Issuing company shares in Hong Kong: step-by-step guide

At some point in your startup’s lifetime you’re likely to have to issue shares – especially if you’re raising funds. We’ve put together this easy five-step guide to help you understand how to issue shares in Hong Kong and make sure you’re ready when you start raising funds.

Step 1: Pass a board resolution 

A board resolution is a formal document that’s created for company records. It can be about any important issue in a company and is created to ensure that the board of directors are aligned on the issue, and that their decisions are recorded in writing. 

In most cases, the first step to issue company shares is to get your board of directors to pass a board resolution. This document should approve the terms of the new investment and the share issuance. The approval should come from the shareholders, whose authority is needed as a legal requirement before the company can issue shares. Board resolutions often include a proposal to get shareholders’ approval. You can get shareholders’ approval via a shareholder resolution or shareholder meeting (more on this below). 

Step 2. Get approval from your shareholders

You’ve got the board’s approval. It’s now time to get your shareholders’ approval via a shareholder resolution.

A shareholder resolution can be passed in two ways:

1. Circulate a draft written resolution for your shareholders to give their approval by signing the document. 
2. Arrange a shareholders’ meeting and have them vote on whether the company should issue shares. 

If you pass a shareholder resolution in writing, you need to obtain approval from all shareholders entitled to vote in the resolution. However, if you organise a shareholders’ meeting to pass a resolution to authorise the issuance of shares, you’ll only need approval from a simple majority (over 50%).

Let’s look at each of these options in more detail. 

1. Pass a written resolution

Most companies opt to have a resolution passed in writing because it’s administratively easier than convening a shareholders’ meeting to take a vote. To pass a written resolution: 

• the board drafts and circulates a written resolution that states the number of shares to be issued. 
• If the shareholders agree with the share issuance, they can approve the resolution by signing the document and returning a copy to the company. 
• As soon as all shareholders entitled to vote have signed the resolution, you can officially issue shares to shareholders.

2. Pass a resolution via a shareholders’ meeting

Alternatively, you can hold a shareholders’ meeting to pass the resolution. 

For this, you need to:

• gather your shareholders
• explain the new shares
• ask your shareholders to vote 
• record the outcome of the vote in meeting minutes

Some companies may choose to hold a shareholder meeting because it provides a forum for their shareholders to discuss the investment. In Hong Kong, some companies may choose to hold a shareholder meeting because the voting threshold for passing a resolution is lower than passing a resolution in writing.

Holding a shareholders’ meeting requires your company to satisfy a number of formalities. If you don’t properly meet these formalities,  the resolutions passed at the meeting could be deemed invalid.

To hold a shareholders’ meeting, you’ll need to: 

• Notify your shareholders: send a notice in writing to all your shareholders at least 14 days before the meeting takes place (or 21 days if the meeting is an annual general meeting). 
• Specify these details in the notice:  date, time and place of the meeting and the resolution proposed to be passed in the meeting (i.e., authorising the issuance of shares). The notice should also specify that the members are entitled to appoint a proxy to attend and vote at the meeting on their behalf.
• Understand your meeting quorum: a quorum is the minimum number of shareholders that needs to be in attendance before a meeting can take place. At least two shareholders need to be present before a meeting is quorum. But if you only have one shareholder, then it suffices for the sole shareholder to be present (but it would be vastly easier to get that sole shareholder to pass a written resolution).

Step 3. Issue shares

When you’ve properly passed all the resolutions needed, you’re ready to issue shares. The requirements set out here represent the default position at law. But they are subject to the terms of your company’s articles of association and shareholders agreement (if any). So be sure to check those documents to see if they contain any additional requirements relating to share issuances, shareholders meetings and approvals in general. If you’ve raised a funding round before, it’s likely that you’ll also need to satisfy any pre-emption and investor consent requirements before you can issue additional shares. When in doubt, seek professional legal advice.

Step 4. File your ‘return of allotment’

Once you’ve issued shares to your shareholders, you need to notify the Companies Registry about the shares issuance. To do this, you need to file a NSC1 form with the Companies Registry, which requires you (or an authorised corporate representative) to prepare the following information:

• Number of shares allotted to the new shareholders
• Amount paid (or to be paid) on the allotment of each share
• Amount (if any) unpaid on each share
• Class of shares that are being issued
• Personal particulars of each shareholder, such as full name, identification number, nationality and address

Step 5: Create share certificates

You can now issue share certificates to the new shareholders, which will serve as evidence of their shareholdings. You will need to do so within 2 months after the shares have been allotted. The certificates should state the name of the company, the class of shares, how many shares each certificate represents and whether the shares are fully paid up.  When you do your fundraising on SeedLegals, you can create share certificates automatically to distribute to your shareholders. 

Sort your legals with SeedLegals

We’ve covered the steps you need to take to issue shares in Hong Kong. We know that documentation can be tedious and take months to draft, finalise and execute. Here at SeedLegals, we help our startups save weeks – or even months – of admin-heavy, expensive work. 

Our automated data-driven platform builds local law-compliant docs in just a few clicks, so you can save time and focus on achieving your company’s milestones. If you get stuck at any point along the way, the step-by-step wizard is there to help or you can reach out to our team of experts anytime to get unlimited support.

If you have any questions, or you’re still unsure about some of these steps,  we’re here to help. Get in touch with our team who will guide you and help you get started.

*Disclaimer: The information contained in this article does not constitute and should not be treated as legal, tax, accounting, or financial advice.