The answer first
Before an investor puts money into your Hong Kong company, they will check that the company is properly constituted, that its records are complete, that it owns what it claims to own, and that its numbers can be trusted. This is due diligence. Companies that prepare in advance raise faster, negotiate from a stronger position and avoid last-minute price reductions.
Gaps in basic company records are the most common and most avoidable problem. Issuing new shares needs the right approvals, documents and filings, including Form NSC1 within one month of allotment.
What investors check
| Area | Typical questions |
|---|---|
| Corporate | Are the registers of members, directors and significant controllers complete and consistent with Companies Registry filings? Are all share issues and transfers documented and stamped? |
| Financial | Are accounts audited and up to date? Do management accounts reconcile? Are revenues and margins as presented? |
| Tax | Are returns filed and tax paid? Any offshore claims or disputes? Any exposure in other countries? |
| Contracts | Key customer, supplier and partner contracts; change-of-control clauses; exclusivity |
| People | Employment contracts, MPF compliance, key-person dependency, share option promises |
| Intellectual property | Does the company own its brand, software and designs? Are founder and contractor assignments in place? |
| Regulatory | Required licences, data privacy and anti-money laundering compliance |
Key takeawayA data room organised in advance, with every document an investor is likely to request, signals a well-run company and shortens the process.
Getting the company ready
- Bring statutory registers and minute books up to date and reconcile them with filings.
- File any overdue Annual Returns or change notices.
- Complete audits and tax returns for all past years.
- Put written IP assignments in place from founders and contractors.
- Document any loans between the company and its directors or shareholders.
- Review the articles of association and prepare for the new shareholders' agreement.
- Record any promises of shares or options to employees and advisers in writing.
Issuing shares to investors
| Step | What happens |
|---|---|
| Term sheet | Agree valuation, amount, share class and key rights (normally non-binding) |
| Documents | Subscription agreement, shareholders' agreement and any amended articles, prepared by lawyers |
| Approvals | Board and, where required, shareholders' resolutions to allot shares and adopt new articles |
| Completion | Funds received, shares allotted, share certificates issued, register of members updated |
| Filings | Return of allotment (NSC1) within 1 month; new articles and special resolutions within 15 days; update the Significant Controllers Register |
Legal advice requiredInvestment documents, share classes and investor rights should be drafted and negotiated by lawyers. Valuation and tax consequences for founders should be reviewed by advisers.
Self-check: where do you stand?
| Question | If the answer is no |
|---|---|
| Do your registers match every Companies Registry filing? | Reconcile and file any missing notices |
| Are all past audits and tax returns complete? | Clear any backlog before approaching investors |
| Does the company own its IP, including code and brand? | Obtain written assignments from founders and contractors |
| Are all share issues and transfers documented and stamped? | Rectify gaps with legal advice |
| Are promises of shares or options to staff in writing? | Document them before term-sheet stage |
| Is your data room organised? | Prepare it before the first investor meeting |
How DBMS Global can help
- A pre-fundraising company health check: registers, filings, accounts and IP ownership.
- Preparing resolutions, allotment documents and Companies Registry filings at completion.
- Organising the corporate section of the data room.
- MAP Asia Pacific advises on fundraising strategy, valuation and investor readiness; RENT-CFO prepares financial models, management accounts and the finance section of due diligence.
Official references
- Companies Ordinance (Cap. 622): allotment of shares and filings, www.cr.gov.hk
- Companies Registry: Form NSC1 (Return of Allotment)