3. Part 3 Company Formation and related matters
- private companies limited by shares;
- public companies limited by shares;
- private unlimited companies with a share capital;
- public unlimited companies with a share capital; and
- companies limited by guarantee without a share capital.
Abolishing the Memorandum of Association
As discussed above, it used to be the law that a company must have a memorandum of association which sets out what it can do as a legal entity. However, the CO, which follows the modern trend of law of most jurisdictions, have abolished the memorandum of association
For companies formed under the old regime, the conditions in the memorandum are deemed to be contained in the articles of association, except for conditions relating to authorised share capital and par value, which are regarded to have been removed for all purposes (section 98).
Companies which apply to be incorporated under the CO need to submit only their incorporation form and articles of association.
Any person or persons may form a company by signing the articles of association of the company intended to be formed and delivering to the Registrar for registration a copy of the articles in the same form as those signed by the founder members, together with a completed incorporation form.
The agreement by the founder members to form a company and take up membership of the company to be formed, previously contained in the memorandum of association, is now contained in the articles (section 67).
Mandatory Articles of Association
Companies incorporated under the CO are required to have certain mandatory articles of association: for instance, the company name (section 81), details of the company’s liabilities, or contributions of the founding members (sections 83 and 84).
Companies incorporating under the CO are required to have as one of their mandatory articles a statement of their capital and initial shareholdings, which is also required to be contained in their incorporation forms.
According to section 85(1), this requirement applies only to companies incorporated under the CO. It is not necessary for companies incorporated under the old regime to amend their articles to include this provision.
Model Articles of Association
According to section 79, a company may choose to adopt any or all of the provisions of the model articles of association prescribed for the type of company to which it belongs.
Three sets of model articles are prescribed by the Notice: one set for public companies limited by shares, one for private companies limited by shares, and one for companies limited by guarantee.
The model articles prescribed for each type of company form part of the articles of a company if it does not register any other articles, and the model articles apply unless they are excluded or modified by the company’s registered articles (section 80).
Under section 82(2), companies may still choose to include objects in their articles.
The articles of a company with a share capital may also state the maximum number of shares that the company may issue.
Limited Companies can only be registered with “Limited” as the last word of their English name or “有限公司” of their Chinese name (section 102).
The old regime required that every company have a common seal with the company name engraved in legible characters.
Under the current law, a common seal is no longer mandatory. The keeping and use of a common seal is optional.
A company may execute a document under its common seal (if it has one); and if the company executes a document under its common seal, it must comply with provisions related to the common seal as stated in its Articles of Association (section 127).