Share capital plays a very important role when it comes to investors and business proprietors. Share capital is pivotal in that it translates the structure of the company and defines the capacity of raising funds. Therefore, it would make complete sense for either the phase of starting a new business or investing in one to be informed about the very basics of share capital.
What is Share Capital?
It refers to the capital raised by any company from the issue of its shares to the investors. In accounting terms, it is the sum of money that a company has received in return from the owners against giving ownership interest. In Hong Kong, those may be dividable into fundamental categories,
Authorized Share Capital: The most amount of capital for which an agency is permitted to issue
Issued Share Capital: The actual range of shares that are issued to shareholders
In the case of personal constrained agencies, ShareCapital is indicative of the capacity of the organization to raise price range for its enterprise operation and expansion.
Allotment of Shares in Hong Kong
Allotment of shares refers to the issuance of new shares to new or existing shareholders. Such an allotment in Hong Kong requires the following steps:
- Obtaining approval from the shareholders.
- Issuing new shares by way of legal instrument.
- Filing of the allotment with the Companies Registry.
In this vein, the principle of legality on allotment guide companies strictly. Therefore, file documents that facilitate transparency and enhance recordkeeping.
Understanding Share Certificates in Hong Kong
A share certificate is a legal document, issued to the shareholders as an evidence of their ownership in a company. In Hong Kong, the issue of share certificates is typically upon the allotment of shares, representing the legal evidence of a shareholder’s right. One must deliver share certificates to the respective shareholders to ensure the authentication of ownership and elimination of possible disputes.
Increase of Share Capital of a Company
This means a Hong Kong company may want to raise additional share capital for expansion of the business or with new investors. The steps involved in increasing share capital include the following:
- Approvals of the shareholders;
- Filings with the Companies Registry;
- Issue of new shares.
In this way, companies can bring in new capital to realize growth and expansion.
Minimum Capital for a Private Limited Company
There is no minimum share capital requirement in Hong Kong for any private limited company. So, this makes it easy for any startup and new business to register a company with minimal upfront investment. In practice, however, reasonable capital is necessary to meet the operation requirements apart from reassuring investors of their confidence in the company.
Share Capital Double Entry Accounting
When bookkeeping for share capital transactions, companies apply the double entry accounting system. There are two entries in the books:
Debit: Bank account for the amount received
Credit: Share capital account
Example: A company issues 1,000 shares at HKD 10 each. The accounting entry will be to debit the bank account for HKD 10,000 and credit the share capital account for the same amount.
Conclusion
Management of share capital plays a very important role in the growth of a business, raising finance, and overall compliance. It could be an allotment of shares or increasing the capital of your company. Basically, it requires understanding the processes involved for things to run smoothly. Investors and business owners alike need information on the dynamics around share capital to make feasible financial decisions.
How FastLane HR Can Help
FastLane HR can provide services for Hong Kong companies in the realms of share capital management, corporate finance guidance, and legal compliance. Let us take care of the most minute details in share capital management and get your business off to a flying start!