Hong Kong offers a different form of incentives and benefits to investors around the world. Hence international companies want to establish their business in Hong Kong. There is a limited amount of government and foreign direct investment restrictions in the country. Therefore, this makes it a famous place for companies to establish themselves.
Apart from this, the process of Hong Kong Company formation is seamless. With limited effort and investment, a company can be formed in Hong Kong. Some of the benefits which attract investors to Hong Kong are the low tax rates present in the country. Apart from this, the economy of Hong Kong SAR is free, enabling diversification of business opportunities.
All these benefits attract different businesses to invest in Hong Kong. Foreign Directors and Shareholders do not have any restrictions when it comes to ownership of the equity in the company. Foreigners are permitted to own 100% equity in Hong Kong. These factors would enable the increase in investment opportunities for foreign companies in Hong Kong.
Hong Kong Company Formation- Types of Companies in Hong Kong
Before investing in Hong Kong, it is crucial to understand what business structure suits the needs of your interests. There are different forms of companies and businesses that are formed in Hong Kong.
The following are the companies that can be formed in Hong Kong:
- Private Limited Company
- Public Limited Company
Private limited companies are divided into a company that is limited by shares and a company limited by guarantee. Section 7 of the Companies Ordinance of Hong Kong speaks about limited companies.
Company Limited by Shares means the amount of shares subscribed by the shareholders is limited to a particular value or amount. Under section 9 of the Companies Ordinance (Cap 622), a company limited by guarantee is understood as any company or entity which does not have any share capital.
A company limited by guarantee is a limited company to the amount subscribed to the memorandum.
Apart from this, private companies can also be divided into unlimited companies. As per section 10 of the Companies Ordinance, an unlimited company can be understood as an entity where the liability of the members is unlimited. Hence the liabilities of the members are not limited to any particular amount of shares.
- Private Company– A Private company is present under section 11 of the Companies Ordinance of Hong Kong (Cap 622).
Section 11 defines the meaning of a private company. Under section 11(1)a– Any company or entity where the articles of the company restrict, the transfer of shares to any other shareholder or member company or limit the number of members to 50 individuals and do not list its shares in a public stock exchange is understood as a private company.
However, any form of a private company does not include a company that is limited by any form of guarantee.
- Public Company- Section 12 of the Companies Ordinance (Cap 622)defines a public company as any form of entity or body corporate which does have its shares listed in a public stock exchange. A public company is not a private company, and the shares of a public limited company can be listed in a public stock exchange. Hence if an investor wants to look into options for Hong Kong company formation, then he would have to look into the above.
What are the benefits of Company Formation in Hong Kong?
When an investor looks into options for Company formation in Hong Kong, he will get the following benefits:
- Starting a company in Hong Kong is a seamless process. There is less regulation regarding company formation in Hong Kong.
- Any individual can start a company in Hong Kong. An international investor can also start a company in Hong Kong. The process is simplified.
- When a foreign company or an individual sets up a company in Hong Kong, then the company would solely belong to the foreigner. Thus a foreigner can be the 100% equity owner of the company formed in Hong Kong.
- Any foreign investor can become the director and shareholder.
- The jurisdiction of Hong Kong SAR follows the British standards of law. The common Law system is therefore applicable in Hong Kong. This makes it easier for a company to be formed in Hong Kong.
- Tax rules are somewhat simplified in Hong Kong with tax rates at a stable rate for companies.
What is the primary regulatory authority for Company Formation in Hong Kong?
The primary regulatory authority for company formation in Hong Kong is the Companies Registry of Hong Kong. The companies’ registry is also known as the Registrar of Companies. Apart from this, the primary law that regulates company formation in Hong Kong is the companies’ ordinance of Hong Kong (Cap 622).
This ordinance promulgates all laws which apply to corporate entities in Hong Kong. Any investor or shareholder would have to follow the prescribed procedure, which is laid down by the companies’ ordinance.
Procedure-related to company formation in Hong Kong
The following procedure has to be considered by an investor for company formation in Hong Kong:
- Name of the Company
- Complying with the Ordinance
- Appointment of Executives
- Directors Appointment
- Appointment of Shareholders
- Appointment of Company Secretary
- Having Minimum Amount of Share Capital
- Having an Office which has a Registered Address
- Name of the Company– The Name of the Company must be according to the requirements of the Companies Ordinance of Hong Kong. Under section 81 of the Companies Ordinance (Cap 622), specifies the information related to the name of the company.
If the company has the name specified both in English and Chinese, then the registrar documents should have the name in both English and Chinese. Such correspondence must be present in all documents of the company.
The memorandum of association must contain the name of the company in both English and Chinese.
- Complying with the Ordinance– As per the companies’ ordinance, all companies which are registered in Hong Kong have to comply with the provisions of the ordinance. This will include any form of company which is formed under the Companies Ordinance. Such ordinance would apply to all form of entities which are formed in Hong Kong.
- Appointment of Executives- Once the company is formed; all executives have to be appointed in compliance with the respective rules and regulations of the company. Such executives appointed will include the following:
- Chief Executive Officer
- Company Secretary
- Shareholders and Directors
- Other Important Officers
- Appointment of Directors- The directors of the company have to be appointed according to the provisions of the companies’ ordinance (Cap 622). Both public companies and private companies are required to appoint a minimum number of directors in compliance with the provisions of the companies’ ordinance (Cap 622).
- Appointment of Shareholders- The Company has to appoint shareholders. In compliance with the norms related to companies ordinance. When appointing shareholders, their appointment has to be framed in accordance with the rules and regulations pertaining to a shareholders’ agreement.
- Appointment of Company Secretary- As per the Companies ordinance of Hong Kong, under section 474 every company must mandatorily appoint a company secretary in Hong Kong. The appointment must comply with the provisions of the ordinance. Under section 474, even a director can be appointed as a company secretary for a company. However, the company has to carry out minimum requirements related to due diligence. If the company has not appointed a company secretary, then the registrar will effect such appointment of a company secretary. This provision comes under section 476(1) of the companies’ ordinance of Hong Kong.
- Having Minimum amount of Share Capital- Having some form of share capital is required for any form of company which is established in Hong Kong. Usually, minimum shares would be allotted to different shareholders. The requirement of share capital for a company formed in Hong Kong would be in any form of currency. However, the main currency issued would be in HKD (Hong Kong Dollars)
- Registered Office- When an investor thinks about company formation in Hong Kong, then it is important to have a registered office present in Hong Kong. The requirements of having a registered office in Hong Kong have to comply with the company’s ordinance of Hong Kong.
Hence the above requirements are needed if the investor opts for Hong Kong Company Formation.
Can a Foreigner start a company in Hong Kong? (Hong Kong Company formation)
As mentioned earlier, any form of an individual can start a company in Hong Kong.
However, the following requirements have to be complied with for a company to be formed in Hong Kong:
- Any foreign individual can start a company in Hong Kong.
- There has to be minimum share capital which has to be subscribed by the foreigner.
- Apart from this, the physical presence of the foreigner is required for starting a company in Hong Kong. However, this requirement can be exempted.
- Physical presence is not only required for starting a company but for opening a bank account, the foreigner must be present in person.
- Any foreign director or foreign shareholder is allowed to operate an offshore company in Hong Kong.
Therefore a foreigner can establish a company seamlessly with limited resources.
Process of Hong Kong Company Formation
- Appoint an Agent- A company can be formed in Hong Kong seamlessly. There is both an offline and online procedure for forming a company in Hong Kong. Though there is an online procedure for formation of a company in Hong Kong, only an agent or authorised agent can seamlessly assist in the Hong Kong Company Formation process.
It would be advisable to utilize the services of an agent for Hong Kong Company formation process, as the agent would be well versed with all the local laws and compliance. Apart from this, any company which is formed in Hong Kong has to comply with the requirements of the ordinance.
- Application- Once the agent has been appointed; the agent will assist you with the application for Hong Kong Company Formation. During this process, the agent will guide you with the requirements and documentation for company formation in Hong Kong.
- Company Name- After completing the above step, the agent will assist you in choosing the name of a company. The name of the company has to be in compliance with the requirements of the Companies Ordinance (Cap 622). Hence the provisions related to section 81 and 82 of the companies ordinance must be complied with. The company name must not be the same as any other name. Hence the company must not infringe any other name of a company. Apart from this, the name of the company must not affect any form of national interests of the country. Therefore the name of the company must not infringe any respective class of trademark.
- Submitting Documents- After the name of the company is chosen, the representative agent would collect all the documents for submitting the same.
The following documents should be collected by the agent:
- Pre-Incorporation Contracts
- Articles of Association
- Memorandum of Association
- Any other respective documents which have to be submitted to the registrar of companies.
- Such a document must be collected by the agent and submitted to the respective authority.
- Application Filing- Once the documents are collected by the agent, the same must be filed online or offline. If the online method is utilised, then it can be submitted at the e-registry portal or through any other appropriate method. Other methods utilised are the CR E-Filing method which is utilised. If the offline method is utilised, then the documents have to be submitted to the companies’ registrar with the fee.
- Certificate of Incorporation- Once the registrar goes through all the documents, and if no inconsistency is present, the registrar will grant a certificate of incorporation. Once this certificate is provided, the company can start operations.
- Opening a Corporate Bank Account- It is essential to open a corporate bank account in Hong Kong to carry out all the business transactions for the company. The agent can also assist in the process of the corporate bank account. Once this is opened, a company can carry out regular business transactions. Hence for a Hong Kong Company formation process, the above steps are mandatory.
Hence if an investor is thinking of opting for Hong Kong Company Formation, then the above process must be followed.
To conclude, Hong Kong is one of the largest financial centers in the world. Due to this, investors and entrepreneurs want to establish their business in Hong Kong. Hong Kong not only offers ease of doing business but also offers seamless compliance and effective tax advantages. Apart from this, foreigners can also take part in the Hong Kong company formation process and having 100 percent equity ownership of the company. For a Hong Kong company formation, it is crucial to follow compliance under the Companies Ordinance of Hong Kong (Cap 622).
Read our article:Procedure for Hong Kong Company Registration