QFA Hong Kong issues joint-investment franchising guide: clarify equity, decision-making powers and further funding obligations

When investing in a franchise with friends or family, the proportion each person contributes is not the only matter to settle. In a joint-investment franchising guide published on 3 October 2026, QFA Hong Kong identified the contracting company, directors’ powers, further funding obligations and shareholder exit arrangements as key issues to address before signing. It urged Hong Kong’s franchise community to settle internal governance arrangements first, so that disagreements do not disrupt operations after opening.

Joint investment involves more than dividing up equity

The guide focuses on how responsibilities are shared between co-investors. When working with friends or family, discussions should go beyond how much money each person will put in. It is equally important to clarify who will sign contracts on the company’s behalf, what powers directors will have and how future decisions will be made.

The guide recommends completing a capital contribution schedule and a decision-making authority matrix before making any payments. These serve different purposes: the former sets out funding commitments, while the latter clarifies who can make which decisions. For those planning to run a franchise together, documenting these matters helps move discussions beyond contribution ratios to practical management responsibilities.

Agree funding shortfall and exit arrangements in advance

Beyond the initial investment, the guide calls on co-investors to address their obligations to provide further funding and prepare a plan for any funding shortfall. Pre-contract discussions should therefore cover not only the money needed to open the business, but also how each party will respond if more capital is required later.

Shareholder exits are another priority highlighted in the guide. Investing together and continuing to run a business together are separate questions. Agreeing exit arrangements in advance helps prevent internal disagreements from disrupting operations once the outlet has opened. The guide’s central message is to put these internal rules in writing before making payments, rather than waiting until problems arise.

No dedicated franchise legislation does not mean no legal obligations

The guide notes that Hong Kong has no legislation specifically regulating franchising, nor any generally applicable statutory franchise disclosure document, franchise registration system or mandatory franchise code. However, franchise arrangements may still be subject to contractual and common law principles, the Misrepresentation Ordinance and other applicable rules.

Businesses operating through a limited company must comply with the Companies Ordinance and obtain business registration under the Business Registration Ordinance. The guide stresses that neither company incorporation nor business registration amounts to government endorsement of a brand or its investment returns. Investors should not treat registration formalities as a guarantee of returns.

Check three sets of documents together

After completing the capital contribution schedule, decision-making authority matrix and funding shortfall plan, the guide recommends asking a Hong Kong lawyer to check that the shareholders’ agreement, articles of association and franchise agreement are consistent. Agreements between co-investors cannot be considered separately from corporate governance arrangements and contractual obligations to the brand.

For Hong Kong’s franchise community, the practical message is to move from simply agreeing contributions to documenting responsibilities clearly. Before making payments, establish who signs contracts, who makes decisions, who must provide further funding and how shareholders can exit. Having those arrangements legally reviewed then provides a foundation for running the business together.