Hong Kong
Company Formation in Hong Kong
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Company formation
The procedure for starting a business in Hong Kong is fairly simple. It is possible to set up a new company within a week and it will cost relatively little. It is essential to seek professional advice before you decide to move permanently to Hong Kong. There are five primary business ventures which foreign investors tend to choose, and these are; Private limited companies, Branch offices of overseas companies, Representative offices, Partnerships/sole proprietorships and Joint ventures.
Company formation in Hong Kong follows this 5-stage process:
- Apply for a certificate of incorporation and choose a company name and the Companies Registry. This process can take up to 7 days and costs approximately 1800 HKD.
- Within a month of starting operations, obtain a business registration certificate. This takes 1 day and costs approximately 450 HKD.
- Submit details of the company to the Companies Registry. This takes 1 day.
- Register for Employee Compensation Insurance and Mandatory Provident Fund schemes, which take 1 day.
- Create the company seal and stamp. This takes 1 day and costs approximately 220 HKD.
- The company name must be unique, certain words are restricted. It can be in either English or Chinese or both
- There is no minimum or maximum share capital
- Between one and 50 shareholders. The liability of each shareholder is limited to the amount of share capital invested
- A company must have a registered office address in Hong Kong. This functions as the company's legal address for notices and proceedings
- One director is satisfactory unless the company is part of a listed group. Directors may be individuals or corporations of any nationality and residence
- A company secretary must be appointed (to carry out necessary tasks including legal returns, accounts, audit and other requirements) who lives in Hong Kong
- A company is incorporated (registered) by submitting the necessary paperwork and fee to the Registrar of Companies
- Profits tax is payable on profits generated in Hong Kong. Many items are tax deductible in Hong Kong
- A signed copy of the company's Memorandum and Articles of Association (containing the rules for its internal regulation and management).
- A "Statement of Compliance on Incorporation" in a specified form (Form NC1A)
- Branch: the address (in Hong Kong) of the overseas company conducting the business
- Branch offices tend to follow the same legal and tax procedures as Hong Kong based/incorporated companies or businesses
- It is a legal requirement for branches to file returns, audited accounts, and this is an ongoing process which must be adhered to
- The overseas company need to apply for registration within a month of setting up a business in Hong Kong. Applying before business begins is recommended.
- A certified copy of the instrument defining a company's constitution.
- A completed Form F1 (can be obtained and purchased from the Companies Registry)
- A certified copy of the company's certificate of incorporation.
- You may be required to supply a certified copy of the latest accounts of the company.
Private limited company
A foreign company may decide to incorporate a Hong- Kong owned company into their business as a subsidiary. These companies may be public or private, limited by shares or limited by guarantee. The majority of companies in Hong Kong are private companies limited by shares.
Private company limited by shares
It is important to check the availability of the proposed company name you wish to use in Hong Kong at the Companies Registry. This can be carried out, free of charge, at the:
Queensway Government Offices
66 Queensway
Hong Kong
Enquiry Hotline (IVRS): (852) 2234 9933
Phone (24-hour Hotline): (852) 2867 2600 / (852) 2867 2604
Fax: (852) 2596 0585
Email: crenq@cr.gov.hk
The second step is to submit the following information to the Registrar of Companies:
The prescribed fee is HK $1,720 (about US $221), plus capital duty of HK $1 for every HK $1,000 of share capital up to a maximum of HK $30,000. A portion of this is refundable if applications are unsuccessful.
If the application process is successful, you will be issued with a certificate of incorporation by the Companies Registry which verifies the name and date of incorporation of the company.
Branch Offices
A business or corporation outside Hong Kong that establishes a branch office as an extension of the investing company is known as an "overseas company". The main differences between a branch and a representative office are the operating scope and taxes.
Conditions:
Costs involved in establishing a branch office, and things to consider:
You must submit the following to the Registrar of Companies:
Finally, there is an application fee of HK$1,720 and a fee of HK$20 for registration of each document.
The next step is to apply for the aforementioned Business Registration Certificate, which costs HK$2, 600 (US$333) for a year.
Usually, it takes 22 working days to process the application and to issue a certificate of registration. You will then be issued with a certificate from the Companies Registry, which will confirm the name and date of incorporation of the company.
Representative Offices
Similar to a branch, the representative office offers a means of setting up a place of business in Hong Kong for those companies incorporated outside Hong Kong. It is a useful venture to consider if you are interested in finding out about the Hong Kong market before you decide to make a permanent investment in the city.
Unlike branch offices and subsidiaries, a representative office has limited options. It may collect information, keep in contact with customers and carry out promotional/liaison work. It is unable to enter into any business contracts.
A representative office may not conduct any business in Hong Kong. If it does, it is essential to register the business as a branch. Since a representative office is forbidden from conducting business in Hong Kong, it should not make any profits.
Once again, an application and fee should be submitted for the Business Registration Certificate within a month of setting up the representative office. There is no further registration procedure.
Partnerships/Sole Proprietorships
The sole proprietor or partner is liable for any debts and legal responsibilities, because these organisations do not have a separate legal entity.
The sole proprietor or partners have unlimited liability for any debts incurred, to the extent that their personal assets could be at risk.
The maximum number of partners is generally 20. There is normally an agreement within the partnership that they are governed by. However if there is no agreement, the partnership legislation would apply.
Tax treatments vary between corporate organisations and partnerships/proprietorships. There are fewer ongoing compliance requirements in place than for corporate associations.
Again, you must apply for a Business Registration Certificate, costing HK $2,600 for one year, but there are no further registration procedures so a partnership is simple and inexpensive to establish.
Joint Ventures
Joint Ventures (JVs) are established when two or more partners wish to go into business together. Each partner within the Joint Venture will contribute to the company in various ways, with a view to getting a return on shares and/or a percentage of the profits.
Usually, a private limited liability company is established in order to carry out the Joint Venture business.
Once terms and conditions have been agreed between the partners, regarding the contributions from each partner, and also the rights, the company can be incorporated as outlined above for the Private Limited Companies.
With regards to each of these business classifications, within a month of registering your company, you must submit an application and fee for a Business Registration Certificate (costing HK $2,600 (US$333) for one year and HK$7,000(US$897) for a three-year certificate). If you purchase a one-year certificate, you must renew it every year, thus companies may prefer to apply for the business certificate valid for three years. It will usually only take 6 working days to process documents and issue a certificate of incorporation.
Since early 2005, many of the above documents can be filed electronically with the Registrar. Different charges may apply.
You must apply to the Inland Revenue Department in order to gain the Business Registration Certificate or for any other necessary/related inquiries about your business.
Offshore Companies
By choosing to incorporate an offshore company, business owners and investors can set-up a business outside the jurisdiction of itsoperations. Offshore companies are traditionally, but not exclusively,incorporated for lower fees and taxes. Business owners must abide theregulations of the offshore jurisdiction, and must not trade within thejurisdiction.
The benefits are vast. As aforesaid, reduced tax and fees are oftenbig factors when considering offshore incorporation. A company may alsochoose and offshore location to:
- Simplify set-up and maintenance - entrepreneurs may find bureaucracy and red tape less of an obstacle in offshore jurisdictions
- Assume anonymity - the names of owners and directors are not forpublic record, and references to the company may only be made in itsregistered agent
- Ensure legal protection - for instance, some jurisdictions favourcorporate governance, meaning a company is only liable to offshore lawsas opposed to those in its areas of operation
- Protect assets - business owners may opt to arrange their assetsand transactions in such a way that protects them from liability
Characteristics of an offshore company:
- Memorandum and Articles of Association
- Certificate of Incorporation
- Registered Office/Agent
- Shareholders / Members
- Directors / Managers
- Company secretary
- Statutory Register
- Bookkeeping
Traditional locations for offshore incorporation are tax havens,such as the British Virgin Islands, Panama and Monaco. Other favouredareas include India, the Bahamas, Dubai, the Cayman Islands, Cyprus,Seychelles, Marshall islands, Delaware, Turks & Caicos Islands,Hong Kong, Jersey, Guernsey and the Isle of Man.
- One-off fee to the property agent (normally one month's rent)
- Management service charges
- Government rates at 5% of annual rental value
- Legal fees, if you use a lawyer for tenancy agreement
- Flatted factories are for general manufacturing processes;
- Industrial/office premises consist of floor space, providing for industrial or office use
- Specialised factories comprise all other factory premises, built for specific manufacturing process and they are normally for occupation by a single person
Useful Contacts
Inland Revenue Building
4/F., Revenue Tower
5 Gloucester Road
Wanchai
Hong Kong
Tel: 187 8088
Fax: 2519 6714
Website: http://www.info.gov.hk/ird/eng/tax/bre.htm
Business hours, depending on the services you require, are 8:15 am - 5:30 pm or 8:45 am- 5:00 pm.
You may decide to register a website for your company. Anybody may register for an .hk domain name. Visit www.hkdnr.hk for information and for an online application form. The registration fee, which is annual, can range from HK$150 to HK$250.
Choosing property for your business
Living in the Central Business District (CBD) in Hong Kong is fairly expensive, but due to the city's infrastructure, good value property within a comfortable distance is not too difficult to find. Though the majority of office space can be found here, other areas such as Wanchai, Causeway Bay and Quarry Bay on Hong Kong Island, and Tsim Sha Tsui on the Kowloon peninsula are office districts that are also popular.
You can lease a property through an agent and fortunately the same procedure and regulations apply to both local and foreign investors.
Leased offices
Leases are usually two or three years, and you have the option to renew. A tenancy agreement which sets out the particular responsibilities of landlord and tenant and a deposit (normally two to three months) are required.
Other costs may include:
Serviced and Virtual Offices
There is also the option of either a serviced office, which are designed for short-term leases. They offer tenants a variety of secretarial services. Virtual offices are slightly different, as they give a mailing address and a receptionist who will answer the phone in the name of your company.This is something you may want to consider in the short-term.
Industrial buildings
Three types of industrial building are available in Hong Kong:
The majority of flatted factories and industrial/office buildings are located in Kwun Tong and Tsuen Wan, while about 80% of specialised factories are situated in the New Territories, which is a region in Hong Kong excluding Hong Kong Island, Kowloon and Stonecutters Island.
Specialist centres (research and development, laboratory, high-tech facilities)
You may require a specialist office location/environment, or decide to be situated among similar businesses. There are facilities in Hong Kong, which include incubator services, for companies that deal with science, technology, design or research and development. These include The Hong Kong Applied Science and Technology Research Institute (ASTRI),the Hong Kong Science and Technology Parks Corporation (HKSTP), Cyberport, which offers offices for the IT and electronics industry, and the Hong Kong Design Centre.
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