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What is the definition of a private company and a public company? What’s the difference between them?

Limited company and unlimited company may be often heard, but when it comes to another classification model of Hong Kong company – private company, public company, or not generally known. What is the difference between the two? The legal definitions also seem to be hard to discern between them, but some discussion of the pros and cons might be ok.

Definition of private company?

A private company generally represents a private company limited by shares (Privately held company), as is the case with most companies registered in Hong Kong. Private companies are also known by many other names, such as “closed company”, “private company”, “minority company”, or “unlisted company”.

In short, unlike private companies and sole proprietorships, the articles of association of a private limited company are governed by the following regulations.

According to Article 11 of the Hong Kong Companies Ordinance, a private company other than a guarantee company may have one director, and its articles of association must contain appropriate provisions to make the following three restrictions:

• Restricting the right of members of the company to freely transfer shares;

• Restricting the number of company members to 50 or less, excluding employed persons, persons previously employed who have been members of the company after termination of employment;

• Restrict invitations to the public to issue shares or bonds of the company.

Definition of a public company?

Hong Kong public company (Public Company), also known as “open company”, “public company”, “majority company” or “listed company”.

When it comes to “listed company”, do you already know its definition? Unfortunately, in fact, a public company is not equal to a listed company (Listed Company). A public company must meet the requirements of the Stock Exchange before it can be officially listed as a listed company. That is to say, a public company is not necessarily a listed company; but a listed company must be a public company.

According to the current Companies Ordinance in Hong Kong, the definition of a public company has never been explained. The common law definition of it is only a company without a private company with constitutional restrictions, that is, there is no maximum number of members, etc. (the number of directors is at least 2). Non-private companies limited by shares and companies limited by guarantee are public companies.

However, since one of the characteristics of a public company is that its shares can be listed for public trading on the Stock Exchange, it is easier to raise capital. Therefore, public companies are usually larger than private companies.

Although the company’s articles of association do not have the above-mentioned restrictions, the reality is that the “Company Ordinance” has stricter requirements on public companies, that is, they need to

What is the difference between a public company and a public company?

First, there are more public companies in Hong Kong than private companies, and a public company is one of the conditions for “listing”, which is regulated by the Listing Ordinance.

Secondly, the above-mentioned “restrictions on the articles of association” and “principle of disclosure” can be described as the biggest differences between the two, and the legal treatment is also different, each with its own advantages and disadvantages.

Finally, a Hong Kong private company can be reorganized into a public company through legal channels; conversely, a Hong Kong public company can also be reorganized into a private company.

The above information is for reference only. If you have any questions about tax declaration and accounting, we welcome your inquiries.

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