In January 2019 the World Heritage Foundation, an American research institution, granted Hong Kong the first place in its ranking of the world’ freest economies for the 25th consecutive year. So, if you are looking for the most business-friendly environment, you need look no further than Hong Kong.
Being a Special Administrative Region (SAR) of China, Hong Kong is one of the main financial centers in the world with attractive tax system, highly skilled English-speaking talent pool and a reputation as a gateway to the mainland China for foreign investors.
Setting up a company in Hong Kong is easy and straight-forward and takes only 3-5 working days. Below are some steps to take in order to register a company in Hong Kong:
1. Choose your legal structure
Depending on your business needs you may consider one the following legal structures:
Limited Liability Company (LLC)
The most common type of company registered in Hong Kong. Private LLC is a separate legal entity with limited liability for its owners and strong public perception. It’s the best option if you plan to expand business in future and want to protect your personal assets from business risks.
Branch / Subsidiary / Representative Office
These business structures are available for foreign companies who wish to establish presence in Hong Kong.
- Branch is, generally speaking, just one more registered company name for an already existing business in Hong Kong or abroad. The parent company is accountable for all debts and liabilities of its branch.
- Subsidiary is an entirely separate legal entity. Therefore, the parent company doesn’t bear any liability for its debts. The subsidiary name may be different and it’s not restricted to perform the same business activity as its parent.
- Representative office in its turn is not a separate entity and can’t engage in any revenue-generating activities in Hong Kong. This structure is more suitable for foreign companies who wish to set up in Hong Kong on a short-term basis, for example, in order to perform a market analysis.
Sole Proprietorship is not a corporate entity and makes senses only for a small-scale business in Hong Kong. Your business shouldn’t be risky, because there is no legal separation between the proprietor and the business and your personal assets are not protected.
Partnership is a structure that allows two and more people run business together and share profits. It’s not a separate legal entity and partners are personally liable for the company’s losses and for the actions of other partners.
There are two types of partnerships:
- General Partnership, where each partner is fully responsible for business liabilities
- Limited Partnership has both general and limited partners. The liability of limited partners is restricted to the amount of their contribution and limited partners can’t take part in decision-making process.
2. Choose the company name
Your company name can be in English, Chinese or both and shouldn’t be the same as a name already appearing in the Index of Company Names kept by the Hong Kong Registrar of Companies. You may conduct a company name search via Cyber Search Centre or Company Search Mobile Service to make sure that the proposed company name hasn’t been taken yet. For an LLC the name should end with the word “Limited”.
3. Obtain Certificate of Incorporation and Business Registration Certificate
Next step is company registration with the Company Registrar and with the fiscal authority, Inland Revenue Department (IRD). Before completing application, please take note on some basic requirements:
Hong Kong company Directors requirements
A minimum of 1 director, no maximum requirement. Your company director must be a natural person of any nationality over 18 years of age.
Hong Kong company Shareholders requirements
A minimum of 1 and a maximum of 50 shareholders. Can be a company or a person of any nationality over 18 years of age. The director can also be the shareholder.
- Your company must have at least one Company Secretary, who should be a local resident or a locally-incorporated company. In case of a sole director/shareholder, the same person cannot be your Company Secretary.
- Registered company address in Hong Kong is required (P.O. box is not allowed).
- Ongoing reporting requirements (annual return, tax filing, etc.)
- Since 1 March 2018 all companies incorporated in Hong Kong are required to maintain a “Significant Controllers Register” (“SCR”) for inspection by Law enforcement officers upon demand. A person (including natural person or legal entity) has significant control over a company if one or more of the following 5 conditions are met –
- The person holds, directly or indirectly, more than 25% of the issued shares in the company or, if the company does not have a share capital, the person holds, directly or indirectly, a right to share in more than 25% of the capital or profits of the company
- The person holds, directly or indirectly, more than 25% of the voting rights of the company
- The person holds, directly or indirectly, the right or appoint or remove a majority of the board of directors of the company
- The person has the right to exercise, or actually exercises, significant influence or control over the company
- The person has the right to exercise, or actually exercises, significant influence or control over the activities of a trust or a firm that is not a legal person, but whose trustees or members satisfy any of the first four conditions (in their capacity as such) in relation to the company
The process of application with Hong Kong government institutions is quite straight-forward, you’ll need to submit the following documents either electronically or in hard copy form:
- Completed incorporation form
- A copy of the directors’ and shareholders’ passports with a certified translation in English or Chinese
- Proof of address (such as utility bill, bank statement, etc.) issued within the last 3 months with a certified translation in English or Chinese
- For Branch / Subsidiary / Representative Office registration you’ll also need to provide Certificate of Incorporation, Memorandum and Articles of Association / Constitution / By-Laws, Registers with a certified translation in English or Chinese
To register a company, you also have to pay applicable fee, which is currently 2,250 HKD.
4. Open a corporate bank account
Hong Kong has one of the world’s soundest banking systems. Absence of currency exchange control guarantees freedom of money transfers. Banks open accounts in HK dollars, US dollars, Euro, Chinese Yuan (RMB), British Pounds and many other currencies.
That said, you may have heard that Hong Kong banks are reluctant to open corporate accounts for newly set foreign-owned companies. However, there is a good chance that the access of SMEs and start-ups to financial services in Hong Kong will be gradually improving, as many local chambers of commerce and business organizations fight for easing unreasonably tight due diligence measures. In any case, if you have a Hong Kong company it doesn’t necessarily mean that your corporate bank account should be in Hong Kong as well. You may have a bank account in any other country: Europe, Singapore, etc.
If you, however, choose a corporate bank account in Hong Kong, you need to come in person to meet with the bank (this concerns company’s directors, shareholders and nominees) and prepare a big deal of paperwork to show to the bank that may include some of the following:
- Duly completed bank account opening form
- Certified copies of the Company’s Business Registration Certificate, the Articles of Association and the Certificate of Incorporation
- Audited financial statements or detailed business plan
- Proof of company’s address
- Information about business owners
There is no minimum initial deposit requirement, however, we usually advise to start out with at least HKD 10,000.
5. Get special licenses (if applicable)
After registering the company, the next step is to obtain any special licenses from certain Hong Kong government departments your business may require. Luckily, there are no so many businesses that need a special permit, among them, Import & Export, F&B, travel agencies, financial services, educational institutions and some others.
You may do all these steps by yourself or to use a local service provider.