Hong Kong articles of association: model articles versus bespoke articles for your company

Hong Kong Articles of Association Model Articles vs Bespoke Articles

Every Hong Kong private company limited by shares must have a constitution. The constitution is formed by the company's articles of association together with the provisions of the Companies Ordinance (Cap. 622) that apply by default. For most new companies, the Hong Kong articles of association model articles set out in Cap. 622 are the starting point. A company may adopt the model articles in full, or it may register its own bespoke articles that modify or replace them. The choice affects how the company is governed from day one.

What the Model Articles Cover

The model articles for a private company limited by shares are contained in Schedule 1 to the Companies Ordinance (Cap. 622). They provide a standard set of rules covering the core governance areas:

• Director powers and duties. The directors may exercise all the powers of the company, subject to the Ordinance and any directions given by the members by ordinary resolution. The model articles set out how directors are appointed, removed, and how they make decisions, including board meetings and written resolutions.
• Share rights. All shares rank equally unless the company issues shares with different rights. The model articles do not create multiple share classes; every share carries one vote on a poll and an equal right to dividends.
• Meeting procedures. The model articles regulate the calling of general meetings, notice periods, quorum, voting by show of hands or poll, and the appointment of proxies. They also permit written resolutions as an alternative to holding a physical meeting.
• Dividend provisions. The directors may declare dividends out of profits available for distribution, and the model articles set out how dividends are paid and how unclaimed dividends are treated.
• Administrative matters. The model articles cover the role of the company secretary, the location of the registered office, the keeping of board minutes, and the procedure for transferring shares.

For a single-owner company or a small group of founders who all intend to be directors, the model articles are usually sufficient. They are designed to work without modification for the typical private company limited by shares.

Hong Kong Bespoke Articles

When the standard model articles do not fit the shareholders' intentions, the company should register bespoke articles. Bespoke articles are drafted specifically for the company and replace the model articles in whole or in part. Common reasons to use bespoke articles include:

• Different share classes. The model articles assume one class of shares. If the company needs ordinary shares, preference shares, or shares with weighted voting rights, the articles must create those classes and define their rights.
• Special voting rights. Founders may want veto powers over certain decisions, or a particular shareholder may require that certain matters need a higher majority than a simple majority.
• Restrictions on share transfer. The model articles allow a director to refuse to register a transfer, but bespoke articles can impose pre-emption rights or require board approval for any transfer to a non-member.
• Investor protections. Venture capital or angel investors often require provisions that are not in the model articles, such as board representation, information rights, or anti-dilution clauses.
• Director appointment and removal. The model articles allow removal by ordinary resolution. Bespoke articles may give a particular shareholder the right to appoint or remove a director, or may require a special resolution to remove a director.

Bespoke articles are filed with the Companies Registry at incorporation as part of the company's constitution. They become a public document, so any person searching the company's file can read them.

Hong Kong Company Constitution

The company constitution of a Hong Kong private company limited by shares consists of:

• The articles of association (whether model or bespoke).
• Any resolutions or agreements that affect the constitution, such as a special resolution to alter the articles or a shareholders' agreement that is incorporated by reference.

The constitution is binding on the company and on every member, as if each member had signed it. A member must comply with the constitution, and the company must exercise its powers in accordance with it. The constitution also governs the relationship between the directors and the members.

The Companies Registry maintains a public register of every company's constitution. Any amendment to the articles must be by special resolution (75% of votes cast) and must be filed with the Registrar within 15 days.

Hong Kong Model Articles Cap 622

The model articles under Cap. 622 are divided into two parts: Part A applies to private companies limited by shares, and Part B applies to companies limited by guarantee. For a private company limited by shares, Part A contains 50 articles. They are the default constitution for any company that does not register its own articles at incorporation.

If a company registers articles that are silent on a particular matter, the corresponding model article applies. For example, if the bespoke articles do not mention how directors are appointed, the model article on appointment will fill the gap. This is why practitioners often recommend that bespoke articles state expressly which model articles are excluded or modified.

Hong Kong Articles Private Company

A private company limited by shares is the most common corporate structure in Hong Kong. Its articles of association must comply with the Companies Ordinance (Cap. 622) and must not contain anything that is contrary to the Ordinance. The Ordinance sets out certain mandatory provisions that cannot be overridden by the articles, such as the right of a member to demand a poll or the requirement for an annual general meeting (unless the company has dispensed with it by written resolution).

The articles also determine whether the company is a private company for the purposes of the Ordinance. A private company must restrict the right to transfer its shares, limit the number of members to 50 (excluding employees), and prohibit any invitation to the public to subscribe for shares or debentures. The model articles include these restrictions, but bespoke articles must also include them to maintain private company status.

When to Use Model Articles

Most small Hong Kong companies with a single shareholder or a small group of equal shareholders can adopt the model articles without change. The model articles are free, they are already approved by the Companies Registry, and they reduce the cost and time of incorporation. The founder simply files Form NNC1 and states that the company adopts the model articles. No separate document is needed.

The model articles are also suitable when the company has no intention of raising external capital or issuing different classes of shares. They provide a clear, standard framework that is familiar to accountants, company secretaries, and the Companies Registry.

When to Use Bespoke Articles

Bespoke articles are advisable when the shareholders have specific arrangements that the model articles do not accommodate. Examples include:

• A joint venture where each party has the right to appoint a director.
• A company with multiple share classes, such as founders' shares with enhanced voting rights.
• A company that intends to grant pre-emption rights to existing shareholders before new shares are issued.
• A company that wants to restrict share transfers beyond the standard director discretion.
• A company that needs to comply with investor requirements, such as information rights or board observer rights.

Bespoke articles are also used when the shareholders have entered into a shareholders' agreement that contains provisions inconsistent with the model articles. In that case, the articles should be aligned with the agreement to avoid conflicts.

Filing Articles with Form NNC1

When incorporating a private company limited by shares, the applicant files Form NNC1 together with the company's articles of association. If the company adopts the model articles, no separate document is required; the form simply indicates that the model articles apply. If the company registers bespoke articles, the articles must be printed or typed and filed with the form.

The articles must be signed by each subscriber (the first shareholder) and witnessed. The Companies Registry will check that the articles comply with the Ordinance and that they contain the necessary restrictions for a private company. Once the Certificate of Incorporation is issued, the articles are part of the public record.

Practical Considerations

A company may amend its articles after incorporation by special resolution. The amendment must be filed with the Companies Registry within 15 days. However, it is more efficient to get the articles right at the outset, because an amendment requires a shareholder vote and a filing fee.

For most Hong Kong companies, the model articles are the right choice. They are comprehensive, they are designed for the private company limited by shares, and they keep the incorporation process simple. Bespoke articles should be reserved for situations where the standard rules do not match the shareholders' intentions. A company that needs bespoke articles should have them drafted by a legal professional who understands Cap. 622 and the practical operation of Hong Kong company law.