5 April, 2015
Under the Old Ordinance, every Hong Kong company was required to keep a common seal with the company name engraved in legible characters. The seal was generally required for executing deeds, issuing share certificates and for certain other purposes. The New Ordinance has abolished this requirement, making the keeping and use of a common seal optional. Companies can still use a common seal to execute documents if they wish. However, the New Ordinance also provides an alternative means for companies to execute such documents.
Under section 127 of the New Ordinance, a company with more than one director can execute a document by having it signed on the company’s behalf by two directors or by one director and the company secretary. For companies with only one director, a document can be executed simply by having it signed on the company’s behalf by the sole director. If these requirements are met and the document is expressed (in whatever words) to be executed by the company, the execution has effect as if the document had been executed under the company’s common seal.
In addition, under section 128 of the New Ordinance, a company may execute a document as a deed by:
- executing it in accordance with section 127 above;
- having it expressed (in whatever words) to be executed as a deed; and
- delivering it as a deed.
A document is presumed, unless the contrary is proved, to be “delivered as a deed” on its being executed in accordance with section 127.
The above changes were introduced to simplify the mode of execution of documents and provide greater flexibility to companies when conducting business. In order to take full advantage of this increased flexibility, a company may wish to review its articles of association and amend any provisions requiring the use of the common seal for execution.
For further information, please contact:
Paul Westover, Partner, Stephenson Harwood
Victor Lee, Stephenson Harwood
Fiona Cheng, Stephenson Harwood