Last updated 6 September 2026.
The directors of a Hong Kong company may not allot shares unless the members have approved it in advance. That is the rule in section 140(1), and the consequence of ignoring it is unusually sharp: a director who knowingly contravenes it is liable to a fine at level 5 and imprisonment for six months.
Once the shares are allotted, a return of allotment must reach the Registrar within one month.
Allotting is not the same as transferring
The two get confused constantly, and they are different transactions with different law:
| Allotment | Transfer | |
|---|---|---|
| What happens | The company creates and issues new shares | Existing shares change hands |
| Who gets paid | The company | The selling shareholder |
| Effect on others | Existing holders are diluted | Total shares unchanged |
| Stamp duty | None | Yes — on consideration or value |
| Registry filing | Return of allotment within 1 month | No filing; shows in the next annual return |
If money is going to the seller rather than into the company, you want the transfer procedure instead.
The members have to approve first
Section 140(1): except in accordance with section 141, the directors of a company must not exercise any power to allot shares in the company, or to grant rights to subscribe for or convert any security into shares.
Section 141 supplies the permission. The company gives approval in advance by resolution; it can be for one particular allotment or general; it can be conditional or unconditional; and the members can revoke or vary it at any time.
Approval does not last indefinitely. Under section 141(3) it expires at the conclusion of the next annual general meeting after it was given — or, for a company not required to hold one, on a date specified in the approval that cannot be more than 12 months out. A general authority granted two years ago and never renewed is not authority today.
The four cases that need no approval
Section 140(2) carves out four situations:
- An allotment or grant of rights under an offer made to the members in proportion to their shareholdings.
- An allotment or grant on a bonus issue to the members in proportion to their shareholdings.
- An allotment to a founder member of shares that the member agreed to take by signing the company’s articles.
- An allotment made under a right to subscribe or convert, where the right itself was granted under a section 141 approval.
The third is why the very first shares — the ones taken on incorporation — do not need a separate member approval. Everything after that generally does.
The offence is personal, and the allotment still stands
Section 140(4) and (5): a director commits an offence if the director knowingly contravenes, or authorizes or permits a contravention of, section 140, and is liable to a fine at level 5 — HK$50,000 — and to imprisonment for 6 months.
Imprisonment is rare in this part of the Ordinance. Most filing failures carry a fine and a daily default fine; this one carries a custodial maximum, which tells you how seriously the drafters treated directors issuing shares to themselves or to friendly parties without asking the owners.
And then section 140(6) does something that surprises people: nothing in this section or section 141 affects the validity of an allotment or other transaction. The shares are validly issued. The register is correct. The dilution is real. The director is prosecuted, but the transaction is not unwound by this section — which is precisely why aggrieved shareholders end up in court on other grounds rather than simply pointing at section 140.
The return of allotment: one month
Section 142(1): within one month after an allotment of shares, a limited company must deliver to the Registrar for registration a return of the allotment.
The return goes on the Companies Registry’s specified form (NSC1) and section 142(2) sets out what it has to contain:
| Requirement | Detail |
|---|---|
| Statement of capital | As at immediately after the allotment, complying with section 201 |
| The shares | The number of shares allotted |
| The allottees | The name and address of each one |
| The increase | If issued share capital increased, the amount of the increase |
| The money | Amount paid or regarded as paid on each share, and anything remaining unpaid |
| Non-cash | Particulars of the contract for sale, services or other consideration |
Section 142(3): if a limited company contravenes subsection (1), the company and every responsible person commit an offence, and each is liable to a fine at level 4 — HK$25,000 — plus HK$700 for each day the offence continues.
If you miss the month
There is relief, but it is not administrative — it is an application to the Court. Under section 142(4) the Court may extend the period on the application of the company or a responsible person, and section 142(5) limits when it may do so: only if satisfied that the failure was accidental or due to inadvertence, or that it is just and equitable to extend.
That is a real remedy for a genuine oversight, and a poor plan for a deliberate delay. Filing on time costs nothing extra.
The order to do it in
- Check the articles for pre-emption rights — existing shareholders may have first refusal.
- Members’ approval under section 141, unless one of the section 140(2) cases applies.
- Board resolution allotting the shares, and the application or subscription from the incoming holder.
- Update the register of members and issue the share certificates.
- File the return of allotment within one month.
- Revisit the significant controllers register — a new holder above 25% is a registrable change.
Step 6 is the one people skip. A new investor crossing 25% makes them a significant controller, and the register has to be updated, not just the members’ register.
If you want to see what the paperwork looks like first, there are free generators for the allotment resolution and the accompanying share application.
Issuing shares to a new investor?
818hi.com and laulega.com are both operated by LAULEGA LIMITED, a Hong Kong licensed trust or company service provider. We prepare the members’ approval and the board resolution, and file the return of allotment inside the month.
See the compliance serviceFrequently asked questions
Can directors issue new shares without asking the shareholders?
Generally no. Section 140(1) of the Companies Ordinance prohibits directors from exercising a power to allot shares except in accordance with section 141, which requires the company to give approval in advance by resolution. Four exceptions are set out in section 140(2).
What happens if shares are allotted without approval?
Under section 140(4) and (5) a director who knowingly contravenes, authorizes or permits a contravention commits an offence punishable by a fine at level 5 (HK$50,000) and imprisonment for 6 months. Section 140(6) provides that the validity of the allotment itself is not affected.
How long does a shareholders’ approval to allot last?
Section 141(3): it expires at the conclusion of the next annual general meeting held after it was given, or the deadline for holding that meeting. For a company not required to hold an AGM, it expires on the date specified in the approval, which cannot be more than 12 months after it was given.
When is the return of allotment due?
Within one month after the allotment, under section 142(1), on the Companies Registry’s specified form. It must include a statement of capital complying with section 201, the number of shares, each allottee’s name and address, and the amounts paid and unpaid.
What is the penalty for a late return of allotment?
Section 142(3): the company and every responsible person each commit an offence and are liable to a fine at level 4 — HK$25,000 — plus HK$700 for each day the offence continues.
Can the deadline for the return of allotment be extended?
Only by the Court. Section 142(4) allows an application by the company or a responsible person, and section 142(5) permits an extension only if the failure was accidental or due to inadvertence, or if it is just and equitable to extend.
Statutory references are to the Companies Ordinance (Cap. 622) and the Criminal Procedure Ordinance (Cap. 221) as in force at the date above; form names are the Companies Registry’s specified forms. Reviewed by Di Ma, responsible officer of LAULEGA LIMITED, a Hong Kong licensed trust or company service provider (TCSP licence TC000573). General information about Hong Kong law, not advice on your particular company.