private company limited by shares;

      (c)  a public unlimited company with a share capital;

      (d)  a private unlimited company with a share capital;

      (e)  a company limited by guarantee without a share capital.

    • Non-Hong Kong Companies Required to be Registered

      Under Section 776 of the Companies Ordinance: These are the non-Hong Kong companies must apply for registration

      (1)  This section applies to—

      (a)  a non-Hong Kong company that establishes a place of business in Hong Kong on or after the commencement date of this Part; and

      (b)  a non-Hong Kong company that—

       (i)  at that commencement date, has a place of business in Hong Kong established before the commencement date; and

       (ii) had not complied with section 333 of the predecessor Ordinance as in force immediately before that commencement date.

       

      (2) A non-Hong Kong company falling within subsection (1)(a) must, within one month after the establishment of the place of business, apply to the Registrar for registration as a registered non-Hong Kong company.

       

      (3)A non-Hong Kong company falling within subsection (1)(b) must, within one month after the commencement date of this Part, apply to the Registrar for registration as a registered non-Hong Kong company.      

    • Private Companies

      1.1 Companies incorporated in Hong Kong can be public or private limited by shares, public a private unlimited companies with a share capital, or a guarantee company. Most guarantee companies are set up by non-profit organisations and most public companies are listed on the Hong Kong stock exchange.

       

      1.2 The appropriate vehicle for a business which wants to:

      (1) limit its liability;

      (2)  obtain private funding only; and

      (3)  generate financial returns for its shareholders

      (4) is a private company limited by shares. The great majority of companies in Hong Kong are private companies limited by shares and in this brochure we limit our discussion accordingly.

       

      Characteristics

      1.3 A private company is a company which, in its articles of association:

      (1)  restricts the right to transfer its shares;

      (2) limits the number of its members to 50 (excluding employees); and

      (3)  prohibits any invitation to the public to subscribe for any shares or debentures of the company.

       

      Liability of shareholders

      1.4 The liability of each member of a company is limited to the amount (if any) unpaid on the shares held by that particular member. Accordingly, if the company becomes insolvent and is wound up, the shareholders stand to lose their agreed investment in the company only, and need not make any further contribution to meet the company’s liabilities. Ongoing maintenance obligations

       

      1.5 The ongoing maintenance obligations relating to a Hong Kong company are set out in detail later in this chapter. These obligations can be divided into annual obligations and those obligations which only arise where there has been a change in relation to the corporate structure and other matters (see Part B, paragraph 4 and Part B, paragraph 5, respectively). Where a company becomes dormant, it will not be necessary for the company to comply with these annual obligations (see Part B, paragraph 7). Pre-incorporation contracts

       

      1.6 Any person who purports to enter into a contract in the name of or on behalf of a company which has not yet been incorporated will be personally liable for that contract. The contract may be ratified by the company after incorporation (in which case the person will no longer be personally liable) but this situation can usually be avoided in the first place by the use of a “shelf” company (see Part B, paragraph 2.15 and Part B, paragraph 2.16).

       

    • General restrictions on Registrar’s power to register

      (1)  If the liability of the members of an eligible company is limited by an Ordinance or otherwise according to law, the Registrar must not register the company under this Part.(2)  The Registrar must not register an eligible company under this Part as a company limited by guarantee unless—

      (a)  if the company has an English name only—Part 17—Division 2 Section 809 Companies Ordinance A4869 Ord. No. 28 of 2012

      (i)the name by which the company is to be registered has “Limited” as the last word of that name; and

      (ii)  a Chinese equivalent of it that the company may use has “有限公司” as the last 4 Chinese characters of the equivalent;

       

      (b)  if the company has a Chinese name only—

      (i)the name by which the company is to be registered has “有限公司” as the last 4 Chinese characters of that name; and

      (ii)  an English equivalent of it that the company may use has “Limited” as the last word of the equivalent; or

       

      (c)  if the company has both an English name and a Chinese name—

      (i)  the English name by which the company is to be registered has “Limited” as the last word of that name; and

      (ii)  the Chinese name by which the company is to be registered has “有限公司” as the last 4 Chinese characters of that name. 809. 

       

      Registrar must not register without members’ assent

      (1)  The Registrar must not register an eligible company under this Part as an unlimited company unless there is assent to the registration by a majority of the members present at a general meeting of the company convened for the purpose.

      (2)  The Registrar must not register an eligible company under this Part as a company limited by guarantee unless there is assent to the registration by at least 75% of the members present at a general meeting of the company convened for the purpose.

    • Minimum Requirements for Private Companies

       

       Incorporation of a company

       

      General

      The incorporation of a private company in Hong Kong requires at least 1 shareholder.

       

      Under the Companies Ordinance (the “CO”), a Hong Kong company is only required to have the articles of association.  There is no longer a requirement to keep a memorandum of association. After the constitutional documents are filed with (and an Incorporation Form is submitted to) the Registrar, the Registrar will issue a certificate of incorporation certifying the name and the date of incorporation of the company.

       

      Name

       

      2.2 A company can be incorporated with any name (except for names which are the same as existing company name and names which are expressly prohibited). The Registrar has the power to require a company to change its name, including where the name gives so misleading an indication of the nature of the company’s activities in Hong Kong as to be likely to cause harm to the public or it is too like another name of an organisation established in Hong Kong under any ordinance at the time of registration.

       

      2.3 A company may be incorporated with either an English name or a Chinese name or both. Where a company is incorporated with an English and a Chinese name so that both names appear on the certificate of incorporation, the two names together constitute the full formal name of the company. Whilst both names should be used on the company’s seal (see Part B, paragraph 3.18), a company may choose to display or state just the English name or the Chinese name, or both the English name and Chinese name in the registered office, every business venue, communication documents, transaction instruments and on any website of the company. If both an English and a Chinese name are to be used it is worth considering the meaning of the name in both languages and ensuring that the translation from the primary to the secondary language is well done. The secondary name may be a translation or a transliteration of the primary name or wholly unconnected with it.

       

      Shareholders

      2.4 Every company must have at least 1 registered shareholder. There is no requirement that a shareholder be resident in Hong Kong. Any legal entity can be a shareholder in a company, including a company, receiver, liquidator or sole proprietor.

       

      2.5 In order to save time, we can incorporate companies with one of our nominee companies acting as founder member. The first share is usually transferred to one of the ultimate shareholders or their nominees after incorporation. Articles of association

       

      2.6 Under the CO, it is optional for a company to state its objects in its articles.  However, if the objects are stated, they will limit the company’s powers and shareholders may restrain the company in acting outside of the scope of its objects.  As the exception to the general rule, companies incorporated to promote charitable and similar objects, and which have been authorised to dispense with the use of the word “Limited” in their name, must provide a description of their objects and powers.

       

      2.7 The articles of association are the regulations (or bye-laws) of the company. They may follow a standard form, incorporating the regulations contained in the Model Articles of the CO or a more detailed version which excludes the Model Articles and contains all the regulations in the articles themselves, or a combination of the two. To the extent to which specific articles (regulations) are not registered with the Registrar, the provisions of the articles of association in the Model Articles will apply.

       

      2.8 In general, companies incorporated by our firm are incorporated with detailed articles rather than the Model Articles. Articles may include a wide range of special provisions to meet individual situations, such as special classes of shares and pre-emption rights on the transfer of shares. Initial share capital

       

      2.9 The concepts of “authorised share capital” and “par value” under the predecessor Companies Ordinance have been abolished.  As a result, there is no longer a need to state the same in a company’s articles.  It is optional for a company to state the maximum number of shares that it may issue in its articles.

       

      2.10 There is no minimum share capital required. It is common for companies to start with a share capital of HK$1,000 or HK$10,000. The capital can, however, be denominated in any currency and there are no legal prohibitions on a company having a multi-currency capital structure, although in practice this can be quite cumbersome.

       

      2.11 The share capital may be divided into different types or classes of shares, including preference shares. A company may also have shares with different nominal values or carrying differing rights.

       

      2.12 At least 1 founder member’s share must be issued on the incorporation of a company, and the share capital can be further increased in accordance with the company’s capital requirements.

       

      2.13 Shares may be allotted for cash, services or other consideration such as the transfer of property. As a result of the abolishment of par value, there is no minimum price for the issuance of shares.  If a company’s articles of association permit, shares may also be issued as redeemable shares.

       

       

       

      Registered office

       

      2.14 Each Hong Kong company must have a registered office in Hong Kong to which all official communications and notices (including service of process) may be addressed. The address of the registered office of a new company must be stated in the Incorporation Form filed at the Companies Registry for incorporation. Our address must be used as the registered office address when we also provide company secretarial services to the company (see Part D, paragraph 3). Timing/shelf companies

       

      2.15 It is always possible to set up a new company but many of our clients prefer to acquire a “shelf” company (a company which has already been incorporated using our standard form articles of association). The main advantage in acquiring a shelf company is that it is not necessary to wait for the Registrar to process the incorporation, which usually takes about 4 working days. Once acquired, the name and/or the articles of association of the shelf company can be changed if the client so desires (see Part B, paragraphs 5.2 to 5.3 and Part B, paragraph 5.6 respectively).  Alternatively, a company can be incorporated on same day by e-filing provided that our service company is the founder member. Fees

       

      2.16 We can provide, on request, details of the costs involved in incorporating a new company or acquiring a shelf company. Our standard charges include:

       

      (1)  legal expenses;

       

      (2)  filing and other government fees;

       

      (3)  business registration certificate (see Part A, paragraph 3);

       

      (4)  printing charges;

       

      (5)  statutory books (share register, minute book, etc.); and

       

      (6)  common seal, and in either case are based on the adoption of standard form articles of association.

    • Minimum Requirements for Hong Kong Branches of Foreign Companies (Non-Hong Kong Companies)

       

       Requirement to register

       

      1.1  Non-Hong Kong companies must register a Hong Kong branch with the Registrar within 1 month of establishing a place of business in Hong Kong.

       

      1.2  In practice, it is sufficient if the application for registration is lodged with the Registrar within 1 month.

       

      1.3  The obligation to register with the Registrar discussed in this paragraph is separate from the obligation under Part A, paragraph 3 to register businesses with the Business Registration Office. Representative office

       

      1.4  A non-Hong Kong company which has a presence in Hong Kong but does not transact any business which creates legal obligations and confines itself to promotional activities is not considered as having established a place of business in Hong Kong for the purpose of registration with the Registrar. Advice should therefore be sought as to whether, based on the nature of the business, in a particular case it is necessary to register a “representative office” as a branch. Name of company in Hong Kong

       

      1.5 Non-Hong Kong companies can and usually do register the Hong Kong branch in their own name. However, the Registrar has power to require a non-Hong Kong company, which is carrying on business in Hong Kong under its corporate name, to use a different name under certain circumstances. This power must be exercised within 6 months of the date of registration of a branch or the date of registration of any change in the name of the non-Hong Kong company. Display of name of company

       

      1.6 Non-Hong Kong companies, which register a branch, must conspicuously exhibit at every place in Hong Kong where they carry on business, and include on their letterhead, the name of the company and the place of incorporation of the company. Where the liability of the shareholders of the non-Hong Kong company is limited, this must also be stated. These requirements are generally complied with by the use of the words, "[Name of Company] incorporated in [place] with limited liability".

       

      Continuing obligation

       

      1.7 Once registered in Hong Kong, a non-Hong Kong company has continuing maintenance obligations in relation to the Registrar and the Commissioner of Inland Revenue. The obligations in relation to the Registrar fall into two categories: the updating on a case by case basis of information filed with the Registrar and the filing of certain documents with the Registrar on an annual basis. The continuing obligations in relation to the Commissioner relate to the registration of each of the non-Hong Kong company’s businesses (see Part A, paragraph 3) and the filing of a profits tax return (see Part E, paragraph 4).

       

      a.            Number of Incorporators/Directors

       

       

       

      b.            Capitalization Requirements (based on proposed business)

       

       

       

                    c.           Foreign Equity Requirements 

       

    • Directors

       3.1 Hong Kong private companies must have at least 1 individual director. The directors need not be resident in Hong Kong. Anyone who is over the age of 18 may, subject to certain exceptions, be appointed as a director. Corporate directors may be appointed in the case of a private company, unless the company is a member of a group of companies of which a Hong Kong listed company is a member. Where a private company has only 1 shareholder and that shareholder is the sole director of the company, the company may nominate a person over the age of 18 as a reserve director to act in the place of the sole director in the event of the latter’s death.

       

      3.2 The particulars of the directors (which as a matter of practice includes alternate directors) and reserve director of a company must be filed with the Registrar within 15 days of their appointment/nomination.

       

      3.3 Directors must disclose to the other members of the board as soon as possible the nature and extent of any material interest, direct or indirect, which they may have in any contract, transaction or arrangement or proposed contract, transaction or arrangement with the company which is significant in relation to the company’s business. If a director fails to do so, that director may be accountable to the company for any profit he or she makes from that contract, also the director can be subject to a default fine.  In certain circumstances the contract may also be voidable at the option of the company. Generally a director may not vote at, or be counted towards the quorum of, a meeting to discuss the matter in which he is interested although often this is relaxed in the articles of associations.  Where any general interests exist (for example, where the director is a director or shareholder of other companies), it is common for a general disclosure to be made at the first meeting of the directors after the appointment of the relevant director or as soon as possible.

       

      3.4 A director may normally be removed by an ordinary resolution of the company even where there is an agreement, or there is a provision in the articles of association, to the contrary. The removal of a director under this statutory power entails certain procedures designed to allow the director to make representations against the proposed removal. The articles of association may also expressly provide for the removal of directors in other ways. Removal of a director contrary to an agreement with the company may give rise to a claim by the director against the company.

         

    • a. Issuing shares

       3.5 The issuing of new shares in a company is a three-stage process involving the allotment by the directors of the shares to particular persons and then the issuance of the shares to such persons after the entering into the company’s register of shareholders of the relevant particulars.

       

      3.6 Allotments of shares, other than allotments pursuant to offers to existing shareholders pro rata to their existing holdings, may only be made with the prior approval of the shareholders in general meeting. This approval may be given either in relation to a particular allotment or allotments or generally. In either case this shareholder approval expires (if not previously revoked by the company in general meeting) when the next annual general meeting of the company is held or ought to be held or until the expiration of the period of 12 months from the date of the said approval if annual general meeting is not required by law to be held by the company.

       

      3.7 A return of allotment of shares, disclosing the members and their shareholdings must be filed with the Registrar within 1 month of the date of the allotment. If this time limit is not met, the Registrar will usually refuse to accept the return of allotments for filing and an application will have to be made to the court for leave to file the return out of time.

      3.8 A share may be beneficially owned by someone other than the registered holder. In the case of a private company, it is not normally necessary for the identity of the beneficial owner to be revealed to the company or to any authority or to be a matter of public record, although a subsidiary is required to state in its accounts the name of its ultimate holding company.

    • b. Alteration of share capital

       3.9 In addition to the issue of new shares mentioned above, a company may alter its share capital in any one or more of the following ways:

       

      (1) increase its share capital without allotting and issuing new shares, if the funds or other assets for the increase are provided by the members of the company;

      (2)  capitalize its profits, with or without allotting and issuing new shares;

      (3)  allot and issue bonus shares with or without increasing its share capital; (4)  convert all or any of its shares into a larger or smaller number of shares; (5)  cancel shares –

      (i)  that, at the date the resolution for cancellation is passed, have not been taken or agreed to be taken by any person; or

      (ii)  that have been forfeited.