A shareholder may or may not be from Hong Kong. They may be an individual or, alternatively, a legal entity, such as a liquidator, a sole proprietor, or a company. Given the various ways of selling shares in your company, it can be difficult to determine the type of structure you want for your shares. Between one and fifty individuals are allowed to be shareholders in a Hong Kong company if it is a limited company. In addition, the minimum number of directors required is one, with no maximum.
What is Hong Kong shareholding?
Investors who purchase shares are granted a certain degree of control over the company in which they have invested. This power is proportional to their level of investment, meaning that the larger their stake in the company, the greater their shareholding. In other words, everyone who has purchased shares jointly owns the company. In return for their investment in a company, shareholders receive certain privileges that may vary depending on the percentage of shares they hold.- If a person holds a majority stake in a company (50%), they have the power to make crucial decisions, such as appointing members of the board of directors;
- If a person owns approximately three-quarters of the shares (75%), they can change the company's name, purchase other stakes from other investors, reduce the share capital, or close the company;
- If a person owns all the shares (100%), they are considered the sole shareholder, giving them absolute power under the company's rules.
The procedure in detail
The company's directors offer shares to potential buyers. The exact number of shares is distributed to investors when they are registered in the company's register of members. A further allotment of shares must take place at a general meeting with unanimous consent. Shareholders may give their consent for a specific allotment or in general. Once the shares have been allotted, the NSC1 must be completed within 30 days to obtain confirmation of the share allotment from the Companies Registry. This involves disclosing the identity of the shareholders and the number of shares they own. The form may be completed for allotments made on a single day or over a certain period.Main types of shares issued by a company in Hong Kong
- Preference shares: Another type of share is the preference share, which grants its holders preferential rights over ordinary shareholders. These may include priority in the payment of dividends and liquidation proceeds. These shares have greater rights regarding dividends and distributions in the event of liquidation than ordinary shares. The amount of dividends allocated to a shareholder is proportional to the value of the shares. The same applies to voting preferences, where only preference votes may be counted in certain cases;
- Convertible securities: In certain circumstances, a company may issue convertible securities, such as convertible bonds or convertible preference shares. As their name suggests, these are securities that can be converted into ordinary shares at a later date;
- Rights shares: In some cases, a company may also issue rights shares, which give current shareholders the power to purchase additional shares in the company at a reduced cost;
- Non-voting shares: These have almost all the rights of ordinary shares, except that they do not carry voting rights;
- Deferred shares: These grant only a specified number of rights to distributions and dividends. Deferred shares are a type of non-voting share and rank behind preference shares and ordinary shares.
What are the obligations of shareholders?
A shareholder must disclose their name to be entered in the company's register and provide personal information such as their address or telephone number. When the company starts making money, they are entitled to their dividends. In the event of dissolution, shareholders are entitled to a portion of the remaining assets, if any, after all debts have been settled.The rights of shareholders in a Hong Kong company
Certain types of rights are included in the articles of association. Here are some of the rights added to the articles:- Shareholders have the right to receive a specified portion of dividends when profits are available;
- When the company is liquidated, shareholders receive any surplus assets after the debts have been repaid;
- Certain shares allow voting only at meetings. Generally, each share carries one vote, but some shares carry no votes or multiple votes in exceptional circumstances;
- Shareholders have the right to appoint a proxy;
- They also have the right to make decisions to appoint the company's management personnel;
- They receive a share of the liquidation proceeds once the debt has been repaid;
- They may request the audited accounts, as well as the director's report and the company's audited report.
