Hong Kong is renowned around the world as one of the best locations for entrepreneurs to set up offshore businesses. This is a quick, five-step guide to setting up a Hong Kong Company.
Step 1: Choose the type of business you wish to set up in Hong Kong
While a private company is the most common form of offshore business set-up in Hong Kong, it is worth considering other options, such as:
- A branch office of your international company. This means that your international company is registered in Hong Kong (but not incorporated there), and you pay corporate income tax: You are not required to set up a subsidiary. This can be a quick way of starting business, but has considerable risks (namely, the international company is liable for any actions and debts of its Hong Kong branch).
- A representative office (RO). A representative office can only carry out limited activities in Hong Kong, such as market research, and is often used to establish whether incorporating a company is worthwhile.
- A partnership. In a partnership, two or more individuals share ownership of the business in Hong Kong. They are jointly and severally liable for each others’ actions: Limited partnerships are available which limit liability to partners classified as limited.
- Sole proprietorship. This is the default business structure when an individual starts operating a business on their own account as a natural person. This is not usually available unless the individual is resident in Hong Kong, and carries significant liability risks.
- Company. Incorporating a Hong Kong company is the most common way for international businesses to operate in Hong Kong. Below we set out the key steps involved in starting a company in Hong Kong.
Step 2: Choose the form of company
1. Private company limited by shares
This is the most common form of company in Hong Kong. It must have one shareholder and is limited to 50 in total. There is no minimum amount of share capital, and shareholders and directors may be based overseas.
2. Private company limited by guarantee
This company has no shareholders and is usually set up for non-profit and charitable purposes. The liability of members is limited based on the contribution.
3. Public company limited by shares
This company structure is required for any company with more than 50 shareholders. The company is listed on the stock exchange and faces stringent compliance and listing requirements. Usually only suitable for very large companies.
Step 3: choose the business name
The proposed company name must be registered with the Companies Registry: It cannot be the name of an existing company. It also should not infringe on the intellectual property rights or trademarks of other companies. A search through the trademark register is important to sure that you are compliant in this regard.
The business name can be in English or Chinese characters, but cannot be a mix of the two. The name will end with ‘limited’.
Step 4: Choose the company structure
A private company limited by shares must have:
- At least one director. That director does not need to be based in Hong Kong, nor does it need to be a real or 'natural' person — the director can itself be a foreign company. Note, however, that where the director is not a natural person, there must be at least one other director who is a natural person, and is at least 18 years of age. Once appointed, a director will be issued with a unique identifier, the Director Identification Number
- At least one shareholder. The shareholder can be the same or a different person than a sole director, and need not be based in Hong Kong
- A company secretary. This person or company must be resident in Hong Kong and has overall responsibility for the administrative obligations of the company in Hong Kong.
- Articles of Association. These are the official company documents setting out the company’s core structure, shareholdings, and core regulations, such as the process for appointing directors.
Step 5: Gather and submit the necessary documentation
For the purposes of both the Articles of Association and the company registration application form, you need to gather a range of information for submission.
- The company name
- The initial share capital and number of shares
- Director powers and appointment process
- Process for appointment and removal of the Company Secretary
- Rules relating to the dividend payment
- The rules for general meetings of shareholders.
Individual directors and shareholders must also provide a range of information, such as passport information and proof of residential address. Corporate shareholders will need to provide documentation as well, including their own business registration certificates, a Memorandum of Association, and Articles of Association.
Once all documentation is prepared, companies can submit the application.
A private company limited by shares incorporation requires the submission of:
- The company incorporation form
- A copy of the company’s Articles of Association
- Notice to Business Registration Office (this informs the Hong Kong tax authorities — the Inland Revenue Department).
Compliance for Hong Kong companies
Once registered, Hong Kong companies need to be mindful of their ongoing compliance responsibilities.
- Preparing and maintaining financial accounts. These must be audited on an annual basis by a Hong Kong CPA
- Submitting tax returns to the Inland Revenue Department
- Annual filing requirements with the Companies Registry.
Setting up a Hong Kong company is straightforward. Once you have decided that incorporation is the right business structure for you in Hong Kong, you can get started on the incorporation process: This includes choosing a name, initial share capital, shareholders, directors, and a company secretary. Core company information should be captured in the Articles of Association of the company. Then, all documentation must be submitted to the Companies Registry.
Once registered, all companies should be mindful of their ongoing tax and compliance obligations in Hong Kong. This includes maintaining proper financial records which are audited annually and submitting compliance returns to the Companies Registry.