As a small business or startup, your priority is to grow and maximize profits, but neglecting legal aspects can be costly. Many startups rely on trust or verbal agreements with shareholders, partners, suppliers, and customers instead of drafting contracts. Failing to document these agreements properly can harm your business and brand image in case of disputes or litigation.
What are the Essential Business Documents for a Small Company/Startup in Hong Kong?
Most small business owners and startup founders are unaware of the contracts needed to protect their relationships with other parties. Here’s a list of the 10 essential business documents for startups and small businesses in Hong Kong:
- Shareholders Agreement
- Investment Agreement
- Confidentiality Agreement
- Service Agreement
- Employment Contract and Offer Letter
- Contractor Agreement
- Memorandum of Understanding
- Joint Venture / Partnership Agreement
- Lease Agreement / Tenancy Agreement
- Privacy Policy
Where do I get these Essential Business Contract Templates?
Having templates for common business contracts is crucial, but many business owners don’t know where to find them. Hiring a law firm to prepare these templates can cost tens of thousands of dollars, which many startups can’t afford. An alternative is to create business documents through DocPro. These templates are fully customizable, allowing you to tailor them to your needs and download them in Word format.
10 Essential Business Contract Templates for Your Business
If you’re running a small business or startup and unsure how to draft contracts, here are the 10 essential business contract templates you need:
1. Shareholders Agreement
What is a Shareholders Agreement?
A Shareholders Agreement is a contract between a company’s founders to define shareholders’ rights and obligations. It addresses key issues like share transfers, minority rights, confidentiality, and dispute resolution. Companies with multiple shareholders should have this agreement in writing to prevent disputes.
What to include in a Shareholders Agreement?
A comprehensive Shareholders Agreement should include:
- Shareholder funding/contributions
- Equal or unequal share ownership
- Duties and responsibilities of each shareholder
- Procedure for issuing new shares or rights to buy additional shares
- Protections for minority shareholders
- Dividend policy
- Accounting policy
- Exit strategy for shareholders
- Dispute resolution mechanism
Why is it important?
Without a Shareholders Agreement, businesses risk disputes and litigation as they grow, especially without a proper business structure. This agreement minimizes risks and protects the business.
Relevant Hong Kong Laws
Under Hong Kong’s Companies Ordinance (Cap 622) and Schedule 2, shareholders’ rights include:
- Voting in shareholder meetings or written resolutions
- Receiving dividends
- Receiving assets during liquidation
- Accessing financial statements and audit reports
Shareholders’ agreements may also outline additional rights, such as issuing or transferring shares or appointing/removing directors.
Shareholders Agreement Templates:
- Shareholders Agreement – Equal Shareholdings: Suitable for a simple joint venture with equal shareholding, drafted for 4 parties in neutral form.
- Shareholders Agreement (3 parties) and Shareholders Agreement (2 parties): For unequal shareholdings with minority protection, drafted in neutral form.
2. Investment Agreement
What is an Investment Agreement?
An Investment Agreement is a contract between a company and investors purchasing shares, who may be new or existing shareholders or external investors.
What does it include?
Key provisions include:
- Amount the investor pays and shares entitled
- Rights and obligations after share transfer
- Mitigating risks of investing in an unprofitable company
- Building investor trust
Why is it important?
As your business grows, funding is essential for expansion. An Investment Agreement outlines terms like restrictive covenants on share sales or rights to purchase new shares, reducing the risk of disputes with investors.
Relevant Hong Kong Laws
Section 144 of the Companies Ordinance (Cap 622) requires a share certificate to be issued within 2 months of share allotment, with penalties for non-compliance unless otherwise specified.
Investment Agreement Template:
- Investment Agreement – Single Investor: Defines terms for a single investor, drafted in neutral form.
3. Non-Disclosure Agreement/Confidentiality Agreement (“NDA”)
What is an NDA?
An NDA prevents unauthorized disclosure of confidential information and restricts its use to the specified purpose. It can be mutual or one-sided.
What to include in the NDA?
A good NDA should cover:
- Identification of disclosing and receiving parties
- Definition of confidential and non-confidential information
- Conditions for third-party disclosure
- Intended use of confidential information
- Handling, return, or destruction of confidential information
- Confidentiality obligations
- Consequences and remedies for breach
- Term of the NDA
Why is it important?
NDAs protect sensitive information like intellectual property, business proposals, or trade secrets, enabling secure sharing and stronger business relationships.
NDA Templates:
- Confidentiality/Non-Disclosure Agreement (Two-way/Mutual): Mutual confidentiality, drafted in neutral form.
- NDA/Confidentiality Agreement (One-way/Unilateral): Unilateral confidentiality, drafted in favor of the discloser.
4. Service Agreement
What is a Service Agreement?
A Service Agreement outlines the terms under which one party provides services to another for remuneration.
What to include in the Service Agreement?
It should include:
- Scope of services
- Fees and payment terms (including late payment fees)
- Refund policy
- Responsibilities of both parties
- Limitation of liability for third-party claims
- Term of the agreement
- Termination rights
- Dispute resolution mechanism
Why is it important?
Service Agreements clarify expectations and responsibilities, reducing conflicts and improving contract management efficiency as your business grows.
Service Agreement Templates:
- Service Agreement – Consulting Work: For professional services with specific deliverables, drafted in neutral form.
5. Employment Contract
What is an Employment Contract?
An Employment Contract is a legally binding agreement outlining employment terms between employer and employee.
What to include in the Employment Contract?
Key provisions include:
- Job particulars (position, department)
- Remuneration and benefits
- Working hours
- Probation period
- Reporting structure
- Leave structure
- Non-compete clause
- Confidentiality provisions
- Notice period
- Dispute resolution mechanism
Why is it important?
It ensures clarity on performance standards and protects sensitive information, minimizing disputes.
Relevant Hong Kong Laws
Employment contracts are governed by the Employment Ordinance (Cap. 57), Minimum Wage Ordinance (Cap. 608), Employees’ Compensation Ordinance (Cap. 282), and Mandatory Provident Fund Schemes Ordinance (Cap. 485). The Employment Ordinance requires inclusion of wages, wage period, notice period, end-of-year payments, and other conditions. The minimum wage in 2021 was HK$37.5/hour.
Employment Agreement Templates:
- Employment Agreement for Junior/Mid-Level Staff: Simple form, drafted in favor of the employer.
- Employment Agreement (Junior Employee without Share Options): Without share options, drafted in favor of the company.
6. Independent Contractor Agreement
What is an Independent Contractor Agreement?
This agreement establishes the business arrangement between a business owner and a contractor.
What does it include?
It includes:
- Scope of work
- Project timeline
- Payment terms
- Roles and responsibilities
- Insurance obligations
- Explicit independent contractor status
Why is it important?
It avoids creating an employer-employee relationship, allowing flexibility to end the contract without employee-related obligations.
Relevant Hong Kong Laws
Employees are entitled to benefits under the Employment Ordinance, unlike contractors. Changing an employee’s status to a contractor without consent may lead to claims.
Independent Contractor Template:
- Freelance/Independent Contractor Agreement – Simple Job: For simple jobs, drafted in neutral form.
7. Memorandum of Understanding/Letter of Intent (“MoU”)
What is an MoU?
An MoU is a non-binding agreement recording the intent to enter a business transaction, followed by a formal binding agreement.
What does it include?
It includes:
- Description of the transaction
- Contingencies
- Restrictive covenants (e.g., non-disclosure)
- Due diligence
- Non-binding status
- End date
Why is it important?
It clarifies expectations and expedites transactions by outlining terms before a formal agreement.
Memorandum of Understanding/Letter of Intent Template:
- Memorandum of Understanding (MOU): Standard template, drafted in neutral form.
8. Joint Venture / Partnership Agreement
What is a Joint Venture?
A Joint Venture is a collaboration where businesses pool resources for a new business activity.
What does it include?
It includes:
- Nature and goals of the joint venture
- Revenue allocation
- Management structure
- Restrictive covenants
- Dispute resolution
- Post-agreement rights
- Exit strategy
Why do you need it?
Joint ventures allow startups to leverage external resources like funding or expertise to achieve goals.
Relevant Hong Kong Laws
Joint ventures are subject to the Competition Ordinance (Cap 619), which prohibits anti-competitive agreements and abuse of market power, enforced by the Hong Kong Competition Commission.
Joint Venture Template:
- Joint Venture Agreement to Supply Products: For manufacturing products, drafted for 3 parties in neutral form.
- Joint Venture Agreement to Provide Service: For service provision, drafted for 2 parties in neutral form.
9. Lease Agreement / Tenancy Agreement
In early stages, startups often work from home, but as they grow, they may lease commercial property or coworking spaces.
What is the difference between a Lease Agreement and Tenancy Agreement in Hong Kong?
- Period: Lease Agreements are typically over 3 years; Tenancy Agreements are under 3 years.
- Form: Lease Agreements must be in writing; Tenancy Agreements can be oral or written.
- Execution: Lease Agreements require a red seal (individuals/partnerships) or company seal (limited companies); Tenancy Agreements require a chop or rubber stamp.
What do you need to consider in the lease/tenancy agreement for commercial property?
Key considerations include:
- Base rent and additional charges (parking, utilities, insurance)
- Security deposit
- Lease duration
- Responsibility for structural expenditures
- Allowed improvements
- Notice period for termination
What do you need to consider before renting a Coworking Space?
Coworking spaces use a license to occupy, not a lease, offering flexibility and lower costs. Consider:
- Rent amount
- Rental period
- Provided resources (WiFi, printers, etc.)
- Terms and conditions
- Networking opportunities
Relevant Hong Kong Laws
Leases are governed by the Landlord and Tenant (Consolidation) Ordinance (Cap.7), Conveyancing and Property Ordinance (Cap. 219), Land Registration Ordinance (Cap.128), and Occupiers’ Liability Ordinance (Cap.314).
Stamp Duty
Per the Stamp Duty Ordinance (Cap. 117), tenancy agreements require stamp duty, typically shared equally:
An additional HK$5 is payable for each duplicate. Unstamped documents may not be admissible in court, and failure to stamp can lead to penalties.
Registration of lease/tenancy agreement
Per the Land Registration Ordinance (Cap.128), Lease Agreements and Tenancy Agreements over 3 years (or with renewal options) must be registered within 30 days to maintain priority.
Tenancy Agreement Template:
- Tenancy Agreement – Commercial: For commercial property, with rent-free period and early termination options, drafted in neutral form.
- Tenancy Agreement – Domestic/Residential Property: For residential property, with similar options, drafted in neutral form.
10. Privacy Policy
What is a Privacy Policy?
A Privacy Policy outlines how a business collects and processes personally identifiable information (Personal Data), such as names, emails, or phone numbers.
In Hong Kong, this is governed by the Personal Data (Privacy) Ordinance (Cap. 486), defining Personal Data as data relating to a living individual from which their identity can be ascertained.
Why do you need a Privacy Policy?
A Privacy Policy ensures compliance with the PDPO’s 6 data protection principles:
- Purpose and manner of data collection
- Accuracy and retention duration
- Use of personal data
- Security of personal data
- Transparency of data policies
- Access to personal data
It also builds trust with customers by demonstrating careful handling of their information.
What does a Privacy Policy Include?
Key provisions include:
- Types of Personal Data collected
- Purpose of collection
- Data storage and security procedures
- Data deletion policies
- Customer rights to access and update data
- Terms for third-party disclosure and cross-border data transfer
- Consent for collecting IP addresses and cookies
What is GDPR, and does it apply to your business in Hong Kong?
The General Data Protection Regulation (GDPR) is a strict EU privacy law. It applies to businesses collecting or processing data of EU residents, even without a physical presence in the EU. Non-compliance can lead to heavy penalties. For more details, see An Update on European Union General Data Protection Regulation 2016.
Privacy Policy Templates:
- Privacy Policy (With GDPR) for Website or Mobile App: Includes GDPR wording, accepted by service use.
- Privacy Policy (With GDPR) for Website or Mobile App: Similar template for websites or apps.
Please note that this is a general summary of the position under the Laws of Hong Kong SAR and does not constitute legal advice.
