This article is to give a brief outline on how to arrange allotment of shares of a Hong Kong private company.
Difference between Share Transfer and Share Allotment
The main difference between Share Transfer and Share Allotment is about the money flow. For share transfer, it is the new shareholder paying the existing shareholder as purchase price of the shares on his/her hand, while share allotment, this is the company to allot new shares for new/existing shareholder to purchase, this is a way to invite new investor, or to increase the shareholding power.
Another difference is that share transfer will NOT alter the shareholder portion of all members as total number issued shares will not change. Yet, for share allotment, because the total number of shares will be increased, if new shares are not to all present members on a pro-rata basis, dilution will happen, and thus, approval of all current shareholders are required.
Preparation of mandatory documents of Allotment of Shares – CASH base
Also, for share transfer, documents are submitted to Inland Revenue Department (IRD), while share allotment, documents are submitted to Companies Registry (CR) instead, and financial reports are no required to submit as well; where upon completion of Know Your Customer (KYC) process by the agent (if applicable), below are the documents to be prepared:-
Application of Shares – by new/existing shareholder to the Company stating mainly
Number of shares to apply;
The consideration (how much) to pay;
His/her particulars to enter into the Register of Members of the Company;
Director’s resolution – mandatory internal record to be signed by all the directors;
Shareholder’s resolution – no need if a general/specific mandate have been granted to the Board, or else, this mandatory approval is required;
NSC1 – Return of Allotment, mandatory return to be filed to Companies Registry;
Register of Members – mandatory internal record to be updated by the Company and keep at registered office address, no signature is required;
Share Certificate – issued by the Company to the Shareholder as proof, to be executed by signature of the director and either common seal or authorized chop of the company;
Significant Controllers Register – mandatory internal record to be updated (required if there is the change of significant control over the company is registrable) by the Company and keep at registered office address or dedicated location, no signature is required;
The NSC1 should be delivered within One (1) month after an allotment of shares; in case the new investment (new injection of capital) does not involve in allotment of shares, other form(s) and procedure(s) would be adopted instead.
Any additional information you would like to know, please feel free to drop us an email:- firstname.lastname@example.org. In addition, we dig out below materials in case you need a little more insights.
FAQ – Documents relating to Share Capital / Shares (Share Transfer)
FAQ – Abolition of Par Value of Shares
Special remarks that Hong Kong Company nowadays has abolished the “par value” concept