A Guide to Share Certificates in Hong Kong: Requirements and Procedures for Shareholders and Companies
Let’s understand all of this in this article.
Hong Kong is a desirable place for international investors owing to its open-minded corporate regulations and its central position in the Asian financial markets. Although it is simple to establish a business in Hong Kong, regular compliance with the law is necessary to keep it operating legally. In that case, whenever an individual invests money in a corporation, he or she will be issued a certificate representing the number of shares of stock owned by the investor.
The importance of share certificates for shareholders and companies cannot be overstated. Shareholders’ certificates are the foundation of the business world since they prove who owns the firm and how much they have invested.
So, how does a share certificate in Hong Kong work? What are the types of shares and share certificates? Let’s understand all of them in this article.
Share certificate in Hong Kong
Share certificates are the primary legal evidence of a shareholder’s ability to exercise voting and other corporate privileges in Hong Kong. These certificates are necessary for many types of financial transactions as evidence of share ownership and dividend rights.
Shareholders in Hong Kong need to have a firm grasp of the importance of share certificates for shareholders and companies in order to successfully navigate the city’s complex business environment.
What is a share certificate?
A Share Certificate acts as a formal written instrument that serves as proof of ownership for the purchaser of the corresponding company shares. Firms that issue shares on the market are required by law to provide a document called a Share Certificate, which is frequently called a stock certificate. Additionally, it functions as a documentation of transactions for a commercial entity engaged in the sale of equity securities within the stock exchange. The number of share certificates a company possesses is contingent upon the number of shareholders it has.
How does share certificate work?
Obtaining a share certificate in Hong Kong was formerly necessary to prove dividend eligibility. In order to verify the receipt of dividend payments, an endorsement was made on the back of the certificate at every exchange. This paper included an appendix with all dividend payment records.
A stock certificate must be issued by the corporation no later than two months after the issuance or transfer of shares. Except in cases where a shareholder specifically demands multiple certificates, companies are under no obligation to produce multiple certificates for shares sold or transferred at the same time.
A stock certificate holder may delegate voting authority for his or her shares to another party by executing a proxy. Similarly, a shareholder who does not have a share certificate but who has granted another person proxy voting rights may have that person cast their vote. The charter and the legislation governing corporations specify the rights of shareholders to vote.
Types of shares and share certificate In Hong Kong
Depending on the details of the plan and the recipients, a wide variety of different share kinds may be issued. The following provides an in-depth analysis of each:
- Ordinary Shares – Common shares, or “ordinary” shares, are the most typical kind of stock ownership for a given corporation. Ordinary shares are the most common kind of stock issued by Hong Kong firms. Ordinary shares do not provide any special privileges, therefore all shareholders are treated equally in accordance with their shareholdings. In terms of dividends and capital returns, they rank below preference shares, but their holders have voting rights that preference shareholders don’t.
- Preference shares – Preference shares are a kind of corporate security that does not always have the same voting rights as ordinary shares. As they are entitled to a guaranteed annual dividend payment, these shares are known as a preference or preferred stock. Arrears might be carried over from year to year in the event that no dividend is paid out. The directors of a Hong Kong business may choose the dividend rate and voting rights of preference shares at the time of the company’s incorporation.
- Shares without voting rights – The rights of non-voting shares are similar to those of ordinary shares, without the shareholder’s ability to vote. However, there are often limitations on voting rights associated with these stocks. They may have voting rights if specific criteria are satisfied, or they may not have any voting rights at all. In other cases, they may even make it impossible for the shareholder to participate in the annual meeting. All other rights are the same as for ordinary shares as established by the firm.
Importance of share certificate for shareholders and companies
A Share Certificate in Hong Kong is the official document that serves as verification of a person’s shareholdings in a certain firm. When a person or a corporation purchases any shares in a firm, they will be presented with a receipt for that transaction, which is more often referred to by the term Share Certificate. Having one set up will not only provide you with a solid legal foundation, but it will also assist to resolve the disagreement in the event that it occurs in the future.
By outlining the shareholder’s legal rights and ownership stake in the corporation, share certificates provide further legal protection. Shareholders should keep their share certificates safely, since they may be needed as proof in the event of a disagreement or legal action.
What information is included in the share certificate?
If you possess shares in a firm that is based in Hong Kong, you are entitled to obtain a share certificate that contains all of the relevant information on your shares. Typically, a share certificate in Hong Kong will include the following details:
- The full legal name of Issuing Organization
- A list of the shareholders and their addresses
- Details on the number of shares owned
- Categories of ownership in shares
- Certificate Number on the Shares
Example of share certificate
Let’s understand how a share certificate works with the example of Shawn, an investor, who is 75 years old. He trades numerous equities every month via his brokerage account at a small, specialized brokerage business. Shawn is a savvy investor who keeps up with market movements. He has trouble adjusting to anything except the digital property records.
Shawn loves to keep his stock documents in tangible forms, such as a certificate with his name and the number of shares he holds in each business. At the end of each month, Shawn presents a certificate request to his broker, who then obtains it from the issuing company.
Shawn’s main issue is that some of the businesses he has invested in do not want to issue certificates even though they are required to do so by law since it involves more administrative labor. For this reason, Shawn sometimes needs to struggle with the corporation in order to get the necessary stock documents. From the standpoint of the corporation, all shareholders who seek stock certificates are being added to a database.
Requirements of issuing Share certificate in Hong Kong
The simplest approach to obtain a Share Certificate can be to contact the issuer or the corporation that issued the shares and ask them to send you a real copy. While necessary, this process is often tedious and time-consuming. You may accomplish this more quickly by consulting your broker. There is normally a minimal fee for this service, however. Therefore, it is important to understand the procedural requirements for issuing a share certificate in Hong Kong. You will understand it better in the following section.
Steps of issuing share certificate in Hong Kong
The company secretary is generally the one to draft out a certificate of stock ownership. When new share certificates need to be issued, the company secretary is often in charge of drafting the necessary paperwork. A share certificate in Hong Kong must have the signatures of a minimum of two directors before it may be issued. If there is just one person in charge of the business, then only their signature is needed. However, it is also important to have the following requirements met.
- The Articles of Association of the firm must specify the permitted share capital before any share certificates may be issued.
- The issue of stock certificates requires a resolution by the board of directors. The resolution should list the shareholders, share class, and any additional terms or conditions.
- Shares must be allocated to shareholders and the specifics of those allocations must be recorded in the company’s share register.
- Certificates of stock ownership must be signed by directors or company secretaries, or other authorized signatories of the issuing firm.
- Within the necessary time range, the firm must submit the information on the share allocation to the Companies Registry.
Record-Keeping and Updating Shareholder Information
Hong Kong law mandates that businesses keep up-to-date shareholder records, including copies of all share certificates issued. This necessitates maintaining a complete record of all stock certificates, including information like the kind of stock, the names of the shareholders, the number of shares issued, and any relevant identification numbers. In most cases, issuing new or revised share certificates is the standard practice for incorporating changes to shareholder information.
Failure to maintain accurate records may result in fines from regulators, delays in communicating with shareholders, trouble carrying out business operations, and even harm to the company’s brand. In order to maintain trust, comply with regulations, and efficiently manage shareholder interests, it is essential for businesses to strictly adhere to these regulations.
Issue share certificate with Eqvista!
In order to issue share certificate in Hong Kong, one must first comply with all of the applicable legal requirements and then compile extensive amounts of supporting paperwork. Companies must follow the required procedures, including producing documentation, receiving permissions, and keeping records.
You may also get help with this process by consulting with experts and using tools like Eqvista to digitally issue share certificates. This way, you can save time and money while staying in line with local regulations by using this kind of platform to issue share certificate in Hong Kong. To simplify your share certificate management, reach out to us today!