To form a company under the Hong Kong Companies Ordinance, certain documents must be prepared which will form the constitution (bylaws) of the company. The constitution or bylaws of a Hong Kong incorporated company is commonly known as Memorandum and Articles of Association. The Memorandum and Articles of Association must be registered with the Companies Registry.
(1) The Memorandum and Association
This must contain –
(a) The name of the company
In relation to choosing the name of the company a number of matters must be considered:
It should be noted that pursuant to Hong Kong Companies Ordinances, no company may be registered by a name which the Hong Kong Government regards as undesirable.
The name of the proposed company must in addition be different to names already on the Register.
The words “bank” or “insurance” must only be used where there is an appropriate license or exemption.
In addition, pursuant to the registration of Business Registration Ordinance, a company may trade under a name other than its registered name. This trade name should be registered in the Register of Business Names.
(b) Declaration of limited liability
e.g. “The liability of the members is limited”.
(c) Objects Clause
This clause will generally define the purpose for which the company was formed and what it shall in fact do in the way of its business. This statement will effectively determine what shall be the powers of the company because the objects stated will confer on the company all the necessary and incidental powers for carrying out those objects.
The objects clause also has a negative effect in that it will limit and restrict the powers of the company from doing things not authorized by the object’s clause. Normally the objects clause will include, for instance a clause authorizing the company to carry on a particular business which it is proposed to carry on and also to carry on various other businesses which it may probably or possibly desire to carry on.
For instance, if a company were formed with the intention of dealing in property, part of the object’s clause might read as follows:
“to purchase, take on lease or in exchange, hire or otherwise acquire any real and personal property and any rights or privileges which the company may think necessary or convenient for the purpose of its business”.
It is normal for the objects clause in addition to include a power generally to acquire property and rights which the company may think necessary or convenient.
It is normal in addition to include a clause empowering a company to acquire any other business similar to its own. Other normal clauses included in the object’s clause would be:
(i) Power to invest company money;
(ii) The power to receive money on deposit, to lend money and to guarantee the performance of contracts;
(iii) To draw, make, accept, endorse, discount and issue promissory notes, bills of exchange and other negotiable or transferable instruments;
(iv) To pay for property and remunerate persons by cash or otherwise;
(v) To sell and dispose of property, assets or undertakings of the company for any consideration including shares, debentures or securities of any other company having objects altogether or in part similar to those of the existing company;
(vi) Power to act as or employ agents.
(This should not be taken in any way as exhaustive of the possible objects/powers available to the company)
(1) It should always be remembered that the objects clause may be altered by a special resolution of the company, i.e. 75% or more of the shareholders in a general meeting. It should be noted that such a special resolution must be registered with the Registrar of Companies within 14 days of being passed.
(2) The Object Clause is no longer required under the Hong Kong Companies Ordinance.
(d) A Capital Clause
This will state the nominal capital of the company, i.e. the value in money of the shares which the company is authorized to issue and the number of shares into which it is divided together with the amount of each share, for example: “The capital of the company is HKD10,000 divided into 10,000 shares of HKD1.00 each”.
(e) The Association Clause
The founding members declare that they wish to be formed into a company and agree to take shares. The names and addresses of the founding members are listed in one column and a corresponding column will list the number of shares they each hold.
(2) The Articles of Association
These are the rules for the internal management of the company. There are standard form articles in Table A of the Hong Kong Companies Ordinance as amended and these can be used and altered as the need arises.
The regulations contained in Table A covers all aspects of the management of a company, but they may broadly be divided into four main aspects:
(a) Capital of a company
This relates to variation of class rights, liens, calls, transfer and transmission of shares, alteration of capital and allotment of shares.
(b) Members (shareholders)
This part contains regulations in respect of the notice of members meeting, proceedings at meetings and votes of members.
This part contains regulations regarding the powers and duties of directors, proceedings of directors meeting and appointment of a managing director and company secretary.
(d) Distribution and disclosure
This part contains regulations mainly related to dividends and reserves, accounts and audits.
See Also: Sample Standard Memorandum and Articles of Association of a Hong Kong private company