Articles of Association

Key Takeaways

• The Articles of Association set out the internal rules for managing a company.
• It is part of the constitutional documents required when registering a company.
• The Articles function as a binding agreement between the company and its shareholders.
• Any change to the Articles requires a special resolution and must be filed with the government.

The Articles of Association is a document that is known by many names across different jurisdictions: Memorandum of Association, Articles of Incorporation, bylaws, constitution, charter. Naturally, the many names by which this document is known can cause confusion, and obscure the fact that they don’t all refer to the same thing. 

So what is the Articles of Association, and why should you read it from start to finish before you incorporate your company? Below, we explain all that and more. 

What is the Articles of Association (AoA)?

The Articles of Association (AoA) is a document setting out rules for the internal management of the company. You may think of it as a contract between company members and the company itself. In Hong Kong and many other jurisdictions, the AoA is one of the documents that must be  submitted to the government when incorporating a company. 

Though company founders may draft this document from scratch with the aid of legal professionals and corporate service providers, many governments, including the HK government, also provide Model Articles that companies may simply adopt as their own. 

Articles of Association vs Bylaws

Sometimes, the rules set down in the Articles of Association are collectively referred to as “corporate bylaws,” though this term is more commonly seen in US and UK contexts. 

Here are some examples of the items that are covered by clauses in the AoA of Hong Kong companies:

Area	Details addressed
The Power of Directors	– How may directors make their decisions? In a directors meeting or in a director’s written resolution? – What is the quorum in a directors’ meeting? – How should directors conduct themselves in votes when there is a conflict of interest? – Under what circumstances can directors refuse the transfer, allotment, or buy-back of shares? (This section importantly gives directors the power to respond to threats of share dilution and hostile takeover)
Procedures for appointing a proxy	– How may a company’s member appoint a proxy to act on their behalf? For instance, will a notice in writing be required?
Procedures for convening meetings	– How many days in advance should members be notified of meetings? – How should members be notified of meetings?
General rules on voting	– How many votes are required to pass a resolution? – How many votes does each member have?
Distribution of dividends	– How should dividends be paid? Through bank transfers, or sending a cheque? – May the directors set aside reserves from the company’s profits? – Do directors have the authority to apply the reserves to any business purpose they think fit?

Articles of Association PDF sample 

The above are only a few examples of the areas that are addressed by a company’s AoA. To get a full picture of just how minute those rules can be, you may visit this official government site to access a full PDF sample of a Hong Kong limited company’s Model Articles. 

Memorandum and Articles of Association: Are They the Same?

“Articles of Association” is often used interchangeably with Memorandum of Association (MoA). However, it must be noted that these refer to completely different documents.

Put simply, the MoA states the company’s goals, and the AoA is a rulebook stating how it can achieve those goals. The main purpose of the first is to outline the main business activities for which the company is formed, and to authorize it to carry out those activities. For example, a clothing company will state in its MoA that its main object is “to carry on the business of selling clothing.”

To streamline the incorporation process, the HK government abolished the MoA in 2014 and integrated it with other incorporation documents and the AoA.

In jurisdictions where a MoA is required for company registration , the MoA is not usually a document that can be altered. This is what distinguishes it from the AoA. 

How to update company constitution documents?

In Hong Kong, alterations to the AoA are allowed under the Companies Ordinance, as long as those alterations do not contravene HK company law. Investor preferences and unique operational needs might call for alterations to a company’s AoA. 

The common practice when making changes is to consult a legal professional, as any room for ambiguity in the AoA can open up the possibility of disputes amongst members.

Here are the steps you should take, if you wish to alter your company’s AoA: 

• Step 1: Pass a special resolution (which requires 75% of votes to be passed) to authorize changes to the AoA 
• Step 2: Obtain a certified copy of the altered AoA. This can be certified by a Hong Kong licensed solicitor, practicing CPA or a Chartered Secretary.
• Step 3: The company must file the altered AoA and the relevant government form within 15 days of passing the special resolution. For general alterations of a company’s AoA, Form NAA1 should be used.

At the end of the day, the AoA is more than a mandatory compliance document. It’s instead a rulebook that should serve the company’s business needs and make its daily operations go without a hitch. If you need assistance in altering your AoA, feel free to contact us now. 

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