Professional Documents
Culture Documents
Liability, Promotion, Formation
Liability, Promotion, Formation
Liability, Promotion, Formation
Week 2
Company Law
The University of Hong Kong
week 2 objectives
• week 1 recap
• questions and follow-up
• tutorials
• participation
• liability
liability-what is it?
partnerships
• examples?
• Partnership Ordinance (Cap 38) & Limited Partnerships Ordinance
(Cap 37)
• disadvantages?
• partners are jointly and severally liable for partnership debts
• maybe difficult to arrange financing
• indefinite duration is not automatic
• advantages?
• autonomy
• confidentiality
• culture
• minimal cost and time maintenance
• attitude toward risk
what is a company?
• a legally created entity (a legal fiction) that generally:
1. formal creation per law
• via Companies Ordinance (Cap 622)
• via specific resolution (e.g., Kowloon-Canton Railway Corporation (Cap 372))
2. legal personality (i.e., entity distinct from its owners/shareholders)
• “artificial person”, “body corporate”
3. limited liability of owners
4. separation of ownership and control
• shareholders, directors, managers, employees principal-agent issues?
5. indefinite duration
• choose to dissolve, forced to dissolve, or acquired
6. freely transferable ownership interests
liability applied
• Whose liability is unlimited? limited?
• Types of liability
• limited by shares
• liability limited to price paid for shares (share capital) or balance if not paid yet
• limited by guarantee (non-profit entities)
• no share capital, liability is up to amount guaranteed by members
• without limited liability (i.e., unlimited liability partnership-like)
• personal liability to pay compensation
• employees/directors don’t do bad things or you pay (e.g., share subscriptions)
• personal liability imposed on members (special situations)
• knowingly conducting business to defraud
• dormant company
• signing incorrectly drafted documents
2018 Company Law 8
The University of Hong Kong
you want to start a taxi empire but right now you have
enough money for one taxi. how might you own it?
you have done well and now have enough for five taxis.
how might you own them?
impact on liability?
corporate veil
• corporate veil: generally courts will not look at why the company
was formed, or see who is in control, or the relationship amongst its
members
tip
• what’s the difference between the below when signing a
document (e.g., a loan agreement)?
1. Great HKU Student Company Limited
--------------------------------------------------
Name: Awesome HKU student
Title: CEO
2. --------------------------------------------------
Name: Awesome HKU student
a promoter’s duties
• fiduciary duty
• must act in principal’s best interest (principalfiduciary)
• highest standard of care
• no conflict of interest
• example 2: promoter in action
• X buys property for 100
• X sets-up company Y with others
• X sells property to Y for 150
• X pockets 50
• any problems?
2018 Company Law 17
The University of Hong Kong
a promoter’s duties
• how does a promoter avoid a conflict of interest?
• no secret profits
• disclose (to company), disclose (to investors), disclose (to CR)
promotion incorporation
• basic documentation:
• sign articles of the company
• complete Incorporation Form
• deliver company’s articles of association and Incorporation Form to
Companies Registry
• submission also triggers business registration with IRD
• lawful purpose
• R v Registrar of Companies, ex parte Attorney General (1991) (page 27)
incorporation output
• constitutional documents
• memorandum of association (n/a)
• articles of association
articles of association
• are a company’s constitution that sets out the regulations for how
the company will be governed
• articles can be changed, usually via special resolution
• but must be “bona fide for the benefit of the company as a whole”
• once articles are registered they have the effect of a contract:
• between the company and its members: Ng Kin Kenneth v HKFA Ltd (1994)
(page 33)
• between its members: Rayfield v. Hands (1960) (page 33)
• relationship between a director’s contract and articles
• Re New British Iron Co, ex parte Beckwith (1898) (page 34)
• Kwok Ping Sheung Walter v Sun Hung Kai Properties Ltd (2009) (page 34)
2018 Company Law 25
The University of Hong Kong
resolution
• a formal, written expression of an opinion, intention, or
decisions by an official body, assembly, company, etc…*
• a resolution is the manifestation of a board of directors
authority/power
group companies
• holding companies-subsidiary companies
• hold co. controls composition of sub. co.’s board of directors
• hold co. controls more than half of the voting rights of sub. co.
• hold co. hold more than half of sub co.’s issued shared capital
(generally excluding preferred shares)
• associated company
company names
• choosing a name
• can’t be taken
• can’t be the same as a company incorporated by ordinance
• can’t be a name that would constitute a criminal offense
• can’t violate trademark
• can’t be offensive or otherwise contrary to public interest
• prior approval required for names that might cause confusion
• government entity
• names that include words like “trust”, “chamber of commerce”, “tourist
association”, “levy”, etc…
• Association of Certified Public Accountants of Britain v Secretary of State for Trade
and Industry (1997) (page 77)
• a name that the Registrar has already directed a company to change
• limited? generally, yes, with certain exceptions
2018 Company Law 32
The University of Hong Kong
enforcement
• “responsible person”: officer, director/shadow director(?) of a
company or non-Hong Kong company
• options
• fines
• imprisonment
• Court order
questions?
Company Law
The University of Hong Kong
Week 2
Company Law