Hong Kong Ordinances

COMPANIES ORDINANCE - SECT 42

Prohibition of allotment unless minimum subscription received

Allotment

(1) Subject to section 38A, no allotment shall be made of any share capital of
a company offered to the public for subscription unless the amount stated in
the prospectus as the minimum amount which, in the opinion of the directors
must be raised by the issue of share capital in order to provide for the
matters specified in paragraph 7 in Part I of the Third Schedule has been
subscribed, and the sum payable on application for the amount so stated has
been paid to and received by the company. For the purposes of this subsection,
a sum shall be deemed to have been paid to and received by the company if a
cheque for that sum has been received in good faith by the company and the
directors of the company have no reason for suspecting that the cheque will
not be paid. (Amended 78 of 1972 s. 11; 86 of 1992 s. 8)

(2) The amount so stated in the prospectus shall be reckoned exclusively of
any amount payable otherwise than in cash and is in this Ordinance referred to
as the minimum subscription.

(3) The amount payable on application on each share shall not be less than 5
per cent of the nominal amount of the share.

(4) Subject to section 38A, if the conditions aforesaid have not been complied
with on the expiration of 30 days after the first issue of the prospectus, all
money received from applicants for shares shall be forthwith repaid to them
without interest, and, if any such money is not so repaid within 38 days after
the issue of the prospectus, the directors of the company shall be jointly and
severally liable to repay that money with interest at the rate of 8 per cent
per annum from the expiration of the 38th day: (Amended 86 of 1992 s. 8)
Provided that a director shall not be liable if he proves that the default in
the repayment of the money was not due to any misconduct or negligence on his
part. (Replaced 78 of 1972 s. 11)

(5) Any condition requiring or binding any applicant for shares to waive
compliance with any requirement of this section shall be void.

(6) This section, except subsection (3), shall not apply to any allotment of
shares subsequent to the first allotment of shares offered to the public for
subscription. [cf. 1929 c. 23 s. 39 U.K.]