Getting Started—How to Open a Company in Hong Kong
Although the impact of the pandemic hit Hong Kong, it keeps ranking high for its robust economy, financial system, and business-friendly environment, according to a survey by the World Economic Forum 2020 Global Competitiveness Report.
Furthermore, it has been ranked as the best city in the world by Lonely Planet for more than 20 years, plus it is a popular choice among Expats when relocating to Asia with their families.
Forming a Hong Kong company does not have to be intimidating. To ease your mind about a process that can become worrisome, we at Statrys have prepared this complete guide with everything you need to know.
We have compiled information about the different types of legal entities available in Hong Kong, the steps and considerations for the incorporation process, and the requirements for the necessary positions and figures. We will also cover the corporate documents the authorities give after the set-up is finished.
Setting up a Hong Kong Company
What you need to know
It is important to decide which entity would fit best the intended business plan before setting up a company in Hong Kong.
Since Hong Kong offers a wide range of Hong Kong companies and entities, and each has its features and uses, we will enlist the most common ones below.
The Types of Hong Kong legal entities and companies
There are many Hong Kong legal entities to choose from when starting a company.
Here is a brief detail of the different types of companies available:
• Private Limited Company:
It is one of the most used and popular choices to kickstart business operations in Hong Kong.
An attractive feature of this type of entity is to grant limited liability to its members, meaning that a shareholder is only personally liable for the quantity of share capital invested.
• Branch Office:
While this type of entity is not an independent legal company, it allows overseas companies to have a direct presence in Hong Kong.
It must not be forgotten that the actions and liability from the branch office will be passed to the parent company overseas.
• Representative Office:
With the primary purpose of directing promotional activities and research of the local market, the representative office also allows a foreign parent company to have a presence in Hong Kong.
However, this type of entity does not allow profit-making related and legal activities.
• Sole Proprietorship:
Individuals can register as businesses in Hong Kong; this is what a sole proprietorship is.
However, as they and the business are one, all the liability and obligations contracted through the entity will fall upon them.
A partnership is an agreement between two parties who later become partners. Hong Kong has two types of partnerships: the General Partnership and the Limited Partnership.
A limited partnership is formed between a general partner with unlimited liability and one or more limited partners with a limited liability.
The process of Company Incorporation in Hong Kong
This guide will focus on the most popular choice for a Hong Kong company registration, the Private Limited Company.
Here we outline all the steps necessary for incorporating a company, including selecting a name, choosing the directors and shareholders, defining the amount of share capital, appointing the company secretary and designated representative, and finally, filing all the necessary documentation with the authorities.
1. Choosing a Company name
The first basic step for company incorporation is choosing a name.
- The local authorities in Hong Kong will use this name to address the entity officially.
- 3 options should be chosen because sometimes the name can already be used.
- The Hong Kong Company Registry will not approve company names that cause confusion or controversy.
2. The Company's Purpose
The second step would be to define the intention of establishing the company and the activity to develop in Hong Kong.
- A Private Limited Company in Hong Kong is allowed to engage in various profit-making activities.
- Nevertheless, some specific or specialized industries may require more licenses. Therefore, it is essential to check if additional requirements exist to operate the business legally.
3. The Company's Organisation
A third step would be to define the internal structure of the Private Limited Company. As required by the Companies Ordinance law of Hong Kong, the following positions must be fulfilled:
- One shareholder (minimum).
- One acting Director (minimum).
- An acting Company Secretary (a person who is a Hong Kong permanent resident or a company in Hong Kong with the certification).
- A Designated Representative (a person who is a Hong Kong, permanent resident).
- A designated registered business address to receive official notifications.
- Defining the fiscal year-end (this will impact the date to declare taxes within a fiscal period).
4. The Company's Initial Investment and Shared Capital
The minimum requirement for the shares is one with a value of HKD$1 (Hong Kong Dollar).
The value of the shares or the number of shares can be modified and amended as the members of the company see fit in the Articles of Association.
5. The Company's Meetings
A good way of overseeing changes and important matters of the company is through scheduling shareholder meetings.
- As indicated in the Articles of Association, the shareholder's board can establish the number of times to arrange the meeting according to their needs.
- Once a year, it is mandatory to have at least the Annual General Meeting.
- The decisions taken during these meetings, being either special resolutions or ordinary resolutions, must be recorded and must be informed to the members of the company. The name of the record is called the meeting minutes.
6. The Company's Formation Steps
Once all the elements mentioned above have been defined, the remaining step would be to submit the incorporation form that includes the company's name, purpose, Articles of Association with all the details of the member's particulars, share capital, and the meetings.
- Incorporating a Company in Hong Kong usually takes 5 to 10 working days.
- Afterward, the authorities will issue corporate identification documents from the newly established entity.
- Another significant consideration would be the Bank account that will allow the company to receive and send money to start the operations.
Setting up Offshore your Hong Kong company
The choice for the Digital Nomad Entrepreneur
As we've seen previously, setting up a company in Hong Kong has many advantages, such as an easy incorporation process, a business-friendly environment, low maintenance cost, and a simple tax regime.
These and many more reasons make Hong Kong a preferred jurisdiction for entrepreneurs and SMEs.
As technology advances and more aspects of daily life are happening online, more people can perform tasks from their devices. Running an SME is no exception—a Hong Kong company can be operated anywhere in the world without needing to be present in Hong Kong. Taking things offshore.
To learn more, read our article: Set Up an Offshore Company in Hong Kong: An Entrepreneur's Guide.
Important documents after setting up a Hong Kong company
After the process is completed, the Hong Kong authorities, such as the Companies Registry and the Inland Revenue Department, will issue different corporate and identification documents for the Hong Kong Companies.
Here, we will enlist the most common and relevant corporate documents that the owners of Hong Kong companies must know:
Certificate of Incorporation documents
The certificate of incorporation is one of the most critical documents for companies incorporated in Hong Kong.
The Hong Kong Companies Registry will issue the document and include the identification number and date when the company was officially established.
Articles of Association
Before forming a company in Hong Kong, the owners and members must prepare a set of rules that will serve as the guiding points for the company. These are known as the Articles of Association.
The Articles of Association will include the share capital amount, the corporate shareholder's rules, and other indications that members and employees of the new company must follow.
Business registration certificate
Another essential document is the Business Registration Certificate. The Hong Kong Inland Revenue Department will issue this document, indicating the company is already in operation.
Additionally, this document shows the registration number, usually used as the tax identification number outside of Hong Kong.
Usually, banks will require a current or valid Business registration certificate to verify the existence of the company before opening a business account for companies.
Maintaining your Hong Kong company
Why do you need a Company Secretary in Hong Kong?
All companies in Hong Kong must have a Company Secretary. A Hong Kong Company Secretary is the company's chief administrative officer and is responsible for the compliance, governance, and retaining good relations with relevant government departments.
The mentioned position can be occupied by a natural person who needs to be a Hong Kong permanent resident or a company based in Hong Kong that is certified to provide this service.
By law, it is a requirement to appoint someone for this position. Both companies incorporated in Hong Kong and non-Hong Kong companies doing business in Hong Kong must appoint someone to fulfill this position.
You can read our article: Why You Need a Company Secretary in Hong Kong to learn more about this figure.
The Significant Controllers Register in Hong Kong—All about the Designated Representative
The Hong Kong Significant Controllers Register started with a new law that became effective in 2018.
All private companies incorporated in Hong Kong must keep this document at their registered business address or another approved location.
It names all the persons, either natural persons or legal entities, which have "significant control" of the company. To be considered a significant controller, an individual or company must possess 25 percent or more of the shares or voting rights in the company.
All private companies must appoint a Designated Representative that will be responsible for keeping the Significant Controllers Register. The register must be available for the inspection of the authorities when requested.
To learn more about the record and the designated representative, read our dedicated article: All About the Significant Controllers Register in Hong Kong.
Having a bank account—One step closer to operating your company
Business Bank Account
As a financial business hub, Hong Kong hosts a variety of International and local banks, allowing you to choose the institution that best meets your new Hong Kong company's requirements.
However, the process of opening an account with the bank can turn out to be a tiring and complex task.
In recent years, international standards have focused their attention on illicit activities, such as money laundering and money-funded terrorist activities, and Hong Kong's institutions have quickly implemented these changes.
As regulatory requirements evolve, the process of opening a bank account in Hong Kong changes accordingly. However, for entrepreneurs and small businesses, this translates into a more lengthy process for reviewing and checking that the information provided by them is not a risk for the institution.
Statrys, an alternative to traditional banks
As we have seen, partnering with a bank to open a business account can be an expensive and time-consuming process.
In contrast, Statrys offer entrepreneurs and Small and Medium Enterprises entrepreneurs a breath of fresh air.
Statrys streamlines the process of opening an account for your Hong Kong company. The entire process is conducted online, and it takes only 10 minutes to complete the application form; plus, no in-person interview is required. Statrys guarantees a 48-hour turnaround time on all applications.
Our team of experts at Statrys is always ready to help you with any questions or concerns regarding your account and usage. We're here to keep things simple so you can focus on running your business.