HONG KONG SAR, CHINA Law and Practice Contributed by: Vincent Lung and Mike Yeung, Parkside Chambers
Private Companies and Joint Ventures In private companies, shareholders are often also directors. The distinction between ownership and management may therefore be blurred. In joint ventures, shareholders’ agreements often reserve important decisions for shareholder approval. These may include budgets, debt, acquisitions, dis - posals, share issues, litigation and changes in busi - ness. Listed Companies In listed companies, shareholders influence manage - ment through voting, engagement and market pres - sure. Institutional investors may engage with boards on governance, remuneration, capital allocation, ESG and succession planning. However, day-to-day management remains with the Hong Kong companies are generally required to hold annual general meetings unless an applicable exemp - tion is engaged. Exemptions may apply to single- member companies, dormant companies or com - panies whose members have dispensed with annual general meetings. At an annual general meeting, shareholders usually consider and approve financial statements, directors’ reports, auditors’ reports, director appointments or reappointments and auditor appointments. General Meetings General meetings may be called by the directors. Shareholders may also have statutory rights to require the directors to call a general meeting. board and senior management. 4.3 Shareholder Meetings Annual General Meetings The notice must specify the time, place, form and business of the meeting. The required notice period depends on the type of company, the nature of the resolution and the provisions of the articles. Physical, Hybrid and Virtual Meetings Hong Kong law permits companies to hold general meetings using technology, subject to the Companies
These rights may include voting, dividends, transfer rights, information rights and rights on winding up. Different classes of shares may carry different rights. For example, preference shares may have priority divi - dend rights but limited voting rights. Register of Members Hong Kong companies must keep a register of mem - bers. This is a statutory record of the company’s shareholders. Shareholder information filed with the Companies Registry (for example, in annual returns) is publicly searchable. However, beneficial ownership informa - tion is not public and it is not uncommon for shares to be held on trust or by nominees. Shares in listed companies may be held in the name of the clearing house and therefore a public share - holder may technically not be a member of the com - pany since his name is not officially on the register. This might have an impact if a shareholder wishes to commence litigation in his own name (for example, a derivative action on behalf of the company). Shareholders do not manage the company’s daily business. Management powers are normally vested in the board of directors through the articles. Shareholders cannot generally instruct the board how to exercise management powers unless the articles, a valid resolution or a shareholders’ agreement gives them such a right. Control Through Voting Shareholders exercise control through their voting and resolutions. They may appoint or remove directors, amend the articles, approve major corporate actions and decide matters reserved to them. In practical terms, control of the board is often the most important shareholder power. A shareholder or group of shareholders who can appoint or remove directors may influence the company’s direction. 4.2 Role of Shareholders No General Right to Manage
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