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

Many foreign companies and entrepreneurs are attracted to Hong Kong because it's a great place to do business. However, setting up a company here comes with its legal obligations and requirements that you must follow.

One of the most important regulations is the Articles of Association, a document legally required for every company. It outlines the internal rules and governance structure, setting the stage for how a business operates within Hong Kong's legal framework. Simply put, it lays out the rules for how your company will be run.

These rules will be governed by the Companies Ordinance and checked by the Hong Kong Companies Registry. Therefore, understanding the Articles of Association document is vital to any Hong Kong company's formation and ongoing operation.

This article will give you a comprehensive understanding of the Hong Kong Articles of Association by explaining what they are, why they are essential, and how they have changed under the new Companies Ordinance.

What Are the Hong Kong Articles of Association?

The Hong Kong Articles of Association are a legally required document that defines a company's internal rules and governance structure. They are governed by the Companies Ordinance, can be customized 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 company’s articles of association are the only ones required.

💡Tip: Find out more about the different types of legal entities in Hong Kong

What Changed With the New Companies Ordinance?

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.

In order to simplify the process of registration for Hong Kong companies, the local authorities decided only to use the Articles of Association since they already contain most of a company's important information.  

What Are the Contents of the Articles of Association?

As the Articles of Association act as the foundations of a Hong Kong company, some elements must be defined in them.

For example, the purpose of the company, its functions, how it will pay dividends and profits, 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. 

More details about the mandatory articles are provided below:

Name

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. 

Purpose 

The company's purpose explains why the company was created and the intended scope of business. A Hong Kong company normally is allowed to have a wide range to conduct business.   

Organisation

As an independent legal entity, the company must include the assigned duties and responsibilities of its members.

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.

Capital

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.

Meetings

Having a shareholder meeting is an efficient way to review important affairs of the company. 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.  

What Companies Are Required to 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 Most Popular Type of Company

• 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 engage in acquiring shares in the way of bonds or stocks. Other companies, like public companies limited by shares, have that capacity.

Other Entities

• 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:

How to Register the Articles of Association?

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. 

Note: From 2014 onwards, there is no need for companies to register for a Memorandum of Association; companies will only need to register for the Articles of Association.

Can the Articles of Association Be Changed? 

As the purpose of companies evolves with time, changes to the Articles of Association can be performed. In Hong Kong, it is a quite common and straightforward process with the Companies Registry of Hong Kong. To modify the Articles of Association, a company is required to 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. Depending on the nature of the proposed alterations, either a special resolution or an ordinary resolution is mandatory.

 Furthermore, the company must submit an official notice along with the resolution to the Hong Kong Company Registry within 15 days. 

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. 

It is necessary to complete the NAA2 form and submit it, along with a resolution, to the Hong Kong Company Registry. Business owners should also prepare a certified true copy of the amended Articles. The updated document can be certified by a Hong Kong licensed solicitor, a practising CPA, or a Chartered Secretary.

Conclusion

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. Additionally, templates for the Articles of Association, known as Model Articles, are available online and provided by the local authorities to standardize the process of setting up companies. 

Nevertheless, it is always advisable to review the appropriate model articles with an expert to avoid any fundamental problems at the moment of the application for company incorporation.