A lot of foreign entrepreneurs and investors are usually convinced to invest in Hong Kong due to the fact that it is a great business place. While the fun of establishing the company here lies in compliance with the legal requirements, there are law and regulations obligations you must follow.
There are several regulations, among which the most important one is the Articles of Association that every company is legally obliged to have. It describes the internal regulations and governance structure, hence paving the way for how a company is going to conduct its business in accordance with the legal framework of Hong Kong. Briefly, it summarizes the decision-making model for your business.
The companies shall be classified according to the Companies Ordinance and the Hong Kong Companies Registry shall be the supervisory body. Subsequently, the Articles of Association document should be processed thoroughly to any new Hong Kong company’s establishment and running procedures.
This article will give you a thorough idea of Hong Kong Articles of Association through the discussion of what they are, why they are needed and how they are modified under the Companies Ordinance.
Content Outline
Articles of Association vs Memorandum
Articles of Association for Hong Kong are a legal requirement for a company where the internal rules and governance structure are described. They are controlled by Companies Ordinance that allows some degree of customization, and they can be modified with the shareholders’ consent. Companies shall have to prepare and update Articles of Association in the form of a corporation that will be consistent with the company’s organizational structure and governance methods and should also be reviewed for compliance by the Hong Kong Companies Registry.
Before, the Companies Ordinance dictated that a newly established company should prepare two sets of documents – articles of association and the memorandum of association. In the meantime, some data on the two documents was duplicated and therefore the Memorandum was abolished. Far beyond, the new Companies Ordinance allows only articles of association to be necessary.
How Did The Corporate Ordinance Change?
Hong Kong government introduced a New Companies Ordinance to revamp and streamline the corporate legal framework, strengthening corporate governance and also reducing business hassles in the territory. Those linked to business operations in Hong Kong including firms and individuals should pay attention to these updates to understand the new rules.
According to the new law, some information that appeared in the Memorandum of Association, e.g. some clauses, became meaningless.
The governing body of Hong Kong decided on a simplified process and used accordingly only the art of association due to it being already filled with most of the important data of the company.
What do the Articles of Association Typically Contain?
Being the Articles of Association are the fundamental part of a Hong Kong company, some of them should be stipulated in the Articles.
For instance, the purpose of the company, it functions, the way it pays dividends and profits, the management of the financial accounts, and the initial shareholdings with the corresponding voting rights are to be stated. In addition to that, they may also focus on the records that require to audit financial records.
Additional information regarding the required articles is provided below:
Name
The company name is the official name of a limited liability company in Hong Kong. The Hong Kong Company Registry will not allow the Company Names already in use, or likely to raise controversies, they will not be accepted.
Purpose
The purpose of the company is a statement that tells how and what the company was created for as well as its sphere of business. Hong Kong companies are subject to general rules that permit them to have an extensive scope to operate.
Organization
The company is subject to corporate laws and therefore must define the duties and responsibilities of its members.
For instance, the details concerning the shareholders of any legal entity are to be included in the company’s description, the owners are the shareholders, the directors are the ones who are responsible for signing for the company and the registered business address is where the official government notifications will be received.
Capital
Share capital may differ as to type and amount as it must be specified in the Articles of the Association. In most cases, the capital contribution of the company is shown by the value of the shares it issues.
Meetings
The meeting of the shareholders is the most effective way of knowing what is happening with the company. The general meetings frequency as mentioned in the Articles of Association will be included.
The mandated annual general meeting which is recorded as the meeting minutes must be held.
Any special or ordinary resolution that is intended to be communicated or that requires attention should be given with proper notice to the rightful departments.
Which Companies Must Have Articles of Association Under the New Companies Ordinance?
In this section, we discuss the Hong Kong companies that are required to register their Articles of Association by law:
The Common Structure of Business Entity
- The Private Limited Company: In most companies limited by liability shares, every member is accountable for a certain amount of capital representation in the number of shares they have. This should be enacted within the rules of an article of associations. Furthermore, as the company is privately held, the public does not have the opportunity to buy bonds or equity the way they would with either stocks or bonds. Other companies, for instance, those incorporated as public limited companies with shares, can go the same way.
Other Entities
- The Unlimited Company: This is the company that faces unlimited responsibilities. Hence, the articles of association must indicate the responsibility of each member along with the company assets.
- The Company is limited by guarantees: It should be said in the articles of association about the liability of a member in case of damage inflicted to the company that they need to pay the stated amount only. The ratio of this period must remain below the company’s assets.
A few sample articles of association for various business types are available from the Hong Kong Company Registry. These are:
Article of Association
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What is the process of Registering the Articles of Association?
To determine the level of complexity of the Articles of Association the structure of one Hong Kong company may differ from another Hong Kong company.
There are several steps that you will need to take to register the Articles of Association with the Hong Kong authorities.
- Start by drafting the articles to ensure the crucial ones are included.
- For each additional requirement and provision, particular articles can be included for specific companies.
- Submit your Company’s Articles of Association as well as the incorporation form to the Companies Registry.
On the other hand, for this type of company with a limited number of shares, a model of articles is contained in the New Ordinance.
Note: Starting from 2014 onwards, no company will have to undergo the MOA’s registration process. They just need to register for the Articles of Association.
Can The Articles of Association Be Amended?
As a company’s objectives change over time, amendments to the Articles of Association are possible. In Hong Kong, it is a quite simple and easy procedure with the Companies Registry of Hong Kong. In order to amend the articles of association, a company is obliged to fill in the NAA1 form at the Hong Kong Companies Registry.
It should be noted that any amendment to the articles of association of your company must be done in accordance with section 88 of the Companies Ordinance. According to the type of changes, whether it is a major or a minor one, a special resolution or and an ordinary resolution would be required.
Additionally, a written notice which includes the resolution mentioned must be submitted to the Hong Kong Company Registry no later than 15 days after the AGM.
If the specified regulations are not met, then the offender is said to have infringed the law. The individual will have both a level 3 fine imposed and a daily penalty of HK$300.
In addition to amending special clauses in the articles of the association, you can also change the goals of your Hong Kong Limited Company. Two options are available you can either give up the goals or cut them down or change them. In such instances, you must pay attention to the conditions as spelt out in section 89 of Companies Ordinance.
To wrap it up, the NAA2 form is to be filled in and sent to the Hong Kong Company Registry with the resolution attached. Business owners should also make true copy of the Articles of the Association with the help of the certifying officer. This new version of the document will be signed by a solicitor of Hong Kong who holds a practicing certificate, a practicing CPA like FastLane Group, or a Chartered Secretary.
How FastLane Group Can Help?
Among many benefits of a cutting-edge, business-oriented space, Hong Kong’s government offers a range programs which are adjusted to the multifaceted needs of a bustling economy. The streamlined registration process becomes a strong reason for both entrepreneurs and foreign enterprises to take a part in the market. The Model Articles that are easily accessible online and provided by local authorities also standardize the procedure of the company setup because they offer them as templates for Articles of Association.
These conveniences though useful, obviously, will require the services of an expert to be critically reviewed to come up with the relevant models. This is preventive measure that reduces possibility of experiencing problems which might arise during the company incorporation process.
FastLane Group makes registration of the Hong Kong Articles of Association simple, guiding the client from beginning to Company Secretary service provided by the experts. We take care of all procedural formalities making sure that your company meets all regulatory standards with ease. Contact us now.