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Allotment of Shares

A company can choose to increase its share capital to attract more investments. Investments can be from new shareholders or existing partners. One popular way of increasing shares is to submit a return of allotment. The form needs to be submitted to the Companies registry and the delivery time is 1 month after the share allotment.

What are the procedures to allot new shares?

The company members shall pass a resolution to approve the allotment of shares to the new investors or existing members. Such approval may be unconditional or subject to conditions set out in the terms and conditions of the contracts of allotment. The company members have a right to revoke or vary the approval of share allotment at any time by a company resolution.

What is a Contract of allotment?

It is very important for the company to have a contract in place with new investors. To determine the exchange of capital contributed for the share allotted by the company, the two parties must agree:

  1. The amount of share capital to be contributed
  2. The time of the contribution of the share capital to the company account
  3. The form of the contribution (cash or non-cash consideration) – monies, goods, services, land or some other forms or assets.
  4. The time of which the new investor to have the unconditional right to the allotting shares.
  5. The rights of membership attached to each share.

Upon receiving the approval from the company member under Section 141 of the Companies Ordinance, the directors can exercise the power and take all necessary steps to allot new shares and grant the corresponding rights to each class of allotted shares. According to section 142 of the Companies Ordinance, the return shall include the statement of capital, name and address of each allottee. It shall also state the consideration of allotment, and whether the shares are fully or partly paid up.

What is a Statement of Capital?

  1. The total number of issued shares of the company.
  2. The paid up amount or regarded as paid up and the outstanding unpaid amount (if any) or regarded as outstanding unpaid amount on the total number of issued shares in the company.
  3. The total amount of issued share capital of the company.

In case there are different classes of shares, the company shall state for each class of shares the prescribed particulars of the rights attached to the shares in the that class.

If the company needs more time to arrange the filing, responsible person(s) can apply for a court extension in delivering the return form NSC1. The court will only grant approval if it is equitable to extend the time for filing. In other words, the delay must be accidental or due to uncontrollable factors.  Once the company allots shares to new members, the company shall issue the share certificate to the new shareholders within 2 months.

If Company owners do not comply with the requirements, every responsible person of the company will be liable to a level 4 fine. Should you require assistance in preparing the share allotment, please contact our Hong Kong professional company maintenance team at info@getstarted.hk.