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Articles of Association of a Hong Kong Company

Prior to the new Companies Ordinance (“CO”) came into effect on 3 March 2014, the constitutional documents of a company formed in Hong Kong were Memorandum of Association ("MA") and Articles of Association ("AA").

The new CO abolishes the requirement for an MA. Conditions (i.e. provisions) of the MA of an existing company (i.e. a company formed and registered under the predecessor Ordinance) will be deemed to be regarded as provisions of the company's AA. However, any condition stating the authorised capital of the company or dividing the share capital of the company into shares of a fixed par value is regarded as deleted.

A company's exercise of powers will be limited by its AA after the elimination of the MA.

1.         Abolition of the Memorandum of Association

The New CO abolishes the requirement for a company to have a Memorandum. A company incorporated in Hong Kong will only have a single constitutional document (the Articles).

For an existing company, provisions set out in its memorandum are deemed to be provisions of its Articles (section 98 of the New CO). However, any such provisions relating to authorized share capital and par value are regarded as deleted (section 98(4)), to reflect the migration to no par.

If a company wishes to remove any provision of the Memorandum now deemed to be contained in the Articles, and which does not constitute a mandatory provision (see below), it may do so by way of special resolution. For example, a company may consider removing its object clause, as discussed below.

2.         Objects clause

The objects clause was previously included in the Memorandum. It states the purpose(s) for which a company is formed and the intended business activities of the company. Since 1997, the objects clause has been optional. For most companies1, it is not mandatory to state the objects in the Articles but a company may do so (section 82(2) of the New CO). Where a company does not state its objects, it has the capacity and the rights, powers and privileges of a natural person (section 115 of the New CO), but may not exercise its powers in a manner contrary to its constitutional documents.

Older companies that retain an objects clause in their constitutional documents should consider taking the opportunity occasioned by the abolition of the Memorandum to delete the objects clause, thereby giving them greater flexibility in their operations and dealings.

Some companies may wish to retain specific object clauses. For example in the case of a charitable company, the objects will be restricted to a charitable purpose. In the case of a joint venture company, the parent companies may wish to specify the exact purpose and business for which the joint venture was formed in an objects clause.

If the objects clause is not deleted, it is deemed to be carried over to the Articles following abolition of the Memorandum. In such cases, a counterparty enquiring as to a company's capacity to enter into a particular transaction (for example, to borrow or provide security) should review any objects clause in the former Memorandum (now deemed to be in the Articles) to determine whether there are any restrictions on a company's powers.

However, note that section 117 of the New CO provides that in favour of a person dealing with a company in good faith, the power of the directors to bind the company will be deemed to be free of any limitation under the Articles, any resolutions of the company or any agreement between the members of the company (more information on the statutory protection of outsiders is contained in our newsletter on "Company Administration, Procedure and Operations").

3.         Mandatory Provisions in Articles

New companies incorporated under the New CO must have Articles that include provisions dealing with the following matters:

• the name of the company (section 81);
• the objects of the company, if the company has been granted a licence to dispense with the use of the word "Limited" in its name under section 103 (section 82);
• details of members' liabilities (section 83);
• details of liabilities or contribution of members (section 84); and
• details of initial capital and initial shareholding (section 85).

Generally, existing companies established under the Old CO will comply with the requirements to have the mandatory articles by virtue of the deeming provision in section 98 of the New CO (as discussed above).

4.         Model Articles

The New CO empowers the Financial Secretary to prescribe different model articles (Model Articles) for different types of companies. These Model Articles replace the Table A Articles and the other tables in the First Schedule to the Old CO for companies incorporated after the commencement of the New CO, and will be in addition to the mandatory Articles that a company must have (as discussed above).

A company may adopt as its articles all or any of the provisions of the Model Articles prescribed for the type of company to which it belongs. The appropriate Model Articles will also apply in so far as the articles of the company do not exclude or modify the Model Articles. Therefore, if a company established under the New CO does not register any additional articles upon incorporation, the Model Articles prescribed for that type of company will apply.

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