The most common type of business entity registered in Hong Kong is a private limited liability company. Limited liability companies have a separate legal personality, limited liability for its owners, strong public perception and an enduring structure; raising capital and transfer of ownership is easier when compared to other business structures such as sole proprietorship and partnership. Foreign business professionals often refer to this type of entity as an offshore company in Hong Kong. Governed by the Companies Ordinance of Hong Kong, any person (foreign or local) above the age of 18 can setup a Hong Kong company.
Basic Requirements and Facts for Hong Kong Companies
- Company name – The company name must be approved before the incorporation of a Hong Kong company.
- Directors – A minimum of one director and unlimited maximum number of directors allowed. The director could be a person or a company. The director can be of any nationality and need not be resident in Hong Kong. Directors must be at least 18 years of age and must not be bankrupt or convicted for any malpractices. There is no requirement for the directors to also be shareholders. Nominee directors can also be appointed. Directors Board meetings can be held anywhere in the world.
- Shareholders – A Hong Kong private limited company can have a minimum of 1 and maximum of 50 shareholders. There is no residency requirement for shareholders. A director and shareholder can be the same or different person. The shareholder must be at least 18 years of age and can belong to any nationality. The shareholder can be a person or a company. 100% local or foreign shareholding is allowed. Appointment of nominee shareholders is permitted. Shareholders meetings can be held anywhere in the world.
- Company Secretary – Appointing a company secretary is mandatory. The secretary, if an individual, must ordinarily reside in Hong Kong; or if a body corporate, must have its registered office or a place of business in Hong Kong. It has to be noted that in case of a sole director/shareholder, the same person cannot act as the company secretary. The company secretary is responsible for maintaining the statutory books and records of the company and must also ensure the company’s compliance with all statutory requirements. A nominee secretary can be appointed.
- Share Capital – There are two types of share capital for Hong Kong companies – authorized capital and issued / paid-up capital. Although there is no minimum share capital requirement, the general norm for companies incorporated in Hong Kong is to have an authorized share capital of HKD 10,000 represented by 10,000 ordinary shares of HKD 1.00 each. The authorized share capital can be increased anytime after the company has been incorporated. The minimum issued/paid-up capital is usually 1 share of HKD 1.00. There is no limit or restriction on the maximum amount of share capital for both types. Share capital can be expressed in any major currency and is not restricted to the Hong Kong Dollar alone. Shares can be freely transferred, subject to a stamp duty fee. Bearer shares are not allowed.
- Registered Address – In order to register a Hong Kong company, it is required to provide a local Hong Kong address as the registered address of the company. The registered address must be a physical address and cannot be a PO Box.
- Public Information – Information about company officers viz. directors, shareholders and company secretary is public information as per Hong Kong Company Laws. It is mandatory to file details of the company officers with the Hong Kong Company Registrar. If you wish to maintain confidentiality you can appoint a nominee shareholder and nominee director by utilizing the services of a professional services firm.
- Taxation – Corporate tax, (or profits tax as it is called), is set at 16.5% of assessable profits for companies setup in Hong Kong. Hong Kong follows a territorial basis of taxation i.e. only profits which arise in or derived from Hong Kong are subject to tax in Hong Kong. There is no capital gains tax, withholding tax on dividends, or GST/VAT in Hong Kong.
- Ongoing Compliance – It is mandatory for companies to prepare and maintain accounts. Accounts must be audited annually by Certified Public Accountants in Hong Kong. The audited accounts together with tax return must be filed annually with the Inland Revenue Department. Every company is required to file annual returns with the Companies Registry and pay the annual registration fee. The Business Registration Certificate should be renewed, one month before expiry on an annual basis or once every three years, as the case may be. An Annual General Meeting (AGM) should be held annually every calendar year. The AGM should be held within 18 months of the date of incorporation, after which no more than 15 months can elapse between one AGM and the next. A written resolution in lieu of Annual General Meeting is permissible.
Usually, it takes about 4-7 working days to incorporate a company in Hong Kong.
Considerations for Foreigners
Foreigners who wish to register an offshore limited liability company in Hong Kong, must take into consideration the following points:
- Foreigners are free to be the sole directors and shareholders of a Hong Kong company. There are no local resident requirements.
- Although their is no requirement to be physically present at the time of company registration, physical presence may be required for the purpose of opening a bank account, depending on the bank chosen.
- Foreigners who do not plan to relocate to Hong Kong are free to operate their Hong Kong offshore company from overseas. They can travel to Hong Kong on a visitor visa as and when required.
- Foreigners who plan to relocate to Hong Kong to operate their offshore Hong Kong company are required to obtain an appropriate relocation visa type.
Company Registration Procedure
The incorporation procedure entails two steps: Approval of Company Name and Application for Company Registration with the Companies Registrar.
Approval of Company Name
The first step in the registration procedure involves approval of the proposed name of the company by submitting an application to the Companies Registry.
Company Name guidelines:
- A company may be registered with an English name, a Chinese name, or an English and a Chinese name.
- A company name with a combination of English words/letters and Chinese characters is not allowed.
- An English company name must end with the word Limited and its equivalent in Chinese characters in the case of a Chinese company name.
- A Chinese company name should use traditional Chinese characters, in “New Sai Ming” font, that can be found in the Kang Xi Dictionary or Ci Hai Dictionary and also in the ISO 10646 international coding standard.
The proposed name will likely be rejected if the name:
- is the same as or similar to a name appearing in the Companies Registry’s ‘Index of Company Names’
- infringes on trademarks
- is considered offensive or otherwise contrary to public interest
Company names containing words or expressions such as ‘Trust’, ‘Chamber of Commerce’, ‘Bureau’, ‘Cooperative’, ‘Government’ etc. will require prior approval from the Chief Executive. In some cases, the use of certain words and expressions in company names is covered by other legislation. For example, use of expressions like ‘Bank’, ‘Stock Exchange’ etc. should not contravene the related legislation and approval from the relevant body/authority is required prior to usage.
Company Registration with Companies Registry
Once the name has been approved, the incorporation request can be filed with the Companies Registry by submitting the above mentioned incorporation documents that have been duly completed and signed.
A successful application is usually processed within four to seven working days and the Companies Registry will issue a Certificate of Incorporation. The presenter of the incorporation documents (person stated in the Incorporation Form) will be intimated of the application outcome as the Companies Registry will send a fax notification, with the details. The Certificate of Incorporation must be collected at the Companies Registry, only in person by the presenter.
Post Registration Formalities
Once the company has been registered, there are a number of other formalities that need to be taken care of. These include:
File post registration documents with Company Registrar
Within 14 days of the incorporation, the following documents/notifications must be filed with the Companies Registry:
- Notification of Appointment of First Directors and Secretary
- Notice of Consent to Act as Director
- Notification of Situation of Registered Address
- Other documents as required by the Companies Registry
Register with Inland Revenue Department
It is mandatory for all Hong Kong limited liability companies to register their business with the Inland Revenue Department’s Business Registration Office and obtain a Business Registration Certificate. Business Registration with the Inland Revenue Department must be done within one month after incorporation with the Companies Registry, irrespective of whether the company is actually in business or not. The business registration number that appears on the Business Registration Certificate is also the respective company’s profits tax (corporate tax) file number.
On receiving the application, Business Registration Certificate will be issued on the next working day and must be collected in person. The Business Registration Certificate must be displayed on the office premises at all times.