In Macau and many other civil law jurisdictions, in order to minimise business risks and implement the principle of limited liability, shareholders often choose to set up companies with the statutory minimum capital, such as a limited liability company by quotas with a minimum capital of MOP 25,000. At the same time, the articles of association of companies tend to include a few basic business activities or are written in a general way. This is because, in most cases, a company’s acts remain valid under the Macau Commercial Code even if they exceed the scope of its business objects.
These two examples have always been legal and common business practices, and they are also provisions in the articles of association that shareholders usually do not deliberately modify or update.
However, in a judgment on a provisional attachment procedure issued by the Court of Final Appeal (CFA) on June 5 2026, Ruling No. 104/2025, the CFA expressed profound thoughts on these common business practices.
The facts of the case
A Ltd. was the contractor of a construction project, B Ltd. was the subcontractor, and C Ltd. was the project owner. At that time, A Ltd. borrowed money from D Ltd. for business capital turnover, and assigned its credit for fees against C Ltd. to D Ltd. as security. However, when this credit assignment was made, the construction payment of the subcontractor, B Ltd., had not yet been fully paid. Subsequently, B Ltd. applied for an attachment order on A Ltd.’s credit against C Ltd. Although D Ltd. won the case after filing a third-party objection (embargos de terceiro), B Ltd. was dissatisfied and appealed all the way to the CFA.
After hearing the case, the CFA pointed out that this assigned credit was originally an important guarantee for repaying the overdue construction payment owed to B Ltd. A Ltd. clearly knew that it owed B Ltd. for the construction work, yet it stripped the credit against C Ltd. from its own assets, causing B Ltd.’s claim to lose an important financial guarantee. Meanwhile, A Ltd. failed to use other assets to repay the overdue construction payment owed to B Ltd. This behaviour of A Ltd. clearly violated the principle of good faith and harmed the legitimate interests of B Ltd. Therefore, the CFA ruled to maintain the attachment order.
The CFA further pointed out that although it could not be confirmed that there was a conspiracy between A Ltd. and D Ltd. to make the credit assignment payment, their behaviour was indeed puzzling. According to the articles of association of D Ltd., its operated businesses were canteen and catering management services, cleaning management services, and security management services, and its registered capital was only MOP 25,000.
The CFA then raised a question: why would a limited liability company with little connection to construction engineering and a registered capital of only MOP 25,000 lend a huge sum of HKD 10 million to others?
Lessons for shareholders and advisers
The questions raised by the CFA are worth deep reflection and attention by shareholders and lawyers.
First, because these routine, rarely updated articles and capital structures can serve as critical objective evidence for judges to determine whether a transaction breaches good faith or if there is an intent to evade debts and harm specific creditors in large-scale claim transfers and debt-clearing disputes.
Similarly, during critical moments involving major financial disposals or third-party interests, a lack of reasonable commercial justification can easily lead judicial proceedings to infer an abuse of rights, thereby leaving creditors’ conservatory measures or objections unchallengeable.
For legal professionals, this strongly reminds us that when helping clients handle major financial and asset disposals, we must look beyond bare statutory compliance and focus on overall business substance and litigation risk prevention.
Furthermore, companies must move away from treating their articles of association as mere static paperwork; drafting them with precision and keeping them regularly updated are vital pillars of sound corporate governance. After all, any unreasonable fund movements or misaligned structural arrangements will not only fail judicial scrutiny but ultimately jeopardise the vital interests of clients.
