Articles of Association in Hong Kong
The Memorandum and Articles of Association are the fundamental constitutional documents of a Hong Kong company as they are required for a company’s incorporation under the current Companies Ordinance (Cap. 32) (“the CO”).
The Memorandum used to contain the objects clause of a company (i.e. a statement on a company’s purpose and scope of activities which it is allowed to carry on). However, since the abolishment of the doctrine of ultra vires in relation to corporate capacity in 1997 (i.e. the rule which says that acts carried out by a company beyond the scope of its objects clause are void or voidable), a company’s objects clause has been given much less significance as all companies, since then, have all the rights and capacity of a natural person in absence of express restrictions.
The new Companies Ordinance (Cap. 622) (“the New CO”), which will commence on 3rd March 2014 (“the Commencement Date”), goes further and completely abolishes the concept of a Memorandum of Association.
Does this apply to my company registered under the CO?
For existing companies incorporated under the CO, any “condition” (i.e. provision) that was part of the company’s Memorandum immediately before the commencement of the New CO is now deemed to be regarded as a provision of the company’s Articles of Association (section 98 of the New CO). This, however, does not apply to any condition which states the amount of share capital with which the company is registered or divides the share capital into shares of a fixed amount which will be considered as deleted (section 98(4) of the New CO).
For any companies incorporated under the New CO, their Articles of Association must contain certain Mandatory Articles dealing with the following matters, namely:-
- the company name (section 81 of the New CO);
- the Articles of a limited company must state the liability of its members is limited (section 83(1) of the New CO);
- the Articles of an unlimited company must state that the liability of its members is unlimited (section 83(2) of the New CO);
- the Articles of a company limited by shares must state that the liability of its members is limited to any amount unpaid on shares held by the members (section 84(1) of the New CO);
- the Articles of a company limited by guarantee must state that each person who is a member of the company undertakes that if the company is wound up while the person is a member, or within one year after ceasing to be a member, that the person will contribute an amount required, not exceeding a specified amount to the company’s assets (section 84(2) of the New CO);
- the Articles of a company with a share capital must state the capital and initial shareholdings (section 85(1) of, and section 8 of Part 5 of Schedule 2 to, the New CO);
- the Articles to be incorporated with a license granted under section 103 of the New CO, or of a company with such a license must state the company’s objects whilst the license remains in force (section 82(1) of the New CO). For any other company, it is not mandatory to state its objects in its Articles but it may do so (section 82(2) of the New CO); and,
- the Articles of a company with a share capital may state the maximum number of shares that the company may issue (section 85(2) of the New CO).
Replacement of Tables A, C by the Model Articles under the New CO
By default or otherwise, many of the companies incorporated under the CO have adopted, in part or in whole, the provisions of Table A for their Articles of Association.
Under the New CO, the Financial Secretary has also been given the power to prescribe Model Articles for companies. These, effectively, have replaced Tables A and C under Schedule 1 to the CO and apply to companies incorporated after the Commencement Date.
A copy of the Companies (Model Articles) Notice can be obtained here: http://www.cr.gov.hk/en/companies_ordinance/docs/sub_legislation_ln77-e.pdf
For those companies who have adopted Table A as (part of) their Articles of Association, these Articles will continue to apply in so far as they are not modified by provisions of the New CO. Companies who are interested in having the Model Articles apply; will have to take a positive act by amending their Articles in order to do so.
Given the timing and nature of the changes with to a company’s Memorandum and Articles of Association under the New CO, companies are encouraged to take an opportunity to review their existing constitutional documents to see if there are any changes that they wish to make in light of the New CO.
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