Legal requirements company set up Hong Kong in 2023 : Christened the world’s freest economy, Hong Kong is one of the most business-friendly cities in the world. For this reason, entrepreneurs and companies that want to use Hong Kong as a springboard to conquer the Asian Market simply can’t resist its allure. With a highly skilled workforce, a favorable tax regime, a strategic location, and a hub for startups, Hong Kong continues to capture the imagination of many.
Setting up a company in Hong Kong is an attractive option for local and foreign businesses seeking to establish their presence in Asia’s financial hub. However, it’s important to understand and comply with the legal requirements for company set up in Hong Kong. As you very well know, complying with the legal requirements for company formation in Hong Kong is of utmost importance.
It gives your business/company legitimacy, credibility, facilitates smooth operation, and provides a strong legal foundation. What’s more? Failure to meet or comply with any of the legal requirements is a recipe for disaster. It can result in penalties, legal lawsuits, and in the worst-case scenario, a damage to your company’s reputation. After all, image is everything. Right?
Before we delve into the legal requirements for a company set up in Hong Kong, let us first look at the type of company vehicles in Hong Kong.
Types Of Companies In Hong Kong
If you are looking to set up your business in Hong Kong, there are several types of company vehicles you can choose from. The following are the main types of companies in Hong Kong.
Private Limited Company
Without a doubt, a private limited company is the most common and most popular type of company in Hong Kong. It is a separate legal entity which means your liability is limited to the business assets. In essence, shareholders are not liable for company debts and obligations.
The company’s shares are not publicly traded and the number of shareholders is usually between 1 and 50.
The great thing about a private limited company is that they provide a strong corporate image, enhances business credibility, and facilitates business growth. They also benefit from flexibility in management and ownership structure.
Public Limited Company
A public company, unlike a private limited company, can be traded publicly. What this means is that it can offer its shares to the public and have them traded on the stock exchange. Public companies are subject to greater scrutiny and are required to publish financial statements and hold annual general meetings.
One great advantage of a public company is the ability to raise capital through public offerings. They also have the potential for increased market visibility and liquidity.
Branch Of Overseas Company
Foreign companies can establish a branch office in Hong Kong to conduct business locally. In essence, the branch doesn’t have a separate legal entity and operates as an extension of the parent company. It must also register with the Hong Kong Companies registry and comply with all reporting requirements.
The branch is subject to the laws of both the parent’s company jurisdiction and Hong Kong.
It is important to note that each type of company has its merits and demerits. For instance, private limited companies are suitable for most SMEs. They offer limited liability, flexibility, and ease of management.
For a business intending to raise capital from the public, a public company is the most appropriate. However, they have a greater need for transparency and accountability.
Branch offices of overseas companies are ideal for companies seeking to establish a local presence while maintaining a close connection to the parent company.
When deciding on the type of company, consider the nature of your business, financing requirements, long term goals, desired level of public exposure, and financing requirements.
Company Name And Registration
Choosing the right company name is crucial in the company registration process in Hong Kong. You need to be aware of the legal requirements and guidelines associated with companies. Consequently, you need to be familiar with the process of company registration including the necessary documents, forms, and fees. Let’s look at all these in detail.
Choosing A Company Name
One of the first things when setting up a company in Hong Kong is choosing a company name. The name of the company can be in English, traditional Chinese or both. The company name should be unique and distinguishable from other existing businesses. It should not infringe against trademarks or intellectual property rights.
It should not be misleading, offensive, or violate any laws or regulations.
Process Of Company Registration
In Hong Kong, the company’s registry is responsible for company registration. You therefore need to submit an application to the company’s registry in order to register your company in Hong Kong. The application can be submitted in person or online.
The necessary documents typically include:
- A duly completed application form. For example, you need to download and fill out form NNC1 for a company that is limited by shares.
- The company’s articles of association. It outlines the internal regulations and management structure of the company.
- Particulars of directors, shareholders, and company secretary.
- Registered office address
Moreover, the identification documents of directors, shareholders, and the company secretary may be required. These are Hong Kong identity cards or copies of passports for foreigners. Ordinarily, the company registration process takes between 1 and 2 weeks.
Fees
The registration fee is not a flat rate. It varies depending on the type of company and the authorized share capital. It is also important to note that there are annual fees for maintaining the company’s registration.
Requirements and Restrictions
The following are the restrictions and legal requirements for company set up in Hong Kong.
- Every single company registered in Hong Kong must display their registered name and registration number at their registered office and on all their business correspondence.
- A company’s name should end with a legal suffix “Limited” which is abbreviated as “Ltd.” for a private limited company. In the case of a public company, it should end in the legal suffix “Public limited company” which is abbreviated as P.L.C.
- If you intend to use certain sensitive or restricted words (such as “National”, “Government” or “Bank”) as part of your company name, you may require approval from relevant authorities.
- The Companies Registry maintains a list of all reserved words that cannot be used without specific approval.
Once you coin or come up with a name, it is important that you conduct a name search in the Company’s registry database. This is to ensure that your desired name is available for registration. Registering a company in Hong Kong might be a tedious process especially if you are clueless about the local laws and regulatory framework.
You can engage the services of a professional company formation agent such as MBiA to help you navigate and streamline the company registration process.
Share Capital And Shareholders
Share capital plays a key role in company formation. It represents the ownership interest of shareholders in a company. That said, understanding the concept of share capital and the requirements is crucial when setting up your company in Hong Kong. Let’s look at it more in detail.
1. Concept of share capital
The share capital, in simple terms, represents the total value of shares issued by a company. It serves as a measure of ownership and financial contribution by shareholders. In other words, share capital determines the rights, privileges, and liabilities of shareholders. It provides the basis for calculating each shareholder’s proportionate ownership and entitlement to assets and profits.
2. Minimum share capital and share division
There is no specific requirement for minimum share capital in Hong Kong. Companies in Hong Kong can have a share capital as low as HKD 1 and it can be denominated in any currency. The division of shares among shareholders can vary based on agreements among shareholders or on the company’s structure.
Shareholders can hold shares in equal proportions or in different classes such as ordinary shares or preference shares.
3. Restrictions and Regulations
While Hong Kong does not impose stringent restrictions on shareholders or share capital, certain regulations and considerations apply. At the time of issuance, allotted shares must be fully paid either in cash or other tangible assets.
Companies may need to comply with anti-money laundering laws when issuing or transferring shares.
Restrictions on issuance of shares or share transfer may be specified in the shareholder agreement or company’s article of association. Last but not least, companies must maintain accurate and up to date records of shareholders and their shareholding.
In summary, setting up a company in Hong Kong requires adherence to several essential legal requirements. Navigating the process on your own can be time consuming and complex. It is important that you engage the services of company formation agents such as MBiA to help you with the company set up process.
We have been tried and tested and can assure you that your company will be up and running within no time. We provide you with invaluable business advice, guide you through the process, ensure compliance with legal requirements, and facilitate a smooth and successful incorporation process. Reach out to us today and let us get your company formation process rolling!