Are allotment of shares the same as transfer of shares? When do I need to file NSC1 form?

The allottee shall not be considered a member of the company and shall not have the legal title of a shareholder unless his or her name is entered in the company’s register of shareholders.

Share allotment is the process by which a company allots new shares to existing or new shareholders, and it is a way for a company to raise capital. Many people often confuse allotment of shares with transfer of shares, but there is a big difference between the two. This article will explain what share allotment, share transfer, and Form NSC1 are and how they differ.

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Table of Contents

What is an allotment of shares? Is it the same as a share transfer?

What is the process of allotment of shares?

Information about the share allotment return/form NSC1

What is allotment of shares? Is it the same as a share transfer?

When it comes to changes in the shareholding of a company, it is important to make a clear distinction between the allotment of shares and the transfer of shares. First of all, share transfer means a change in the proportion of existing shares of the company, usually to an internal officer or shareholder of the company (for more details, please refer to the company’s share transfer/transfer strategy, what are the procedures and restrictions for share transfer?)

In contrast, an allotment of shares means that the directors of the company distribute shares of the company to outside investors and subsequently allot shares to those persons. Shares can be issued to investors as long as the parties and the relevant bodies sign the company’s register of shareholders.

This can only be done with the prior approval of the shareholders’ meeting, unless the new shares are allotted in proportion to the existing shareholding of the company. The allotment of shares may be approved by granting a specific allotment or multiple allotments.

In any case, the approval of the allotment of shares approved by the shareholders and executed by the directors will expire when the next annual general meeting of the company is held or should be held (only if it has not been revoked earlier at any general meeting). During this process, the company must comply with relevant regulations to ensure a fair and equitable distribution.

What is the process of allotment of shares?

A share issue is an important means of raising capital for Hong Kong companies. It follows a defined process to ensure that it is done legally and efficiently. The following is a detailed explanation of the process:

Obtaining shareholder approval

In the case of an initial share issue, the company should obtain approval from the shareholders in a general meeting. This should cover the allocation, issue or grant of

(a) shares

(b) securities convertible into shares

(c) options, warrants or similar rights to subscribe for any shares or such convertible securities.

With the approval of the general meeting, the enterprise shall publish a notice of acceptance of the offer to the allottee and shall be entitled to allocate the shares.

Allottees shall be entered in the Company’s register of shareholders

The company should update the company’s register of shareholders to include the new allottee within two months of the allotment of shares.

Notify the registry of companies by completing the return of allotment of shares (NSC1)

Within one month after the issue of shares, the enterprise is required to submit a Return of Share Allotment (NSC1) to the Companies Registry in Hong Kong, which should clearly state the number of shares of the allottee, the name and address of the recipient of the share certificate, the amount paid by the allottee or the consideration for the shares, and the updated capital statement of the company.

If the company fails to submit the relevant documents within the time limit, the Registrar of Companies in Hong Kong may refuse to approve the application for change of shareholders.

Information on the Share Allotment Return/Form NSC1

A return of allotment of shares (Form NSC1) is a statutory document that records the members of a company and their shareholdings. The document should be filed with the Registrar of Companies within one month from the date of issue of shares. In case of late submission, the Registrar of Companies has the right to refuse to accept the application. In such a case, the company must file a late filing application with the court.

Under section 142(1) of the Companies Ordinance, a company should file a Form NSC1 with the Companies Registry within one month after the date of the initial share issue (excluding the date of issue). If the share issue involves non-cash payment in whole or in part, please submit other relevant documents at the same time.

The above information is for reference only. If you have any tax return (personal tax return, corporate tax return, accountant tax return) queries or information enquiries, you are welcome to contact our professional advisors and we will provide you with a free quotation and consultation service in due course. #allotmentofshares #allotmentofshares #formNSC1