FAQ - No-par Regime
FAQ - No-par Regime:
| Q . 1 : Why does Hong Kong adopt a "no-par" regime? | |
| Ans: | Nominal value (also known as "par value") of shares is the minimum price at which shares can generally be issued. The new Companies Ordinance ("the new CO") adopts a mandatory system of no-par for all local companies having a share capital and retires the concept of par value for all shares. |
| This is in line with international trends to provide companies with greater flexibility in structuring their share capital. | |
| Q . 2 : What is the difference between a share of no par value and one having a par value? | |
| Ans: | There is no essential difference between a share of no par value and one having a par value. Both represent a share, |
| being a fraction of the equity,but par value share has attached to it a fixed face value, and share without par value does not. | |
| Q . 3 : What will be the major changes due to adopting a "no-par" regime? | |
| Ans: | A company will have greater flexibility to alter its share capital in a no-par environment, for example, |
| a company will be able to capitalise its profits without issuing new shares and to allot and issue bonus shares without increasing its share capital (section 170 of the new CO). | |
| Q . 4: Without par value, how will the "share capital" of our company be determined? | |
| Ans: |
The full proceeds of a share issue will be credited to share capital under the new regime and becomes the company's share capital. The notion of issued or paid capital will continue to be relevant even after the abolition of par value, and it would then also reflect the amount in the share premium account. In other words, it will represent the amount the company actually receives from its shareholders as capital contribution. |
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The concept of paid up capital, issued capital and partly paid shares are still relevant. But they will be related to the total consideration paid or agreed to be paid for the shares issued, and not tied to par value. |
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