What are the minimum statutory requirements for forming a company in Hong Kong?
In Hong Kong most companies are incorporated as private limited companies (limited by shares).
These are the basic requirements for company formation in Hong Kong:
- Any individual or business entity may incorporate a Hong Kong company.
- A minimum of one shareholder, who can be a local or foreigner. A shareholder must be above 18 years of age.
- A minimum of one director, who can be a local or a foreigner. A director must be above 18 years of age.
- The shareholder and the director can be the same person.
- There is no minimum share capital requirement. However, it is the norm to have an authorized share capital of HKD 10,000, represented by 10,000 ordinary shares of HKD 1.00 each. The minimum issued/paid-up capital will usually be 1 share of HKD 1.00.
- Must have a local registered address (P.O. Box not allowed)
- Must have a company secretary. If the secretary is an individual, they must ordinarily reside in Hong Kong; or if a body corporate, must have their registered office or a place of business in Hong Kong. The sole shareholder and director cannot also act as company secretary.
- A name approval is required prior to company registration.
Names must not be:
- be the same as or similar to a name appearing in the Companies Registry’s ‘Index of Company Names’
- infringe on trademarks
- be offensive or otherwise contrary to public interest
- be a combination of English words/letters and Chinese characters
How long does the Hong Kong company formation procedure take?
Typically it takes about 4-7 working days to incorporate a company in Hong Kong. If you are located overseas, however, it may take longer owing to the logistics of signing and couriering the relevant company formation documents.
What language can a company name be registered in?
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 a Chinese company name must end in the Chinese characters equivalent of the word “limited”.
Are bearer shares allowed in Hong Kong?
No. Hong Kong company formation law does not permit bearer shares.
Do we need to be present in Hong Kong during company formation process?
You do not need to be physically present at the time of company incorporation. However, depending on the bank that you choose, you may need to meet with the bankers in Hong Kong personally at the time of account opening.
What documents do I need to send in order to incorporate a Hong Kong company?
Assuming that you are a foreign national, the service provider you choose to incorporate your company will usually require the following documents from you:
- Copy of your passport
- Copy of your residential address proof such as utility bill, cable bill, etc.
- Personal bank reference letter
- Completed incorporation details document, containing information about the proposed company, such as the company name, shareholders, directors, etc.
What is the minimum age requirement for directors and shareholders of a Hong Kong company?
Directors and shareholders of a Hong Kong company should be 18 years of age or older.
How long does it take to open a corporate bank account in Hong Kong?
After the company has been registered with Company Registrar, you will be able to proceed with opening the bank account. Typically, the time needed to open a bank account can range between 2-10 days, although that can vary from bank to bank.
Are Hong Kong companies required to file annual accounts
Hong Kong company formation laws mandate that every company formed in Hong Kong, unless specifically exempted, must file audited accounts with the Inland Revenue Department of Hong Kong, along with its profits tax return, on an annual basis. The auditor must be a member of the Hong Kong Society of Accountants and must hold a practicing certificate. There is no requirement to file accounts with the Companies Registry.
Which companies are exempt from filing audited accounts with the Inland Revenue Department?
The following companies are exempt from submitting audited accounts together with their profits tax return:
- Small corporations (small corporations are defined as corporations whose total gross income does not exceed HKD 500,000 for the basis period)
- Dormant companies according to definition by the Companies Ordinance (dormant companies are defined as having “no relevant accounting transactions” during a financial year)
- Companies incorporated in a jurisdiction whose laws do not require accounts to be audited
- The Hong Kong branch of a foreign company, provided that the following information is supplied in addition to the return:
- Location of the incorporation of the foreign company
- If that country’s laws require a statutory audit of the worldwide company accounts
- If that audit has been carried out, and
- A brief summary of all accounting and financial records maintained by the Hong Kong branch
What is a “dormant company”?
A dormant limited company in Hong Kong is a company that is legally described as having no relevant accounting transactions in a fiscal year. A relevant accounting transaction, by Companies Ordinance’s definition, is one that is entered in the company account books, like receipts and expenditures and the purchases and sales of goods, as well as assets and liabilities. Not included are transactions that come from paying Ordinance-required fees.
Under the Companies Ordinance, a company can pass a resolution which authorizes directors to make a statutory declaration, stating that the company will become dormant, and then to deliver a copy of the declaration to the Registrar.
That company will be deemed a dormant company, effective to the date of delivery, or a later date if specified in the declaration.
Are there any compliance exemptions that apply to dormant companies?
Yes. Private limited companies that are deemed dormant under the Companies Ordinance in Hong Kong will be exempt from filing yearly returns to the Companies Registry, as well as holding annual general meetings, appointing auditors and preparing audited accounts. They must, however, file a profits tax return with the Inland Revenue Department.
If I set up a Hong Kong company, can I relocate to Hong Kong to operate my company?
A foreign entrepreneur wishing to relocate to Hong Kong to operate their company must apply for what is called an “Investment Visa”. The application for the Investment Visa is comparable to applying for an Employment Visa under the General Employability Policy, with the exception that this visa is intended for company owners. It’s important to note that you can only apply for an Investment Visa after company formation.
What is the permitted currency of share capital for a Hong Kong company?
Any major currency is permitted, with the Hong Kong Dollar being the preferred currency of choice.
Do we need to engage a professional firm to incorporate a Hong Kong company?
A professional services firm is not required for incorporating your Hong Kong company if you are residing in Hong Kong; it is your choice if you wish to self-incorporate the company. The incorporation procedures and ongoing statutory compliances are highly complex, however, so hiring a professional services firm is recommended.
Non-residents planning to incorporate a company in Hong Kong are mandated to hire a professional services firm to represent you.
Do foreigners need a Hong Kong partner to incorporate a company?
A local shareholder or director is not required for incorporating your Hong Kong. You will probably need a corporate services provider to maintain the company’s ongoing statutory compliance purposes. Typically, your corporate service provider will act as secretary as well as the registered address agent. In addition to these services, they will manage annual filing for the company and carry out nominee director and nominee shareholder services, if necessary.
Does Hong Kong company law make a distinction between a regular director and a nominee director?
No, it does not. Hong Kong company incorporation laws require that all directors are seen as the same, and all directors should complete fiduciary and other duties and responsibilities.
Is the information regarding directors and shareholders of the company available publicly? What are the reporting requirements for shareholders and directors of a Hong Kong company?
Yes. All details regarding company officers or directors, shareholders and the company secretary is required to be public per Hong Kong company incorporation laws. Filing those details with the Companies Registry is mandatory upon incorporating a Hong Kong company. If you wished for those details to remain confidential, that could be accomplished by appointing a nominee shareholder and director from your corporate service provider.
Are corporate directors and shareholders permitted?
Yes. Directors and shareholders are permitted to be natural persons or body corporates.
Is a Hong Kong company required to obtain any business license after incorporation?
Company incorporation is governed by the Companies Registry of Hong Kong. It is possible that actual business activities could be controlled or regulated by different government authorities, and there may be permits or business licenses required before you can perform business activities. Some businesses that need a license to operate include: restaurants, travel or employment agencies, lawyers, insurance brokers, fund managers, childcare centers, banks, etc. Business licenses can only be applied for after incorporation of a Hong Kong company.
Is a registered office required for a Hong Kong company? Can I use my home as the place of business of my company?
It’s a requirement that every Hong Kong incorporated company has a registered office in Hong Kong from its incorporation date. That address will be the company’s legal address for receiving notices and proceedings, and that address can be different than its business address
You can use your Hong Kong-based residence address for a smaller-scale business.
Is there a stamp duty for allotment or transfer of shares for a Hong Kong company?
Stamp Duty on share capital can also be referred to as “capital duty” in other nations. In Hong Kong, Stamp Duty on share capital in Hong Kong has the following characteristics:
- No Stamp Duty is payable on share allotment.
- Stamp Duty will be payable on the transfer of shares described below.
Stamp Duty is payable on:
- Transfer from the sale or purchase of any Hong Kong stock
- Transfer by way of gift of Hong Kong stock
- Transfer of any other kind
The rate of Stamp Duty and time limit for stamping is as follows:
- In relation to a contract note for sale or purchase of Hong Kong stock- 0.1% of the consideration or Net Asset Value (depending on which is higher), on every sold note and every bought note. Stamp duty must be paid within 2 days after the sale or purchase, if performed in Hong Kong; or within 30 days after the sale or purchase, if performed elsewhere.
- In relation to transfers from a gift – HKD 5 + 0.2% of the value of the stock – Stamp duty must be paid within 7 days after the execution of the instrument of transfer, if executed in Hong Kong; within 30 days after the execution, if executed elsewhere.
- For transfers of any other kind – HKD 5 – Stamp Duty must be paid before the date of execution, if executed in Hong Kong; within 30 days after the date of execution, if executed outside Hong Kong.
Note: Certain exemptions apply to specific transfers relating to a stock borrowing and lending arrangement.
What are the annual filing requirements for companies incorporated in Hong Kong?
Annual filing requirements include:
- Filing the annual return for the Hong Kong Company Registry
- Filing the annual tax return with the Inland Revenue Authority of Hong Kong
Is a Hong Kong company required to have an annual turnover?
No. There is no such requirement.
What are the different types of business entities in Hong Kong?
For private enterprises, some common types of business entities are:
- Private limited company. This is the most preferred type of legal entity.
- Branch office
- Subsidiary company (a private limited company with corporate shareholder)
- Representative office
- Sole proprietorship (not recommended due to unlimited legal liabilities on owners)
Can a Hong Kong company hire foreign employees?
Yes. Companies in Hong Kong are permitted to hire foreign employees to work in Hong Kong. Companies are required to file an employment visa for every such employee and to have it approved by the governing authorities. Different arrangements in the employment visa category provide for different groups of employees:
- Non-local graduates, holding a degree or higher qualification from a full time, locally accredited program in Hong Kong
- Foreign-educated employees that hold certain skills, knowledge or experience that is valuable to and not readily available in Hong Kong
- Chinese residents holding specific skills, knowledge or experience valuable to and not readily available in Hong Kong.
Can the name be changed after incorporation of the company?
Yes. A company name is able to be changed at any point after incorporation. The company would need to pass a special resolution, and a “Notification of Change of Company Name” would need to be filed through the Companies Registry during the 15 days after the Special Resolution passes. As soon as the changed name is approved, the company will have a Certificate of Change of Name issued.
How difficult is it to close a Hong Kong company?
Two ways that a company can be closed are “Liquidation/Winding Up” or “De-Registration”.
Deregistering a company is usually a simple process, and is less expensive and faster than winding up or liquidation. There are certain stipulations for a company to fulfill in order to de-register. That process can take between 5-7 months depending on the complexity of the procedure. Winding up a company is a complicated, long-term process and is very expensive.