The capital of a Hong Kong company represents the assets employed to carry out its business activities. The capital of a Hong Kong company will usually be divided into share capital and loan capital. The share capital is represented by the money shareholders have contributed with to the company’s capital and the loan is the represented by the money the company has borrowed from banks or other financial institutions. In Hong Kong, only companies limited by shares are required to have a share capital. The share capital is represented by shares.
The shares represent a personal property of the shareholder that can take the form of money or another type of asset. Shares can be transferred according to the Companies Law in Hong Kong. All information about the shares and share capital must appear in the Memorandum or Articles of Association of a company in Hong Kong. The ownership of shares is stated by the issuance of a share certificate. The share certificate will contain information about the number of shares a company member has.
The new Hong Kong Company Ordinance classifies shares into ordinary, preference or preferred and redeemable preference shares. All shares allow its owner certain rights such as voting rights, rights to profits made by the company or the right to receive the amount of money invested in the company in case the company is liquidated.
In June 2014, the Hong Kong Companies Act has undergone certain changes, some of these changes targeting the share capital of companies. Among these changes, one of the most important is the abolishment of the authorized share capital and the nominal value of shares. The authorized share capital was the maximum amount of money a company could raise when issuing shares. The nominal par value of a share represented the minimum issue price for one share in the company.
According to the Companies Law, there is no minimum share capital required for companies in Hong Kong, except for companies requiring special permits or licenses such as insurance companies, bank, financial institutions and traveling agencies. These types of companies are required a certain share capital that is regulated by the relevant authorities.
Although there are no mandatory requirements for a minimum authorized capital for Hong Kong companies, most legal entities start with a minimum amount, for example, 10,000 HK$. The shares typically used have a value of 1.00 HK$ each. A company’s share capital can also be denominated in a foreign currency; however, it will be more difficult to change the currency after the company is incorporated. A minimum issued or paid-up capital will typically have a value of one share of 1 HK$.