Main Forms of Business Organisations in Hong Kong – Part 1russonxiao
Just like in any part of the world, legal forms of Hong Kong companies are various and can be very different from each other’s. In this article, we will try to summarize the six main forms of business organisations used in Hong Kong. We will split this publication in two separated articles, the first one being the two most common used forms and the second one presenting four other forms that can be very useful depending on the situation.
A. Limited Liability Company
Private limited company in Hong Kong is one of the most popular business forms because the liability of its members is limited only to the amount of investment in the company and the member’s personal assets are not endangered if the company goes into bankruptcy. This type of company is suited for small and medium sized companies.
The public limited company is suited for larger businesses, as the number of shareholders can be larger than 50. These companies are usually listed on the Hong Kong stock exchange and thus hey have to observe different regulations for public disclosure of information.
Setting up procedures for a limited liability company by shares in Hong Kong are quite simple:
- Before a company is incorporated, incorporation documents must be filed with the Companies Registry. The Companies Registry provides a one-stop platform for company and business registration service. A person who submits an incorporation form of a company at the Companies Registry will be deemed to have made a business registration at the same time. The registrar will reject a proposed name if it is identical to or is likely to be confused with another company name already registered.
- There is a statutory minimum requirement of one shareholder and one director for setting up private limited liability company. Anyone (corporation or natural person) can be a shareholder and director of a Hong Kong company; provided that at least one director must be a natural person. There is no restriction on foreigners holding shares in Hong Kong companies. Shares can be registered in the name of persons residing outside Hong Kong.
- A Hong Kong company is required to have a statutory secretary. It also must have an address in the territory and secretary, it must have its registered office or place of business in Hong Kong.
- There is no requirement as to the minimum amount of share capital. As such, many Hong Kong companies are established with a paid-up share capital of HK$ 1 only. But it is sometimes necessary for a Hong Kong company to have a larger share capital in order to fulfill the asset backing requirement of bankers, business partners, customers, etc.
- It generally takes around one week to incorporate a limited liability company. However, there are also some “ready-made” companies in the market, which are available for immediate use.
- A Hong Kong company generally has to hold an Annual General Meeting of shareholders every financial year. An Annual General Meeting, however, can be dispensed with by a resolution approved by all shareholders. Directors’ meetings can be held anywhere. Shareholders’ meetings can also be held outside Hong Kong provided that there is nothing to prevent this in the Articles of Association. The minutes of meetings are often prepared by a professional firm acting as the statutory secretary.
- Every year, a Hong Kong company must complete an Annual Return and file it with the Companies Registry where it is open for public inspection. The Annual Return gives details, among others, of a company’s share capital, members and directors.
- A Hong Kong company is required to keep proper books of accounts. The accounts need to be audited by an auditor holding a practicing certificate issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). A Hong Kong private company is not required to file audited accounts with the Companies Registry. Therefore, a company’s financial position is not available to the public. However, the annual audited accounts have to be submitted to the Hong Kong Inland Revenue Department (“IRD”) together with the annual Corporation Profits Tax Return for assessment.
B. Branch of a Foreign Company
A foreign corporation may establish a branch in Hong Kong by registering itself as a non-Hong Kong company having a place of business in Hong Kong under Part 16 of the CO and making a business registration with the Companies Registry.
Such registration shall be made within one month of business commencement by submitting following documents with the Companies Registry:
- A certified copy of the Certificate of Incorporation and Articles of Association of the foreign corporation or other instruments defining its constitution. If the instrument is not written in Chinese or English, a certified translation of the document is required.
- The names, residential address and passport number or Hong Kong Identity Card number of the directors of the foreign company.
- The name, address and passport number or Hong Kong Identity Card number of at least one authorized representative in Hong Kong who is authorized to accept legal notice served on the foreign company.
- Name, address, passport number or Hong Kong Identity Card number of foreign company’s statutory secretary.
- The address of the principal place of business of the Hong Kong branch.
- The addresses of the principal place of business and registered office of the foreign company in its place of incorporation.
- A certified copy of the company’s latest published accounts.
Even though these are the most common used forms of businesses in Hong Kong, there are four more that we will describe in a second article.
If you have any questions about legal requirements or accounting regulations in Hong Kong, please feel free to contact us.