Issuing of Shares
A company can issue any class of shares to the shareholders with the desired rights attached, which is the terms of issuing the shares in Hong Kong.
Shares are the units of ownership interest in the company by the shareholders which are measured in the form of money for liability and interest, it also represents the ownership of the business. A company can issue any class of shares to the shareholders with the desired rights attached, which is the terms of issuing the shares in Hong Kong.
Rights of the shareholders
Shareholders are the one who owns the stocks in a public or private limited company,also referred to as the members of the corporation. The specific rights of the shareholders are included in the Article of Association or the Return of Allotment. the following general information is about the rights of shareholders related to their shares-
- During the winding-off of a company, the shareholders have the rights over the remaining assets of the company, only after all the debts have been paid off.
- When a company gains profit, the shareholders are also entitled to receive a dividend of the company.
- The shareholders may get the rights to vote in specific situations if this is applicable in specific classes(es) of shares
Responsibility of Shareholders
The shareholder can either be an individual, a body corporate, an HK resident or a foreigner, but the person must be above the age of 18. They are entitled to receive the dividend of the company as a part of their nominal share value. If the company undergoes bankruptcy, they are liable to receive the assets of the company after its distribution among the creditors.
However, as compared to the directors, shareholders will not usually be involved in the running of the company. They are required to convene a general meeting and must agree upon the issues related to the management of the company. Shareholders may have personal liability to the extent of the shares they own in the company.
The rights of shareholders can vary based on the types of shares they are holding, also to the particularities included in that company’s Articles of Association or the shareholder’s agreements.
Common Classes of Shares
Some classes of shares possess the rights for the shareholders. Here are general descriptions for some of the classes of the shares that everyone should know-
- Ordinary shares: These are the most common type of share, usually companies will only issue this type of shares. Ordinary shares cover equal rights pro-rata based on the number of shares owned by shareholders, in respect of voting or receiving dividends or distributions in liquidation.
- Preference shares: Preference shares are those shares of the company which offers special rights to the dividends, or distributions in liquidation. The voting rights of these shares may be different from the rights attached to the ordinary shares. In some special cases, it can only be practiced when the dividend of preference shares are in arrears. The dividend is distributed among the shareholders according to their fixed proportion of the share’s nominal values. In short, if no dividend is announced in the year, then the arrears can be transferred to the next year.
- Non-voting shares: Although most of the rights of these shares are related to the ordinary shares, the holders of non-voting shares are not liable to vote in the shareholders’ general meeting.
- Deferred shares: Deferred shares are the shares that enjoy limited rights to the dividends of the company. Generally, they are considered as non-voting shares. This type of shares ranks behind the preference and ordinary shares. It is because they don’t have the right to the assets of the company undergoing bankruptcy until all common and preferred shareholders are paid.
- Redeemable shares: Redeemable shares are usually issued on the terms that the company or shareholders may repurchase them in the future. The date may be fixed, or it should be based on the director’s discretion (still it is according to the mechanism set out in their terms of issue).
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