A Hong Kong limited company is a popular structure for both domestic operations, as well as offshore business. It offers protection from liability to its owners as it is a separate legal entity and is simple to incorporate and maintain.
The Hong Kong private limited company (also known as a Hong Kong Ltd.) is the most popular form of Hong Kong company. It offers its owners favorable tax laws and a rock-solid international reputation.
Furthermore, Hong Kong has a well-developed legal and financial system and is widely known as a global business center.
While a company is a versatile corporate structure, it isn't perfect for every business.
Let's look at the required structure and how to incorporate this type of business with the Companies Registry, company secretary requirements, and other key compliance requirements.
What is a private limited company in Hong Kong?
The private limited company is the most popular form of Hong Kong company and is separate from its owners legally. It protects personal assets from business liabilities and acts as a legal entity for tax purposes.
This kind of company must have at least one director.
In addition, there is no limit on the number of directors for the company, and corporations can also act as directors.
A single shareholder can act as the director of a company, making it a good option for trading companies, which is very convenient for small businesses or startup companies.
For companies wishing to establish a subsidiary in Hong Kong, this is the ideal vehicle to invest and set up the subsidiary that will be operating in the local market.
What are the advantages of a Private Limited Company in Hong Kong?
Hong Kong limited companies have numerous advantages. It is a good choice for businesses that operate in Hong Kong or have offshore operations that can take advantage of Hong Kong's legal and banking system.
Specifically, those advantages include the following:
Save money and fast incorporation
It is easy to incorporate a company in Hong Kong, and the annual compliance requirements are minimal.
Tax rates in Hong Kong for domestic income are low by global standards, and offshore income is generally not subject to tax under Hong Kong's tax laws.
Companies can also take advantage of the Closer Economic Partnership Arrangement (CEPA) with Mainland China and any other tax benefits extended to Hong Kong-registered businesses. These agreements give a business in Hong Kong an advantage over companies incorporated in other nations.
Companies protect their owners from personal liability (for this reason, it is also known as a 'private limited liability company').
The private limited liability company structure offers significantly legal protection at home in Hong Kong and in global operations.
Shareholders' responsibility is limited to the number of shares of each shareholder, which help them to protect their personal assets.
Zero Minimum Startup Capital
Unlike other jurisdictions, a Hong Kong private company limited has no minimum capital requirements, which makes it perfect for small businesses that need to incorporate.
Companies can be incorporated with a registered capital of 1HKD. Other popular jurisdictions, like Germany, have a minimum capital requirement of 25,000 EUR, which is prohibitive for small businesses.
Small businesses that operate globally, or startups that wish to commence operation but avoid being obligated to pay a very high capital, are well served by a Hong Kong Private Limited Company.
Low Compliance Burden
There are a few annual compliance requirements for a Hong Kong Private Limited Company:
- Renew the Business registration certificate;
- Perform accounting minimum required once per year;
- Audited accounts once a year;
- Present the Annual return. Unlike other locations around the world, companies can perform accounting a minimum of once per year and are not obligated to perform monthly reporting.
There is a requirement for one annual general meeting to be held for the company, and there are no restrictions on where the meetings are held. Meetings can be held via telephone or other remote options if needed.
Low taxes, ease of incorporation, simple compliance, simple setup process, and inexpensive to maintain are the excellent advantages of this type of legal entity.
Developed Business Ecosystem
Regarding business support services, Hong Kong has a deep bench. English and Chinese are the official languages.
As a financial hub, Hong Kong has banking options for Asia and the broader global markets. Small businesses can take advantage of one-stop support services that help to make compliance simple.
The Hong Kong SAR is also a transportation hub, so access is simple if you need to be physically present in Hong Kong.
Protection of Business Operator Privacy
In Hong Kong, all companies are required to maintain a significant controllers registry, which is accessible to law enforcement personnel.
A significant controller is defined as a person or company (or any other legal entity) that meets one or more of the following five conditions:
- A person owns 25% or more of the issued shares
- A person owns more than 25% of the voting rights
- A person has the right to appoint or modify a majority of the board of directors of the company
- A person has the ability to exercise significant influence or control over the company
- A person has control via a legal entity, such as a company or trust, that meets any of the first four conditions
While this does impact the privacy of owners of a Hong Kong limited company, it is in line with global norms.
Positive Public Reputation
Hong Kong and Hong Kong companies have a positive reputation around the world.
Hong Kong is known as a global banking center and the access point for China from the international markets.
Hong Kong private companies limited take full advantage of Hong Kong's legal and banking system, which can further their international profile.
The fact that English is spoken in Hong Kong makes it a highly-accessible market for international companies.
Hong Kong Company Registration: The Disadvantages
Hong Kong private companies have many advantages and are one of the most accommodative company structures globally.
It is easy to form, inexpensive to maintain, and offers tax advantages and liability protection for its owners. Of course, nothing is perfect, and Hong Kong private companies also have some disadvantages.
More Complicated to Set Up Than Being Unincorporated
The incorporation process for a Hong Kong Private Limited Company is straightforward, but it is more complex than doing business as a sole proprietorship or as a partnership.
In addition, there are added requirements for a Hong Kong Private Limited Company that would not apply to a sole proprietorship or a partnership.
The company will be required to restrict the right to transfer its shares and cannot have more than 50 shareholders, not including current and former employees.
How to Register a Private Limited Company in Hong Kong
It is easy to register Hong Kong private limited companies. However, a few steps and government regulations must be followed.
Here we explain the key steps for Hong Kong company incorporation and registration.
Hong Kong Company Incorporation Process
The process of incorporating any company in Hong Kong is simple and can be done in a matter of days if you work with a consultant.
A few things are required, with personal information needed to fulfill compliance obligations. These requirements are all clearly set out in the Hong Kong Corporations law, the 'Hong Kong companies ordinance.'
The incorporation process for Hong Kong Private Limited Companies will require the following:
- A name for the company
- A local Hong Kong address (for the registered address) this address can be the same as the company secretary
- Information about directors
- Information on shareholders and share capital
- Outline of business activities
- Description of subscribed share capital.
Required Company Incorporation Documents
Non-resident shareholders and directors must provide a copy of their passport and proof of an overseas residential address.
Shareholders and directors who are residents of Hong Kong must supply a copy of a valid Hong Kong identity card and proof of their residential address.
A new company in Hong Kong is free to choose any name it wants, but the name can't resemble an existing company's name or certain licensed agencies in Hong Kong. A name can be created in either English or Chinese; or both if desired.
More generally, a Hong Kong limited company must have a registered address in Hong Kong and a company secretary.
However, there is a thriving industry to support the compliance and administrative needs of Hong Kong companies, so the company can easily rent an office and find the support of a company secretary. The company secretary can be a natural person or a corporate body.
The company secretary ensures that annual compliance requirements are met and file the necessary documents. It also acts as a trusted advisor to directors on any compliance matters.
How to receive a business registration certificate
A Hong Kong Private Limited Company is required to register with the Hong Kong Companies Registry by filing a Memorandum and Articles of Association.
This is required by the Business Registration Ordinance, and once done, the company will receive its Certificate of Incorporation and business registration certificate.
As a part of the registration process, the Inland Revenue Department will be notified of the company's existence so that any applicable taxes can be paid on profits.
From 2011, the One-stop Company and Business Registration Service allow a business to register with both the Inland Revenue Department (Business Registration Office) and the Hong Kong Companies Registry at the same time.
Business registration, and receipt of the business registration certificate, in Hong Kong, are straightforward and can be done quickly if the incorporation process is done correctly.
Hong Kong Private Limited Companies offer its directors and shareholders a flexible business structure in one of the world's best places to do business.
Hong Kong is a top-tier market with a developed ecosystem to support companies' strategic and admin needs. Additionally, Hong Kong has one of the best financial markets in the world and can help small businesses grow.
Any international business should consider Hong Kong company formation, and the Hong Kong Private Limited Company is one of the best options, especially for international businesses.
Hong Kong company formation is perfectly possible to achieve remotely, and there is no requirement to live in Hong Kong in order to make use of a Hong Kong company for your business interests.
Any business interested in Hong Kong company formation should, however, look carefully at the requirements imposed by the companies registry and business registration office to ensure that they are fully compliant. For example, while a Hong Kong-based director is not required, a Hong Kong-based company secretary is.