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Irwin Law
Irwin Law, Attorney
Category: Business Law
Satisfied Customers: 7165
Experience:  30+ yrs. representing small business, real estate, probate
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Is it work to add a pre-emption clause in the Articles of Association

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Is it work to add a pre-emption clause in the Articles of Association of a Hong Kong company limited by shares that just to grant the first right of refusal on shares to one current shareholder, say A Limited? There is not any pre-emption clause at the Articles of Association before. Is it possible not to amend the Articles of Association and just use an agreement between all shareholders to grant the right of first refusal on shares to A Limited and if possible, is the agreement need to be filed to the Company Registry as a public document?

You should not need to amend the Articles of Association. The pre-empt or right of first refusal can be signed by all those who are to be bound by it. In the case of the Corporation, it should be authorized and approved by the Board of Directors and signed by the Secretary and Attested by the Secretary. Individual shareholders who are to be bound must sign it as individuals.

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Customer: replied 4 years ago.

I really want to know is it work to add that clause of "first right of refusal on share for just only 1 shareholder, say A Limited" into the Article of Association as I am told that it will bind to any late coming shareholders also, i.e. not just for those who sign the agreement. If only an agreement for first right of refusal is signed, it only binds the contracting parties, is it right? The other point is that if only an agreement is signed when should the contractual parties inform the corporation of that agreement, i.e. just the time they sign it or when they really do the shares transfer?

I am not sure what you mean by "is it work". If "is" means "will", I apologize for our language and the answer is "yes" it will work to include a first option or right of first refusal to the existing shareholder (s) to buy any new shares that might be issued by the corporation. Another way to do it is what I suggested. But that said, when you have only one shareholder, that person controls the corporation and can do anything they wish with it. I hope this clarifies matters for you.

I hope this Answer is helpful and that you will give it a positive rating. If you have any follow up questions please send back a Reply. You should consult a local attorney to verify that this information is accurate for your state. Thank you for using Pearl.com- Just Answer. We appreciate your business.

Customer: replied 4 years ago.

My corporation has now 5 shareholders, let says 'A','B','C','D' & 'E'. I want to know if I can add the clause of first right of refusal on share to 'A' in area of share transfer & share transmission into the Articles of Association.

I get it now. The answer is "No", not without the consent of B C D & E. That is because their rights to future stock issuance are vested and cannot be taken away from them without their consent.

I hope this Answer is helpful and that you will give it a positive rating. If you have any follow up questions please send back a Reply. You should consult a local attorney to verify that this information is accurate for your state. Thank you for using Pearl.com- Just Answer. We appreciate your business.

Customer: replied 4 years ago.

In Hong Kong, if we want to amend the Articles of Association, shareholders have to pass a resolution to approve that amendment. My question is if that resolution for the first right of refusal on share in transfer & transmission to 'A' is passed by our shareholders, is it legally right to add it into the Articles of Association. And thank you for your previous reply!

They might do it a little differently in Hong Kong, but when you amend the Articles, the amendment is to be added to the original Articles themselves. A copy of the Articles as amended must be kept in the minute book of he corporation.

I hope this Answer is helpful and that you will give it a positive rating. If you have any follow up questions please send back a Reply. You should consult a local attorney to verify that this information is accurate for your state. Thank you for using Pearl.com- Just Answer. We appreciate your business.

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