As the nexus of trade in Asia, Hong Kong sees hundreds of companies looking to register to trade in the territory each year. In order to govern the principles by which these companies function, they are required to submit their ‘Articles of Association’ upon registering. This is a document that specifies precisely how a company is going to operate and its fundamental purpose. In this document, companies outline how they are going to go about accomplishing their tasks as well as how they will be appointing their directors and managing their financial records.
A company’s Articles of Association can be thought of as a sort of manual or user guide, informing stakeholders of the manner in which the entity will aim to accomplish its day-to-day tasks. These ‘articles’ provide necessary provisions beginning with the company name and purpose. Also included in the document are provisions relating to its shares structure, organisation and meetings of the shareholders themselves. Here, we look at the components of what constitutes the Articles of Association for a company looking to operate in Hong Kong.
Why are the Articles of Association Necessary?
This vital document is intended for the use of members of the public, Hong Kong authorities and various other stakeholders with a vested interest in the entity. It essentially gives the reader an insight into the company structure. More importantly, it offers vital information as to how it intends to issue shares and pay dividends while outlining the methods to be used in maintaining accountability and oversight relating to liability, shareholder rights and financial record audits.
In order to foster a positive, well-regulated business environment to exist, Hong Kong legislators have introduced the new Company Ordinance of Hong Kong. This guiding framework aims to regulate business in line with modern norms of good business practice and corporate governance. As such, companies are required to submit their Articles of Association to register as a legal trading entity.
In the past, companies were required to submit both Articles of Association as well as their Memorandum of Association. While the former discusses the rules of how the company will operate, the latter lists those who were involved with the founding of the company. The need for a Memorandum of Association has since been abolished in Hong Kong.
What are in the Articles of Association?
While the articles listed within the document differ between countries, those required for registration in Hong Kong must meet a minimum threshold to proceed with registration in the territory. The articles themselves are a set of requirements, expected by Hong Kong law, that must be met. Essential articles are required as follows:
- Company Name – In order to operate as a legal entity, a company must have a name that is recognisable, identifiable and does not infringe on the right of other entities. This name should contain a suffix describing the type of company such as “Ltd” or “Inc.”. Offensive or confusing names are often proscribed.
- Company Member Liability – The liability of the members of the company must also be listed. Whether their individual liability is limited or unlimited, depending on the type of company, the Articles of Association must clearly define this. Where shares govern the limitations on liability, the articles must also stipulate that the liability of the members is limited to any amount unpaid on the shares held by the members.
- Share Capital – The company must declare the initial share capital amount to be issued to members as well as details pertaining to the initial shareholdings. These can include information about the number of shares to be issued out of the share capital, as well as the different types of shares.
- Organisation of the Company – Here, information that would be contained within the Memorandum of Association would be included. This may include details as to how the company is structured, who its directors are and who participated in the founding of the entity.
- Purpose of the Company – This straightforward definition expresses the fundamental reason for the company’s existence. Whether it be a non-profit establishment or a purely for-profit organisation; an engineering firm, or a holiday rentals agency, the purpose of this company article is a critical component.
- Shareholder Meetings and Voting Rights – Shareholder Meeting and Voting Rights – Finally, this article outlines how shareholder meetings will be held, when they will be conducted, and also expresses the rules that will manage them. Voting rights are also listed here.
How to Submit these Articles of Association
Before submitting a company’s Articles of Association, it is important that applicants first determine which type of company they’re looking to register. The articles must prescribe if they’re registering a private or public company limited by shares or guarantees.
Once the company type and name has been determined, the Articles of Association will need to be submitted along with an Incorporation Form and a Notice of Business Registration to the Hong Kong Business Registration Office. While there is no standard Articles of Association form to be completed, one can find many examples and templates online.
Non-Hong Kong residents are entitled to register a local limited company, provided that they subscribe to the provisions required within the Articles of Association.
