What Are the Hong Kong Articles of Association & Why It Matters

In Hong Kong, the Articles of Association are like a rulebook. They detail your company's internal structure and daily operations. The Articles of Association are also governed by the Companies Ordinance and checked by the Hong Kong Companies Registry. 

Therefore, you must understand why the Articles of Association document is important for your company's formation and ongoing operations.

This article will explain the Hong Kong Articles of Association in detail, including their purpose, their role, and the updates they've undergone with the new Companies Ordinance.

The Hong Kong Articles of Association are a legally required document that defines the internal rules of the company and its governance structure. The company and its Articles of Association are governed by the Companies Ordinance. Still, they can be customised to some extent, and can be amended with shareholders' approval. Companies must draft and maintain Articles of Association that accurately reflect their corporate structure and governance procedures and must also be reviewed by the Hong Kong Companies Registry for compliance.

Previously, the Companies Ordinance required a newly formed company to prepare a set of Articles of Association and the Memorandum of Association. Since some of the information was duplicated on both documents, the Memorandum was abolished. Now, with the new Companies Ordinance, the only thing required of the founders at the company formation stage is the Articles of Association.

In 2014, the New Companies Ordinance aimed to modernise and simplify the corporate regulatory framework, enhance corporate governance, and improve the ease of doing business in Hong Kong. Companies and individuals involved in corporate affairs in Hong Kong should be aware of these changes to ensure compliance with the updated legal requirements.

Under the new regulations, some information included in the Memorandum of Association, such as some clauses, lost their purpose.
To simplify the company registration process for Hong Kong companies, local authorities decided only to use the Articles of Association since they already contain most of the information about the company. 

The Articles of Association are to be the foundations of the Hong Kong company you plan to establish, so the rules and regulations of the company must be defined in the document.

For example, the purpose of the company, the functions of the company, how the dividends and profits are to be distributed to the owners and shareholders, the management of the financial records, and stating the initial shareholdings with the corresponding voting rights. In some cases, they even include the details to audit financial records. 

Let’s look through what content specifically is to be expected in the typical Articles of Association.

The company name is the official denomination of a Hong Kong company. Company names that are already in use, or could cause controversy will not be approved by the Hong Kong Company Registry. In fact, the name of a company is one of the first things you include in your submission to the Company Registry to get their approval of the company you want to set up. 

The purpose of the company explains why the company was created and the intended scope of business. A Hong Kong company typically submits a wide range of activities to the companies registry in order to future-proof the possibilities of the business. The company registry will usually approve of a company that conducts a wide range of business activities.

As an independent legal entity, the company must assign duties and responsibilities to the members - what is expected of a member of a company can vary depending on their exact role.

For example, any legal organisation must include the information from the original shareholders, which are the company owners, the directors, who are the ones in charge of signing on behalf of the company, and the registered business address, where the official government notifications will be received.

The share capital varies in type and amount and needs to be defined in the Articles of Association. Normally, the company's capital contribution is reflected by the value of its shares.

Having a shareholder meeting is an efficient way to review important company affairs. The frequency of these general meetings will be stated in the Articles of Association. 

The annual general meeting must occur, and the records of these meetings are known as the meeting minutes. 

Any special or ordinary resolution must be communicated with proper notice to the corresponding parts. 

Now let’s take a look at the Hong Kong companies that are required to register their Articles of Association by law:

The Private Limited Company: In most companies limited by shares, the liability of each member is related to the number of shares they hold. This should be stated in the articles of association. Additionally, as a private company, the public cannot acquire shares in the form of bonds or stocks. Other companies, like public companies limited by shares, have that capacity.

The Unlimited Company: For this type of company, as the liability is unlimited, the articles of association must indicate the liability of each of their members and the company’s assets. 

The Company is limited by guarantees: it must be stated in the articles of association that in the case of damage caused to the company for the leave of a member, that member must cover a stated amount. That amount must not exceed the company’s assets. 

The Hong Kong Companies Registry has provided a few sample Articles of Association for different company types, and they are:

The complexity of the Articles of Association's structure can vary from one Hong Kong company to another.

However, generally speaking, there are a few steps to take to register the Articles of Association with the Hong Kong authorities. Here, we list them:

• Prepare the structure of the articles, including the ones that are mandatory.
• Additional provisions or articles can be added according to each company's needs.
• Submit your Articles of Association together with the company incorporation form to the Companies Registry.
• As a special note, for the entities limited by shares, there are model articles stated in the New Ordinance. 

Yes, companies can change the Articles of Association. As companies grow, sometimes their purpose evolves over time, so changes to the Articles of Association is available for these situations. The process to change this is straightforward with the Companies Registry of Hong Kong. Companies must simply complete the NAA1 form at the Hong Kong Company Registry.

Should you wish to amend your articles of association, your company must observe section 88 of the Companies Ordinance, among various other sections that govern altering your Articles of Association. This section describes requirements such as the fact that only by a special resolution can the articles be altered, unless specific requirements are met for an ordinary resolution, or that the Registrar of Companies must be notified within 15 days of the alteration, and so on. 

Failure to comply with these requirements constitutes a violation of the law. Individuals responsible may be subject to a level 3 fine in addition to a daily penalty of HK$300.

Apart from modifying specific clauses within the articles of association, you also have the option to change the objectives of your Hong Kong company. You can either abandon or restrict the existing objectives or adopt new ones. In such cases, you should pay attention to the stipulations outlined in section 89 of the Companies Ordinance. This section mandates that changes to the company’s objectives require a special resolution, ensuring that all shareholders are duly informed and involved in such significant decisions. 

With a high-ranking, business-friendly environment, the local authorities of Hong Kong offer various options for the different needs of a dynamic market. A simple registration process is always an attractive incentive for entrepreneurs and foreign companies. Having Articles of Association bolsters the attractiveness of this business environment.

These documents standardise the governance of companies. They ensure transparency. They ensure accountability. The availability of Model Articles provided by local authorities simplifies the incorporation process because you’re required to make them upon registration. 

By defining clear guidelines for the structure and operation of businesses, the Articles of Association are instrumental in fostering a reliable and orderly market environment.