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What you need to know about the Articles of Association in Hong Kong

Articles of Association, one of the main documents for companies incorporated in Hong Kong

What are the Hong Kong articles of association?

In order to do business in Hong Kong, foreign companies explore their options, and, normally, the decision to establish a Hong Kong company is made. As we know, there are several forms of business entities that are available in Hong Kong, and most of them share the same basic principle of having a set of points that define their internal structure and operation. This is known as the Articles of Association (AoA). 

As the Articles of Association include the most basic information of a business entity, these are ruled by the Companies Ordinance and are reviewed by the Hong Kong Companies Registry for compliance. Previously, the Companies Ordinance required that a newly formed company prepared a set of Articles of Association and the Memorandum of Association. Since some of the information was duplicated on both of the documents, the Memorandum was abolished. Now, with the new Companies Ordinance, the company’s articles of association are the only ones required.

Now that we have a general idea of what are the Articles of Association, in the following sections more details will be provided.  

What changed with the New Companies Ordinance?

Under the new regulations, some of the information included on 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 to only use the Articles of Association, since they already contain most of the important information of a company.  

What are the contents of the Articles of Association?

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

For example, the purpose of the company, its functions, the way the company will pay dividends and profits, the management of the financial records, as well as 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.   

Organization

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

For example, any legal organization 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 shareholder meetings 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 take place, and the record of these meetings are known as the meeting minutes. 

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

What companies require 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 on the articles of association. Additionally, as a private company, the public cannot engage in acquiring shares in the way of bonds or stocks. Other company types, 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 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. 

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. 

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. Depending on the changes or updates that want to be performed to the Articles of Association, it is suggested to seek the advice of experts.  

 

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 Article of Association, known as Model Articles, are available online and are provided by the local authorities as a way 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.

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