What Are the Articles of Association in Hong Kong: A Complete Guide
- Modified: 26 February 2024
- 9 min read
- Starting a Company
Gabi Bellairs-Lombard
Business Writer
Gabi creates content that inspires. She's spent her career writing compelling website copy, and now she specialises in product marketing copy. As the voice of our products and features, Gabi makes complex business finance and accounting topics easy to understand. Her top priority is ensuring that her words impact and inspire her readers.
Are you incorporating a company in Hong Kong or looking to understand your firm’s governance? The articles of association are a required legal cornerstone that defines a company’s structure and operational rules. This document is not only a legal necessity during incorporation but continues to shape key management decisions, investor relations, and company policies. Our guide details what you should expect from a Hong Kong company’s articles of association and how they underpin the business’s daily and strategic functions.
Key Takeaways
- The Articles of Association define a company’s legal structure and governance in Hong Kong, outlining critical elements such as the company name, purpose, share capital structure, organisational details, and protocols for shareholder meetings.
- The Articles are legally binding for the Hong Kong company and its members, including shareholders and directors, mandating adherence to the regulations and duties prescribed within, and are essential for corporate governance and investor relations.
- Upon incorporation, a Hong Kong company must file the Articles of Association and any amendments must be filed with the Companies Registry. These articles can be customised to meet specific business needs while ensuring legal compliance.
What Are the Articles of Association?
The Articles of Association, also known as company articles, essentially define a legal corporate structure and a company's governance. These documents are a key component of the company incorporation process and play a vital role in establishing and enhancing business governance among the company owners. Along with the Memorandum of Association, the AOAs are the fundamental constitutional documents of companies incorporated in Hong Kong, required for its incorporation under the current Companies Ordinance.
These articles are not just internal guidelines for a private and public company limited by shares or guarantees but are also available to the public at the company’s registration office. This ensures a level of transparency for stakeholders, allowing them to access vital information about a company’s operations and governance, including those of public companies limited.
Need assistance navigating the new Companies Ordinance structure or choosing the right company registration option in Hong Kong? Our experts are here to help you understand the nuances and ensure compliance every step of the way. Contact us today for personalised guidance and support!
Additionally, it's important to be aware of the new Companies Ordinance structure in Hong Kong, which aims to simplify the corporate regulatory framework, enhance corporate governance, and improve the ease of doing business in Hong Kong. Whether you're a sole proprietorship or private company, anyone doing business in Hong Kong should familiarise themselves with the differences between the new and old structures to ensure compliance with the updated legal requirements. You can outsource these to a consultant such as Osome who has a Hong Kong-based team of compliance experts knowledgeable in local regulations.
Why Are the Articles of Association So Important?
The Articles of Association are not just another document to file while establishing a business. These articles are some of the most critical documents for a newly formed company, carrying both legal and strategic importance. They are mandatory for company incorporation in many countries, including Hong Kong, and must be signed by the company secretary and directors.
Furthermore, the Articles of Association are pivotal for investor relations and stock market performance. Also, they serve as a framework for establishing regular goals, thereby guiding the company’s strategic progression.
What Is Included in the Contents of the Articles of Association?
The Articles of Association encapsulate diverse aspects of a company incorporated in Hong Kong, making it a comprehensive document. This includes:
- The company name
- The business’s purpose
- The organisation of the company’s capital
- Critical organisational details
They also lay out the protocols for conducting shareholder meetings and passing resolutions.
Company name
The company name is not just a label; it is an integral part of a company’s identity and a reflection of the company’s assets. Featured in legal documents, transactions, and communications, the company name must comply with local regulations as stated in the Articles of Association for a company limited.
A company name must include a legal suffix, such as ‘Inc.’ or ‘Ltd.’, to indicate its status as a legal entity. The name should be unique and not infringe on intellectual property rights or cause controversy, as stipulated by the Hong Kong Company Registry. This ensures the official company name aligns with the business form, such as an unlimited company, and avoids any potential legal issues.
Purpose of the company
Another key component of the Articles of Association is the company’s purpose, which defines its primary objectives and operations. The company purpose can be depicted as either a broad general statement or as a detailed description encompassing specific activities.
This serves as a guiding light for governance and aligns with jurisdictional regulatory compliance, shaping the company’s strategy and activities. However, it is crucial to strike a balance in defining the company’s purpose — while a broad statement allows for business diversification, a specific statement ensures focused operations.
Share capital structure
The Articles of Association’s capital structure significantly contributes to defining the company’s financial foundation. It outlines:
- The total capital contributed by shareholders in exchange for ownership shares, known as share capital
- The type and number of shares, including common and preferred stock classes
- Shareholder rights and obligations, such as receiving dividends and voting at general meetings
- The liability for share amounts
Provisions for issuing additional shares in the future, if necessary, may also be included in the Articles of Association.
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Organisational details
Organisational details in the Articles of Association, as guided by the Companies Ordinance, provide a blueprint of the company’s structural setup. This includes the company’s official registered address, effective from the incorporation date.
These articles also detail:
- Director and officer appointments, including statutory roles such as the company secretary
- The founding directors and original shareholders with a clear record of the individuals and entities that initially established the company
- The management of the business’s financial records and the need to audit financial records
- The directors’ responsibility to maintain accurate accounting records
Shareholder meetings
The section of the company's Articles of Association on shareholders’ meetings outlines the conduct of these essential gatherings. Contained within this section are the specific details regarding the resolutions, notices, and votes of each shareholder meeting. This information provides a comprehensive overview of the proceedings.
In addition to the provisions for the first general meeting, details on every subsequent annual general meeting are also documented in this section. This ensures a clear understanding of the procedure and protocols for these crucial meetings.
Who Is Bound by the Articles of Association?
Far from being just guidelines, the Articles of Association constitute a binding contract between the company and its members. This means that the company, shareholders, directors, and employees are all bound to adhere to the rules and regulations outlined within these articles.
Directors and officers
Directors and officers maintain a pivotal role in managing a company’s operations. Their roles and duties are governed by the Articles of Association. They are duty-bound to act in good faith for the benefit of the company, including being accountable to present and future shareholders.
Directors are required to:
- Exercise independent judgment and use their powers for the company’s benefit
- Avoid conflicts of interest
- Prohibited from using the company’s property or information for unauthorised purposes or personal gain
- Adhere to the regulations and obligations outlined in the articles of association throughout their tenure.
Shareholders and members
Likewise, shareholders are bound by the Articles of Association, serving as a contract that governs their relations with one another and the company. This includes respecting the rights and obligations that come with their shares, such as voting rights and rights to dividends.
Through annual directors’ reports, shareholders are entitled to review and approve the company’s environmental policies, legal compliance, and relationships with employees, customers, and suppliers. They are also bound to adhere to provisions regarding the appointment of directors and the organisation of board and shareholder meetings.
Filing Articles of Association: Requirements and Procedures
For companies in Hong Kong, filing the Articles of Association is a significant step in the incorporation process. This involves submitting the Incorporation Form and a copy of the company’s Articles of Association to the Hong Kong Companies Registry.
Mandatory filing
In Hong Kong, every company, without exception, is required to file the Articles of Association. Hong Kong companies must complete the prescribed document with all mandatory articles and submit it along with the incorporation form to the Companies Registry.
When amendments are made to the Articles of Association, an updated copy must be filed with the Secretary of State or equivalent authority. The resolution to amend the Articles of Association must be filed with the appropriate Registrar within 15 days to record the changes and make them effective.
Model articles and customisation
Companies can utilise Model Articles while drafting their Articles of Association. These are basic templates prescribed by the Companies (Model Articles) Notice for different types of companies.
Without company-specific Articles, the company’s articles will automatically be formed by the appropriate Model Articles as per legal stipulations. However, companies have the flexibility to customise their Articles of Association to cater to their specific business needs as long as they comply with mandatory legal provisions.
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How To Change Articles of Association
Most companies want to adjust their Articles of Association as it evolves, but there are steps to follow. To change the articles, a process must be initiated which starts with:
- Reviewing the current document
- Identifying changes needed
- Gaining board approval
- Passing a resolution in a formal meeting with the necessary quorum and voting threshold
Shareholder approval
It goes without saying that any modifications to the Articles of Association necessitate shareholder approval. In Hong Kong, this approval is obtained through a special resolution requiring at least a 75% majority of the voting shareholders.
A Special Resolution can be tabled at a Director's Meeting, whereas an Ordinary Resolution requires the endorsement by a majority vote.
The process of getting approval usually involves a formal vote, which may include specific procedures such as a secret ballot or more stringent requirements than a simple majority. If a quorum is not met in the first or second meeting, a third may be called and the members present, unlimited by the quorum, make all decisions.
The articles of association form a contract between the company and its shareholders, which means any changes need to be agreed upon through special resolutions with substantial agreement from the shareholders.
Limitations and restrictions
Although revising the Articles of Association can be essential for a company’s evolution, one must be conscious of certain limitations and restrictions. Here are some important points to keep in mind:
- Any alterations to the Articles of Association must be made in good faith and for the benefit of the company
- Changes cannot have retrospective effects
- Changes cannot increase existing members’ financial liability
Altering the articles cannot serve as a means to avoid fulfilling the company’s established contractual obligations with third parties. In case of a conflict between shareholder agreements and articles, the agreements are more powerful, provided they do not violate statutory provisions.
Additionally, form NAA4 (Notice of Change of Company Status) needs to be submitted for reporting a change of the company status from a private company to public company or vice versa, which necessitates a change to the company's articles. This also needs to be reported to the Companies Ordinance.
Summary
In summary, the Articles of Association are a cornerstone document in a company’s legal structure. From defining the company’s purpose to delineating shareholder rights and obligations, these articles form a statutory contract binding the company, its shareholders, directors, and employees. Navigating these articles can be a complex endeavour, but understanding their significance can offer a clear roadmap for effective corporate governance.
FAQ
Which companies are required to file Articles of Association?
In Hong Kong, all companies registered under the Companies Ordinance are required to file Articles of Association. This includes both private and public companies. Filing the Articles of Association is a necessary step in the incorporation process and ensures compliance with Hong Kong's legal requirements for company formation.
What is the difference between AOA and MOA?
The Memorandum of Association (MOA) outlines a company's essential details, while the Articles of Association (AOA) specify internal management and regulations. These documents form the basis of a company's constitution.
How do I update the company Articles of Association?
To update the Articles of Association in Hong Kong, review and draft amendments, hold a shareholder meeting to approve changes, file the amended Articles with the Companies Registry, update records, and notify stakeholders. Maintain ongoing compliance and monitor for future updates.
Who is bound by the Articles of Association?
Everyone involved in the company, including shareholders, directors, and employees, is bound by the rules and regulations outlined in the Articles of Association.
How can the Articles of Association be changed?
To change the Articles of Association, a special resolution with at least a 75% majority of voting shareholders is required, followed by reporting the changes to the Hong Kong Company Registry within 15 days.
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