How to issue new shares in Hong Kong

How to Issue New Shares in Hong Kong

To issue new shares in Hong Kong, directors must first pass a resolution authorising the allotment. The company then files a return of allotment with the Companies Registry within one month. Hong Kong shares have no par value, so directors set the issue price. The entire amount received becomes share capital.

The Hong Kong Share Allotment Process

Share allotment begins with a directors' resolution. The directors decide the number of shares to issue, the price per share, and the identity of the allottees. Under the Companies Ordinance (Cap. 622), directors have the power to issue shares unless the articles of association state otherwise.

An ordinary resolution from members may be required if the allotment pushes issued share capital past the directors' authorised limit. Check the articles of association before proceeding. Once the resolution passes, the company secretary or a director prepares the allotment letter and updates the register of members with the new allottees' names and holdings.

Consideration for the shares can be cash, property, or services. For non-cash consideration, directors must value the asset and ensure the shares are not issued at a discount to that value. The entire amount received, whether cash or value, is recorded as share capital.

Form NSC1 Hong Kong

File Form NSC1, the prescribed return of allotment, with the Companies Registry within one month of the allotment date. The form requires the number of shares allotted in each class, the nominal value (left blank or marked as nil under the no-par-value regime), the amount paid or deemed paid on each share, the amount unpaid if any, and the names of the allottees and the number of shares each received.

File Form NSC1 on paper or through the e-filing portal. The registration fee is included in the incorporation filing or paid separately. The Companies Registry does not charge a separate fee for Form NSC1 itself, but late filing incurs a higher registration fee.

Return of Allotment Hong Kong

The return of allotment is the statutory notice to the Registrar of Companies that new shares have been issued. It is a requirement under section 140 of the Companies Ordinance. The company must deliver Form NSC1 within one month of the allotment date.

Failure to file on time makes the company and every officer in default liable to a fine. The registrar may also refuse to register the allotment, invalidating the share issue. The company secretary is typically responsible for filing the return.

This return is distinct from the annual return (Form NAR1), which reports the total issued share capital as of the return date. The annual return consolidates information from all allotments made during the year.

No Par Value Shares Hong Kong

Hong Kong abolished par value for shares on 3 March 2014 under the new Companies Ordinance (Cap. 622). Shares now have no nominal value. The concepts of authorised share capital and share premium no longer apply. When issuing shares, directors set the issue price, and the whole amount received is recorded as share capital.

This simplifies accounting. There is no share premium account to maintain and no need to distinguish between nominal value and premium. A company's subscribed capital is simply the aggregate amount received for all issued shares.

The no-par-value regime allows directors to issue shares at any price determined in good faith. The old rule against issuing shares at a discount is gone. Still, directors must act in the best interests of the company and not issue shares at a price that unfairly dilutes existing members.