The answer first
A company raises new share capital by allotting new shares. Under the Companies Ordinance there is no authorised capital and no par value, so there is no ceiling to "increase". The company simply allots more shares, provided the directors have authority and any pre-emption rights are respected.
File Form NSC1 within 1 month after allotment. There is no government fee and no capital duty.
At a glance
- Authority
- Members' resolution or the articles, unless an exception applies
- Pre-emption
- May apply under the articles or a shareholders' agreement
- Filing
- Form NSC1 within 1 month after allotment
- Government fee
- Nil; no capital duty
- Share certificates
- Within 2 months
Step by step
| Step | What happens |
|---|---|
| 1. Check documents | Review the articles and any shareholders' agreement for authority, pre-emption and class rights |
| 2. Members' approval | Ordinary resolution (or written resolution) authorising directors to allot, where required |
| 3. Offer | Offer shares to existing members first if pre-emption applies, or obtain waivers |
| 4. Board resolution | Directors resolve to allot the shares and set the price |
| 5. Payment | Subscription money paid into the company's bank account |
| 6. Register | Enter new shareholders and holdings in the register of members |
| 7. File NSC1 | Within 1 month after allotment |
| 8. Certificates | Issue within 2 months |
| 9. Controllers and bank | Update the Significant Controllers Register and inform the bank |
Price and payment
- Shares can be issued at any price agreed by the directors, consistent with their duties.
- Payment can be in cash, or for non-cash consideration (for example, assets or capitalising a shareholder loan), properly documented.
- Issuing shares below fair value to some shareholders can dilute others; take care where shareholders are not treated equally.
Key takeawayConverting a shareholder loan into shares is common. Document the loan, the agreement to capitalise and the allotment, so that the accounts and registers tell the same story.
Bonus issues and other variations
A company can also capitalise profits or reserves to issue bonus shares, issue shares of a new class, or convert shares, subject to its articles and the Ordinance. These involve additional steps and should be planned with us and, where needed, your lawyers.
Penalty exposureLate filing of NSC1 is an offence; fines of up to HK$25,000 plus HK$700 per day of continuing default may apply.
Self-check: where do you stand?
| Question | If the answer is no |
|---|---|
| Do the directors have authority to allot shares? | Pass a members' resolution first |
| Do existing shareholders have pre-emption rights? | Offer shares to them or obtain waivers |
| Has the subscription money been received? | Allot only once payment terms are met |
| Will NSC1 be filed within 1 month? | Diarise the deadline now |
| Does the change affect who controls the company? | Update the Significant Controllers Register |
How DBMS Global can help
- Resolutions, allotment documents and share certificates.
- NSC1 filings and register updates.
- Capitalisation of shareholder loans and bonus issues.
In summary
- No authorised capital or par value: allot as needed.
- Respect authority and pre-emption rights.
- File NSC1 within 1 month.
Official references
- Companies Ordinance (Cap. 622), Part 4: share capital and allotment
- Companies Registry: Form NSC1, www.cr.gov.hk