New Hong Kong Companies Ordinance: Execution of documents

01 Nov 2013 | Newsletter/briefing

WHEN IN FORCE: 3 March 2014

COMPANIES AFFECTED: All Hong Kong incorporated companies

NEW PROVISIONS: Part 3 of new CO: ss124, 127, 128

1. COMMON SEAL

Summary of changes

  • under the existing legislation, every company must have a common seal
  • under the new CO, companies have a choice of whether or not to adopt and use a common seal. If a company chooses to adopt a common seal then the existing requirements (that the seal must be metallic and have the company’s name engraved thereon in legible characters) continue to apply

Implications for practice

  • if a company wishes to change its current practice of using a seal, the articles of association should be checked as amendments will likely be required

2. EXECUTION OF DOCUMENTS

Summary of changes

  • the current Companies Ordinance is silent on execution requirements (although statutory presumptions are found in other ordinances). Usually, a company’s articles of association prescribe the manner in which the company seal may be used
  • section 127 of the new CO states that a company may execute a document by:
    • affixing its common seal in accordance with the requirements contained in its articles of association
    • signing the document by any two directors or any director and the company secretary or (in the case of a single-director company) its sole director
  • in respect only of a purchaser for valuable consideration who acts in good faith, a document which on its face purports to have been signed in accordance with the above requirements is deemed to have been duly executed by the company

Implications for practice

  • the new s127 is permissive. In addition to the above, a company may continue to use other ways to execute documents - eg through a directors’ resolution appointing authorized signatories. However, the deeming provision in favour of purchasers for valuable consideration who act in good faith will only apply to documents executed in accordance with s127
  • companies should continue to adhere to any limitations set out in the articles of association when executing documents
  • if a company wishes to change its current execution practices and sign documents in accordance with the new s127 provisions, the articles of association should be checked as amendments may be required

3. EXECUTION OF DEEDS

Summary of changes

  • the current Companies Ordinance is silent on the execution requirements for deeds (although statutory presumptions are found in other ordinances). Usually, a company’s articles of association prescribe the way in which the company seal may be used
  • the new CO requirements for a company to execute a document as a deed are:
    • execution of the document must be in accordance with s127 outlined above (ie execution by seal or under hand by, eg, two directors)
    • the document must be expressed to be executed by the company as a deed
    • the document must be delivered as a deed

Implications for practice

  • if a company wishes to execute deeds without affixing a seal, the articles of association should be checked as amendments will likely be required
  • to satisfy the requirement that the deed is "expressed" to be executed by the company as a deed, deeds should continue to incorporate a testimonium
  • notwithstanding the new way of executing deeds under hand, companies may in their articles adopt specific procedures for execution of deeds (whether under hand or under seal). Best practice when considering if a counterparty has properly executed a document as a deed is to review the counterparty’s articles of association
  • guidance from the Law Society in 2002 on the execution of deeds governed by Hong Kong law suggests that, as a matter of prudence, such execution of deeds be witnessed. This guidance remains in force, although it is not a legal or regulatory requirement. We expect that the Law Society will consider updating this guidance so that it does not apply to execution of deeds under the new (under hand) requirements

4. EXECUTION OF DEEDS BY FOREIGN COMPANIES

  • as per the present legislation, the new CO is silent on the question of valid execution by a foreign company of a Hong Kong law document expressed to be a deed

Implications for practice

  • foreign companies should therefore continue to sign deeds in the same way as under existing law and practice

5. SAMPLE TESTIMONIUM

  • a sample testimonium is set out below

IN WITNESS of which this document has been executed and delivered as a deed on the date which first appears above.

6. SAMPLE NEW-FORM EXECUTION BLOCK

  • a sample execution block for a Hong Kong company executing a deed under the new (under hand) requirements of the new CO is set out below

EXECUTED and DELIVERED as a deed )
by [name of company] )
acting by either two directors or one )
director and the company secretary )

  • the two directors (or director and company secretary) would sign and print names at the right hand side of the execution block.
  • the above sample execution block will need to be tailored for each particular Hong Kong company, to reflect the execution requirements set out in the company’s articles


For related publications, see also: New Hong Kong Companies Ordinance Tool Kit.

Contacts

Peter Brien (partner), Lisa Chung (partner), Peter Lake (partner)


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