Everything You Need to Know About a Company Constitution in Hong Kong
A company constitution is one of the major aspects of incorporating and running a company in Hong Kong. It is legal documentation that contains the basic information, structures, and rules and regulations of a firm. It also specifies how the company will run its activities and dictate its governance. Additionally, a company constitution in Hong Kong assigns roles and responsibilities to different executives within the firm.
The company constitution consists of the company’s relationships with the members and clearly states what is expected of everyone working in there. This helps the business to stand as an entity on its own. It works in a way that every related person works for the betterment of the venture rather than fulfilling their own personal goals. Thus, the constitution also helps to avoid and address any potential conflict.
What is the Difference Between the Company Constitution, the Memorandum of Association and the Articles of Association?
The Memorandum of Association is a document that defines the company structure, objectives, and its members. Generally, it consists of the company name, physical address, goals, the names of shareholders (which also includes the number of shares they have, and their liability). It also defines the relationship with the company and its members with the outer parties.
On the other hand, the Articles of Association consists of the rules and regulations inside the company. It defines the relationships between the company and the members, and the relationship between the members themselves. Once drafted, the Memorandum of Association can’t be changed or altered, but the Articles of Association can be.
In previous times, the Memorandum of Association and the Article of Association used to be different documents. In recent days, the trend has it that most of the companies combine these two documents. Company Constitution is basically the combination of the Articles of Association and the Memorandum of Association.
Do We Need Both Memorandum and Articles of Association in Hong Kong?
Previously, it was mandatory for companies to have both Memorandum and Articles of Association. These days, companies only need to have an Article of Association.
However, keep in mind that the authorities refer to the Company Constitution in Hong Kong as ‘Article of Association.‘ Meaning that these days, in your Articles of Association, you have to write every information that would be in a Memorandum.
How to Draft the Company Constitution in Hong Kong?
Before starting with this section, we strongly recommend you work with Hong Kong incorporation experts to draft the company constitution. They will make sure that you include the information that the paper needs. Remember that the company constitution isn’t only important while registering the business, but you also refer to it later when issues and conflicts arise.
Having said that, you start with the basic information about the company:
Name: The company name should be different from existing companies, and it shouldn’t be vulgar or offensive. It can be in English or Chinese but not both.
Liability: This clause explains the extent to which the company’s members will be liable for the loss or debts.
Subscriber Clause: The subscriber clause has information about the firm’s initial shareholders. A Hong Kong Private Limited Company can have up to 50 shareholders.
Object Clause: You have to list the major business activities and the company goals here.
Rules and Regulations: The rules and regulations should be in accordance with the regulatory authorities in your field.
Company Type: Company type refers to whether the firm is a sole proprietorship, partnership or a limited liability company.
Shares: Apart from the shareholders, you can put information about the shares of the company and the manner they are treated. For example, how you sell the shares, for at least how long should a shareholder have a share before selling it, etc.
Company Directors: Company directors and beneficiary information are necessary while opening a company in Hong Kong.
Company Documents: The corporate documents that you have until now. This could be agreements, meeting conclusions, etc.
Conflict of Interests: If conflicts occur, how will you deal with it?
Loans: Loan that you have taken, and the loan you plan to give.
Indemnities: It refers to the protection that a director or employees get when there is an unfavourable financial situation.
Remember that the above list is just a reference. There could be other information depending on the sector of the company, nature of the business, and its goals or requirements. The main idea here is to ensure the authorities that apart from your business plan, you have a good idea of what running an actual company will be like so there aren’t unnecessary issues or failures.
Essentially, the business goals, structure, and rules, and regulations are the most important considerations while drafting a company constitution in Hong Kong.
A company constitution in Hong Kong defines the roles and expectations of people working in the company and also the third parties related to the firm. You should have a comprehensive company constitution that is clear and without any loopholes. For the best results, work with a professional company registration firm that also provides company constitution writing services and one of the best companies of that type is 3E Accounting Hong Kong.