Bermuda-based financial services company.
The core provisions affecting the operation of companies under the Old CO will be repealed, except those provisions relating to winding-up and insolvency of companies and prospectuses.
Charltons is preparing a series of newsletters summarising the key changes to the company law framework under the New CO. In this second newsletter, we discuss the key changes in respect of share capital in particular, abolition of par valuetransactions involving share capital such as capital reductions, buy backs and financial assistanceand registration of share transfers.
Generally, par value is the minimum price at which shares can be issued.
Key changes under the New CO The New CO adopts a mandatory system of no-par for Hk cross border insolvency regime Hong Kong companies with a share capital and abolishes the concept of par or nominal value of shares. This will apply to all shares, including shares issued before that date.
Concepts such as par value, share premium and the requirement for authorised capital will be redundant following the migration to no par, and will be abolished.
The New CO provides that the amount of authorised capital set out in an existing company's constitutional documents is deemed to be deleted. Schedule 11 to the New CO sets out transitional arrangements and deeming provisions so that existing companies will not need to take steps to change their existing share capital and constitutional documents to reflect the no-par regime, and to ensure that contractual provisions that reference par value and related concepts will not be affected by the abolition of par.
For contracts, resolutions, trust deeds and other documents executed before the commencement date of the New CO, any express or implied reference to par or nominal value will be deemed to be a reference to nominal value immediately before the commencement date of the New CO.
From the commencement date, any amount in the share premium account and any amount in the capital redemption reserve will become part of the company's share capital. The current permitted uses of share premium will be preserved for any such amounts in the share premium account immediately before the commencement date.
The liability of a shareholder for calls on partly paid shares issued before the commencement date whether the amounts due are in respect of nominal value or premium will not be affected. Practical considerations and recommended steps The migration to no-par should benefit companies by giving them greater flexibility in structuring their share capital.
The nature of a share will still be the same whether or not it has a par value, in that a share will still represent a fraction of ownership in a company. The concepts of paid up capital, issued capital and partly paid shares will also still be relevant. Alteration of share capital Section of the New CO sets out the various methods by which a company can alter its share capital other than by redemption or repurchase of sharesincluding issuing new shares, capitalising profits, issuing bonus shares and effecting a share split or a share consolidation.
A company must submit notice of any alteration of share capital to the Registrar of Companies in Hong Kong the Registrarwhich notice must include a statement of capital setting out the number of shares in issue and the amount of the share capital.
Issuing new shares for consideration If a company issues new shares for consideration, then the full proceeds will be credited to the share capital account. As the concept of par value has been abolished, there is now no minimum price at which shares must be issued, or indeed any statutory control over the setting of the issue price of shares.
However, directors will still have an overriding fiduciary duty to set the price in good faith. It may also be necessary to obtain shareholders' approval before issuing new shares, if the shares are not allotted under an offer made to all members of the company in proportion to their holdings i.
Maximum number of shares that may be issued As the concept of authorised share capital is being abolished, there will be no limit on the number of shares that the directors can issue. However, if shareholders so wish, they can amend the articles of association by way of special resolution to specify a maximum number of shares that may be issued.
The maximum number of shares that a company may issue can be changed by way of ordinary resolution. Issuing bonus shares When a company issues bonus shares under the "no-par" regime, such shares will have no nominal value, meaning the company is no longer required to transfer an amount to share capital if it issues shares for no consideration, unless it elects to do so for example, by capitalising profits.
Therefore, a company may allot and issue bonus shares either with or without increasing its share capital. Shareholder approval would not be required for a bonus issue, provided the issue is to members of the company in proportion to their shareholdings. Consolidation and subdivision of shares Companies will continue to be able to consolidate and subdivide shares.
Although there is no nominal amount to be divided for no-par shares, a similar result to subdivision can be achieved by increasing the number of shares.Hong Kong Newsletter February New Companies Ordinance - Share Capital.
Richard specialises in litigation and dispute resolution and has extensive experience of a broad range of litigation matters, including contentious insolvency, regulatory and investigatory matters, contentious probate, employment, professional indemnity and disciplinary matters, shareholders’ and partnership disputes and major commercial cross-border litigation.
We regularly work on complex cross-border transactions, ground breaking new legal solutions and products, and help Allen & Overy's clients resolve their most difficult disputes. A sia Business Law Journal‘s Deals of the Year Awards for has increased its coverage to 70 outstanding deals throughout the region.
The deals, along with some truly exceptional star deals, were the ones our editorial team felt best showcased examples of legal expertise in the region. Airlines currently excluded from cover: * * PLEASE NOTE * * Cover excludes any airline where there is a threat of, or has filed or applied for any form of insolvency or insolvency protection at the time of effecting cover or issuance of the air ticket.
noteworthy cases in the areas of corporate disputes and insolvency in Hong Kong, the UK and other common law countries. The Singapore High Court declines jurisdiction under its insolvency regime in favour of overlapping arbitral proceedings English Court does not have jurisdiction under the Cross-Border Insolvency Regulations to.