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Articles of Association for Hong Kong Companies – In Depth Guide

Byron Chan
二月 19, 2024

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The Articles of Association are the written regulations that govern the internal rules and governance of a company

The Hong Kong Companies Registry has provided a sample Articles of Association for companies with simple structures to use

Major sections of the Articles of Association include: Company name, Share capital, Power of directors, Board meetings, General meetings, Dividends

What are Articles of Association?

 

The Articles of Association are the written regulations that govern the internal rules and governance of a company. The Hong Kong Companies Ordinance has specific legal requirements on the Articles of Association for Hong Kong companies.

 

 

What language should the Articles of Association use?

 

Under section 76 of the Hong Kong Companies Ordinance, the Articles of Association must be written in English or Chinese.

 

 

Can the Articles of Association be amended?

 

Yes, the Articles of Association can be amended by a special resolution or an ordinary resolution. The company will need to submit a notice of the alternation in the specified form, Form NAA1, and a copy of the altered articles certified by an officer of the company within 15 days of the effective date of alteration. (section 87 & section 88 of the Hong Kong Companies Ordinance)

 

 

Major Sections of Articles of Association

 

In this article, we will give a brief description of each major section of the sample Articles of Association provided by the Companies Registry, including:

 

  • Company name
  • Members’ liabilities and contribution of members
  • Share capital
  • Powers of the directors and company secretary
  • Directors board meetings
  • Appointment and resignation of directors and company secretaries
  • General meetings
  • Issuance and transfer of shares
  • Distribution of dividends

 

 

Company name

 

The first section of the Articles of Association states the name of the company. If the company has both an English and Chinese name, both names must be listed in this section of the Articles of Association.

 

The company name used must not be already in use, and must not constitute a criminal offensive, or contain offensive words. The company name should end with the word “Limited”, unless permission has been granted from the Registrar.

 

 

Members’ liabilities and contribution of members

 

Section 2 and 3 of Part A of the sample Articles provided by the Companies Registry states that the liability of the members is limited, and limited to any amount unpaid on the shares held by the members. This is true of all limited companies in Hong Kong. If you want to know the difference between limited companies and unlimited companies, we wrote an article about that here.

 

 

Share capital

 

Section 4 of Part A of the sample articles states the basic information regarding the share capital of the company, in particular, the total amount of shares to be issued, the class of the shares issued, and the initial distribution of the issued shares. The names of the founding members of the company and the number of shares issued to each founding member is listed here.

 

The sample Articles of Association provided by the Companies Registry only lists ordinary shares as the class of shares. If a company requires more than one class of shares with special rights attached to the shares, the sample articles would not be adequate. Companies with complex share structures and share classes should engage a lawyer to draft their articles of association according to the needs of the company.

 

Share Capital Table taken from the Sample Articles of Association (Companies Registry)

 

 

Powers of the directors and the company secretary

 

Part 3 of the sample Articles of Association provided by the Companies Registry states the powers, rights, and procedures regarding the directors and the company secretary of the company.

 

 

Directors’ authority

 

The directors of the company have the authority to manage the company’s business, and any alteration to the articles do not affect the prior actions of the directors.

 

 

Members’ reserve power

 

Although the directors have general authority, the shareholders, through a special resolution, can direct the directors to take specific actions or refrain the directors from taking actions. However, the special resolution cannot invalidate the actions already taken by the directors.

 

 

Directors power to delegate

 

This section gives the directors the authority to delegate any of their powers granted by the articles to other people. The directors may even delegate the authority to delegate powers to others. The directors also have the right to revoke any of the powers delegated to other people.

 

 

Directors Meetings

 

Calling directors meetings

 

Any one of the directors of the company has the authority to call a directors’ meeting by providing notice to all the directors, or authorising the company secretary to provide notice to all directors. The notice provided to the directors should specify the details of the meeting, such as the proposed date, time, and location of the meeting. The notice does not need to be in written form.

 

 

Participation in directors’ meetings

 

Directors can participate in directors’ meetings in any mode of communication or location, therefore, directors attending a meeting remotely would have the same effect as attending physically.

 

 

Quorum for directors’ meetings

 

A quorum is the minimum number of directors required in attendance for the directors’ meeting to be considered valid. The sample Articles of Association provided by the Companies Registry has set the minimum to 2 directors for quorum to be reached. If the company only has 1 director, then 1 director is adequate for quorum and decisions can be made solely by that director.

 

 

Meetings if quorum is not reached

 

If quorum has not been reached, then no decisions or proposals can be taken or accepted. The only decisions allowed to be taken without quorum is to appoint additional directors or call a general meeting so that the shareholders can appoint additional directors.

 

 

Chairing of directors’ meetings and chairperson’s casting vote

 

The directors can appoint a director to serve as the chairperson for the meeting. If the chairperson is absent or unwilling to chair the meeting within 10 minutes of the start time, the participating directors can appoint another chairperson.

 

The chairperson can cast the deciding vote for proposals that are at a standstill from receiving equal votes on both sides.

 

 

Conflicts of interest

 

Under section 536 of the Hong Kong Companies Ordinance, when a director has a personal interest in any proposals or transactions discussed in the directors’ meeting, the director must disclose the nature and extent of their interest to the other directors. The director is prohibited from voting on or being counted to reach quorum.

 

Directors are still allowed to enter into contracts or transactions with the company, but a director of the company cannot also be the auditor.

 

 

Records of decisions made to be kept

 

Under the Companies Ordinance, the directors of the company must ensure that there is a written record of every decisions made by the directors for at least 10 years from the date of the decision.

 

For companies with only 1 director, the sole director must still maintain a written record of the decisions made. For decisions made through written resolutions, the written resolution can be considered as the written record.

 

 

Appointment, Resignation, and Termination of Directors

 

Appointment of directors

 

A person can be appointed as a director if they are willing and legally permitted to act as a director. The person must be at least 18 years of age. The director can be appointed by either an ordinary resolution or by the decision of the directors.

 

A director appointed by an ordinary resolution can stay in office indefinitely, but a director that has been appointed by the decision of the directors must retire either at the next AGM or within 9 months after the end of the company’s financial year end, and seek reappointment.

 

 

Termination of directors

 

A director is terminated if they become prohibited by the law from being a director, file for bankruptcy, become mentally incapacitated, resign, absent from directors meetings without permission for more than 6 months, or they are removed from office by an ordinary resolution.

 

 

Annual General Meetings (AGM) and General meetings

 

General meetings and shareholders meetings

 

The sample Articles of Association provided by the Hong Kong Companies Registry requires the company to hold an annual general meeting each financial year to comply with the AGM requirements from the Companies Ordinance.

 

The directors of the company also have the right to call a general meeting for the shareholders if necessary. The shareholders also have the right to request the directors to call a general meeting. If the directors refuse to call the general meeting, the shareholders have the right, under the Companies Ordinance, to call the general meeting themselves if they hold more than half of the voting rights.

 

Notice of general meetings and shareholder meetings

 

To call an AGM (annual general meeting), written notice of at least 21 days must be provided. A general meeting of the shareholders must provide written notice of at least 14 days. The day the notice is served and the day of the meeting do not count towards the 21 days or the 14 days.

 

The notice should be provided to every director and shareholder of the company. The auditor should be provided a copy of the notice. If notice to anyone was accidentally omitted, the meeting is still considered valid.

 

The notice of the meeting should include the following:

  • Date and time of the meeting
  • Format details of the meeting, whether it will be held at a physical venue or virtually
  • General nature of the items to be discussed
  • The type of meeting, whether it is an AGM (annual general meeting) or a general meeting
  • Information on any resolutions to be discussed
  • Statement notifying the members of their rights to appoint a proxy

 

 

Quorum for general meetings

 

A quorum is the minimum number of shareholders required in attendance for the general meeting to be considered valid. The sample Articles of Association provided by the Companies Registry sets the minimum shareholders in attendance for quorum to 2 shareholders present. If the company has only 1 shareholder, then that sole shareholder alone constitutes a quorum. The attendance can be in the form of virtual or physical. Without establishing a quorum, the only action that can be taken is the selection of a chairperson for the meeting.

 

 

Adjournment

 

The act of adjourning a meeting is to postpone the meeting. If during a general meeting called by the directors, a quorum is not established within 30 minutes of the scheduled time of the meeting, the meeting will be adjourned. If the meeting was called by the shareholders and no quorum is not established within 30 minutes, the meeting will be dissolved.

 

If the meeting is adjourned, the directors must determine the date, time, and location of the adjourned meeting. If during the adjourned meeting, a quorum still has not been established, the members present at the meeting will be considered a quorum.

 

 

Voting at general meetings

 

Resolutions at a general meetings can be voted on by a show of hands. A poll can be demanded by either the chairperson, at least 2 shareholders, or a member that has at least 5% of the total voting rights. During a vote, if there is a tie, the chairperson of the meeting will have a second deciding vote.

 

The number of votes each member has is different depending on whether the vote is by a show of hands, or if a poll is demanded. When voting is carried out by a show of hands, each member present has 1 vote each. When voting is carried out by a poll, each member present has one vote for each share they hold.

 

 

Appointing a proxy for a general meeting

 

If a shareholder wishes to appoint a proxy to attend and act on behalf of them at the general meeting, a written proxy notice must be delivered at least 48 hours before the meeting.

 

The proxy notice must be authenticated or signed on behalf of the shareholder and the proxy notice should include the following:

 

  • The shareholder’s name
  • The shareholder’s address
  • The appointed proxy’s identity
  • The general meeting that the proxy will attend

 

Under section 605 of the Companies Ordinance, if the shareholder appoints a proxy but still attends the general meeting, then the proxy’s authority to act is revoked.

 

 

Issuance, transfers, and allotment of shares

 

Picture of vintage share certificate 

 

Issue of shares

 

For shares to be issued to shareholders, the shares must be fully paid for. The company must notify the Companies Registry within one month of the issuance by submitting a Return of Allotment.

 

 

Transfer of shares

 

Shares of the company can be transferred using a document called the instrument of transfer. The company can keep a copy of the instrument of transfer. The transfer is not effective until the new shareholder’s name has been entered into the register of members.

 

The directors of the company have the power to refuse a transfer of shares, but the directors must provide a statement of reasons for the refusal. Reasons for the refusal may include improper transfer procedures or suspicion of fraud. If the event of a shareholder’s death, the company can recognise the legal representative of the deceased shareholder to hold title of the share.

 

 

Allotment of shares

 

The company may allot new shares of the company with the approval of the shareholders by resolution.

 

 

Dividends

 

Declaring dividends

 

Under the Companies Ordinance, dividends can only be paid out of the profits of the company. The declaration of dividends can be carried out at a general meeting of the members, and the dividends must be paid based on each member’s shareholding on the date of the resolution to declare dividends. A shareholder also has the right to waive their right to their dividends.

 

Dividends can be in the form of other non-cash assets. The company can pay non-cash dividends with the approval of an ordinary resolution.

 

 

Conclusion

 

The Articles of Association play a crucial role in governing the internal rules and operations of a company in Hong Kong. These written regulations, as required by the Hong Kong Companies Ordinance, provide a framework for the company’s structure, decision-making processes, and relationships among its members.

 

The above sections have highlighted the key aspects of the sample Articles of Association provided by the Companies Registry. However, companies with unique needs or complex share structures should seek legal guidance to draft tailored Articles that suit the company’s needs.

 

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