New Hong Kong Companies Ordinance: Memorandum of Association is retired from the constitutional documents

01 Nov 2013 | Newsletter/briefing

WHEN IN FORCE: 3 March 2014

COMPANIES AFFECTED: All Hong Kong incorporated companies

NEW PROVISIONS: Part 3, Division 2 of new CO

SUMMARY OF CHANGES

  • under the existing legislation, the constitutional documents of a company are:
    • the memorandum of association
    • the articles of association
  • typically, the memorandum contains basic information such as a company’s objects and authorized share capital (i.e. how many shares have been authorized to be issued, and the "par"or "nominal" value of each of those shares). The regulations governing the operation of the company are set out in the articles
  • the memorandum has decreased in significance because:
    • the ultra vires doctrine in respect of a company’s objects (for acts of the company already carried out) has been abolished for some time
    • the concepts of “authorized share capital” and "par" or "nominal" value are no longer used in the new CO
  • the new CO therefore retires the memorandum. A Hong Kong incorporated company will only have a single constitutional document - the articles. For an existing company, provisions set out in its memorandum will be deemed to be provisions of its articles
  • a company may remove all or part of the provisions of its memorandum which would otherwise be deemed as being set out in its articles (other than certain liability provisions) by passing a shareholders’ special resolution or a written resolution
  • most companies may change their articles to remove the object clause - which was previously in the memorandum and are deemed under the new CO to be in the articles

IMPLICATIONS FOR PRACTICE

  • for administrative convenience, a company should in due course adopt new articles, so that all provisions (including previous deemed provisions) are located in one document
  • when new articles are adopted, a company may wish to tidy up the articles generally, taking into account the other new amendments to the companies law (e.g. references to "par value" and "authorized share capital" can be removed)
  • for due diligence purposes (e.g. when checking the ability of a company to borrow, grant security or give financial assistance) it will still be prudent to check the company’s memorandum (as deemed to be in the articles) to ensure there are no capacity concerns
  • with the streamlining of a company’s constitutional documentation, a new share capital form has been introduced. Each time a company changes its share capital, it must file with the Companies Registry a "statement of capital". The statement of capital provides a snapshot of the company’s entire share capital structure. Debenture allotments are to be filed separately
  • some companies such as joint venture companies or charitable companies may well want to maintain specific object clauses in their articles
  • a separate practitioner alert sets out practical matters a company should consider when amending its articles


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

Contacts

Peter Brien (partner), Lisa Chung (partner)


Publications and seminars landing page