Question

Part A

Mr Li, Mr Tong, Miss Chow and Mr Yu are directors and shareholders of Quick Profit Limited (‘the Company’), a Hong Kong private limited company. The Company has an issued and paid-up share capital of HK$30,000,000. Each of them holds 4,000,000 shares in the Company.

The Company has adopted the Model Articles as its articles of association, which were subsequently modified to include the following clauses:

1 every director must subscribe at least 3,000,000 shares in the Company within two months after appointment; and

2 the quorum of directors’ and shareholders’ meetings is three.

As the company secretary of the Company, advise Mr Li, the chairman of the board, on the course of actions to be taken by the Company (giving reasons for your answers) in the following circumstances:

a Mr Tong informed the Company that he intended to sell 1,100,000 shares to Mrs Wong who will then hold those shares in trust for her husband, Mr Wong.
b Miss Chow informed the Company that she would sell all her shares in the Company to her friend, Mr Lo and resign as director of the Company with effect from 1 April 2018.

c The Company received a photocopy of the power of attorney from Mr Chan, who is the attorney for Mr Lam, who holds 500,000 shares in the Company.

d Ms Tang, who holds 10,000 shares in the Company, informed the Company that she had married and requested the Company to amend her name on the register of members from Tang Mei Mei to Au Tang Mei Mei.

e The Company received a letter from MCC Limited, which holds 200,000 shares in the Company, informing the Company that MCC Limited has commenced liquidation on 1 March 2018 and Mr Black has been appointed as liquidator of MCC Limited.

f Mrs Yu informed the Company that her husband, Mr Yu, had passed away on 30 March 2018.

Part B

a A pre-emption clause governing transfer of shares may be found in the articles of association of some private companies. Explain what a pre-emption clause is and whether it is beneficial to the shareholders of a private company. Give reasons to support your answer.

b If Quick Profit Limited is a listed company, a share registrar will deal with the matters stated in Part A. Explain the duties of/services provided by a share registrar to a listed company.

Answer 1

The company should receive the Share Transfer deed and the Share Certificate from Mrs. Wong as given by Mr. Tong to her. After inspection, the company needs to issue the Transfer receipt. Invite any objection by issuing letters to the related parties. Getting approval of Board of Directors in the next meeting. Finally, the company needs to get Mrs. Wong registered with Registrar and issue the old share certificate endorsed by Mr. Tong.

In transfer of shares the above procedures needs to be followed. Regarding the resignation of Miss Chow as a director, she needs to send the company in writing a notice prescribed as in the Articles of the company. The company if need be will appoint a new director.

The company will keep the Power of Attorney photocopy as a record in their records section. It comes in handy if and when the shareholder transfers his/her shares.

The company will require the attested Marriage Certificate copy to change her name in the register and the share certificate will be endorsed by her new name.

The company will keep constant communication with Mr. Black regarding the treatment and the handling of the shares of the company on liquidation. The company would want to know to whom the shares of the company have been allotted in the liquidation process.

The company needs to transfer the shares to the successor according to Mr. Yu’s will (if any). If there was no will the shares will be transferred to Mrs. Yu. And as the quorum of directors and shareholders needs three one more director needs to be appointed as per the procedures mentioned in the Articles.

A preemption clause gives the existing shareholders right to acquire new shares of the same company. It is beneficial to shareholders when they invest more of their money in the company if the company is performing well.

Registrar of Companies administers the proceedings and requisite filings of reports of listed companies. As the company secretary maintains records of the private company as per the regulations of the companies, the registrar maintains everything directly for listed companies.