Hong Kong and the limited company
For decades, Hong Kong has attracted entrepreneurs and investors from all over the world for its Laissez-faire economy, low taxation, and simple rules. One of the cornerstones of this economy is the ease and low cost with which foreigners can incorporate and register a business. Without being a Hong Kong resident, one can form a company and conduct normal business operations within the territory.
A private limited liability company is the most common form of enterprise. A foreigner or Hong Kong resident above the age of 18 can form a limited company. Other business types include a branch office of a parent company, representative office, subsidiary, and sole proprietorship. Entrepreneurs and businesses conduct the incorporation with the Hong Kong Company Registry. You must also register your business with the Inland Revenue Department. Incorporating a limited company in Hong Kong typically takes around one week. Now, much of the process can be completed online.
Forming a Company in Hong Kong : an initial Considerations
Fees for a Private Limited Liability Company
Forming a company in Hong Kong is very inexpensive compared with other territories. There are some ongoing registration fees, which business should be cognizant of on an annual basis.
- Company Registration Fee: HK$ 1,720
- Business Registration Certificate: HK$2,000 for a one-year certificate; HK$5,200 for a three-year certificate
- Levy to the Protection of Wages on Insolvency Fund: HK$250 for a one-year certificate; HK$750 for a three-year certificate
There is no minimum registered capital requirement for limited companies. However, at the time of company formation, a minimum of one share must be issued to the company founder. Share capital may be issued in any convertible currency.
Businesses must have a local company address and submit this information with their application. It must be a physical address. As such, a PO box is insufficient when incorporating your company. If you do not wish to rent an office space because you are operating your business from overseas, a professional services company can provide you with a registered address for your business.
The company name must be approved in order to incorporate your company. Some naming requirements include the following.
- The company name may not be the same as another company appearing in the Index of Company Names kept by the Company Registry. Existing company names can be searched for on the Company Registry website.
- May not be the same as a corporate body established under an ordinance.
- May not have a name where its use would constitute a criminal offense, according to the Company Registry.
- May not have a name that is offensive or deemed contrary to the public interest, according to the Company Registry
Forming a company in Hong Kong: Documentation
The following documents must be submitted to the company registry when incorporating a company:
- Articles of Association It is recommended that companies write and submit their Articles of Association based on a standardized template which a professional services firm will provide or which can be found on the website of the Company Registry.
- Incorporation Form On the incorporation form, applicants must provide the company name, registered address, description of business activities, directors, shareholders, company secretary, and share capital information.
- Copy of Passport This is only applicable to non-resident applicants. Locals should submit a copy of their ID card.
- Proof of Address Can be overseas or local.
Basic company information (including shareholders, directors, secretary, and company address) will be registered and filed with the Company Registry. The Company Registry makes this information public. Maintaining Confidentiality: If a business wishes to make company information confidential, it can do so by appointing nominees as the shareholder and director, at which point it will be the nominees’ information that is made public rather than the de facto shareholders and directors.
At least one director is required to incorporate a private limited company. There is no maximum number of directors. The director can be of any nationality or residency. Directors must be over 18 and may not be bankrupt nor convicted of malpractices. Board of directors meetings may be held anywhere in the world. It is the responsibility of directors to ensure that the company secretary (see below) is fulfilling his/her duties to ensure ongoing compliance. As such, directors are liable for non-compliance fines and, potentially, prosecution.
A maximum of 50 shareholders are permitted for Hong Kong private limited companies. Shareholders are not subject to residency or nationality requirements. A shareholder can be a person or a company. A shareholder, when it is a person, must be over 18 years of age. Shareholder meetings may be held anywhere in the world.
The appointment of a company secretary is required. The secretary may be an individual or a corporation. In both cases, the secretary must be formally located in Hong Kong. A professional services company may provide a company secretary for the purposes of your company in Hong Kong. When there is only one shareholder or director, the company secretary must be a different person. The role of the company secretary is to maintain company records and books and ensure compliance with statutory requirements.
Forming a Company in Hong Kong : Taxation, Compliance, and Ongoing Administration
The corporate tax rate in Hong Kong is set at 16.5% of company profits. Assessable profits, on which the corporate tax rate is calculated, are determined based on the accounting profit or loss within the tax period of interest. Non-taxable items include dividends, interest, capital gains, and profits earned overseas.
Administration and Compliance
Companies must annually file tax returns and records of their audited accounts with the Inland Revenue Department. Accounts must be audited annually by Hong Kong registered Certified Public Accountants. Companies must submit an annual return to the Company Registry along with a copy of their tax returns. A director, as well as the company secretary must sign the annual return. The Business Registration Certificate must be renewed in accordance with the previously purchased certificate. As stated above, companies can purchase one-year or three-year certificates.
An Annual General Meeting must be held every calendar year including the directors, shareholders, and secretary. It can be held anywhere in the world, however, records of the meeting must be submitted to the company registry. The meeting must include a director’s report and the announcement of a summary of the company’s financial accounts. The interval between meetings may not exceed 15 months.