Setting up a company in Hong Kong: what you need to know

Setting up a company in Hong Kong: what you need to know

HOW TO: Setting up a company in Hong Kong

Thinking of establishing a company in Hong Kong? Expanding into a new international market is exciting for any business, but it also presents its own set of significant challenges. For many executives, the first hurdle is understanding how the company formation regulations and processes work in the new jurisdiction.

Our guide below makes it easier to take the leap with an overview of everything you need to know about setting up a company in Hong Kong.

Hong Kong Market Profile

Hong Kong is an important financial hub within the Asia Pacific (APAC) region that is renowned for its business-friendly taxation and regulatory environment. Some of the key characteristics of the Hong Kong market include:

  • Office rental pricing: Average monthly rent for grade A office space in Hong Kong’s central district was $HK 1,807 per square metre for the first quarter of 2021.
  • Average office space density: 1sq m per person
  • Fixed internet download speed: 59 megabits per second in July 2021
  • Mobile internet download speed: 06 megabits per second in July 2021
  • Gross Domestic Product US$ bn: 344.7
  • Population: 7.5 million
  • Official languages: Chinese, English
setting up a company in hong kong

Benefits of setting up a company in Hong Kong

As one of the largest financial centres in Asia, Hong Kong offers many benefits to companies looking to establish a presence in the region, including:

  • Strategic locational advantages: Hong Kong’s central location is beneficial for companies that want to enter the mainland Chinese market or expand their business within the APAC region.

The Hong Kong market also has many cultural similarities to mainland China, making it ideal for foreign investors to develop a footprint in the Chinese market.

  • Attractive tax structure: Hong Kong’s corporate tax rates between 8.25% and 16.5% (subject to the amount of profit earned) are considered some of the lowest in Asia.

In addition, Hong Kong has no capital gains tax, sales tax, consumption tax, value-added tax, estate duty or withholding tax on dividends and interests.

Further, the ‘territorial source’ concept applies, meaning that residents pay no tax on incomes earned beyond Hong Kong’s borders. Income earners within Hong Kong are taxed at between 2% and 17%, depending on salary. This is considered significantly lower than other jurisdictions in the West.

  • No foreign ownership restrictions: 100% of the shares of incorporated companies in Hong Kong can be owned by foreigners or foreign companies. The market also operates on free trade principles, with no onshore or offshore investment restrictions, import or export tariffs and foreign exchange controls.
  • Bilingual business communication: in Hong Kong, English is widely used in a business context, making it easier for foreign investors to establish companies within the region.

How to establish a company in Hong Kong

To help you start enjoying all of the above business benefits, we have compiled a step-by-step process for how to create a company in Hong Kong:

Step 1 - Choose a company type

The two most common company types for businesses operating in Hong Kong are:

  1. Limited Liability Company: This entity type means that a business is set up as its own legal entity. Foreign investors often prefer this type because it offers limited liability for business owners. Companies can be limited by shares or by guarantee.
  2. Foreign Company Office: Foreign companies can register in Hong Kong as either a representative office or a branch office. Neither option creates a separate legal entity, however, so all liability extends to the parent company.
Step 2 - Give your company a name

Your company name must not:

  • be the same as a name already approved on the Companies Register; or
  • infringe upon any third party’s intellectual property rights.

You can search the register for free using the Companies Registry search sites: Cyber Search Centre or Company Search Mobile Service.

The name you choose must comply with the Guideline on Registration of Company Names for Hong Kong Companies, which states that:

  • Company names can be registered as either an English name, a Chinese name or both. However, combining English words/letters and Chinese characters is prohibited.
  • An English company name must end with the word “Limited”, and a Chinese company name must end with the characters “有限公司”.
  • A Chinese company name should contain traditional Chinese characters (繁體字) that can be found in the Kang Xi Dictionary (康熙字典) or Ci Hai Dictionary (辭海) AND also in the ISO 10646 international coding standard. Simplified Chinese characters are not acceptable.
Step 3 - Set up your company structure

An essential part of Hong Kong company formation is determining the structure of your company per the following requirements:

  • Directors: a minimum of at least one person. One director needs to be a natural person (ie. an individual). Directors do not need to be residents of Hong Kong, but they must be aged 18 or older.
  • Shareholders: a minimum of at least one shareholder. They can be either an individual aged 18 or older, or a corporate. 100% of shares can be foreign-owned. Sole directors can also act as shareholders.
  • Company secretary: a sole director must not act as the company secretary. To register a company in Hong Kong, you must appoint a company secretary who is either:
    • a person who lives in Hong Kong; or
    • a body corporate with a registered office or place of business in Hong Kong. We provide expert company secretarial services so that your company can meet all of its statutory obligations in Hong Kong.
  • Share capital: no minimum share capital is required. However, most companies choose to issue at least one ordinary share to one shareholder. Bearer shares are not permitted.
  • Registered address: must be a physical address in Hong Kong, not a P.O. Box. If your business does not yet have local office space, professional service firms like BoardRoom can provide your company with a registered office location.
hong kong company formation
Step 4 - Submit company registration documents

You must submit the following registration documents to the Companies Registry:

  • the Incorporation Form;
  • a copy of the company’s articles of association; and
  • a copy of the Notice to Business Registration Office.
Step 5 - Make other permit and business licence applications (if applicable)

You may need to apply for other permits and business licences, depending on the type of business you operate. Find more information about permits and licences here.

how to register a company in hong kong

How to successfully open a business in Hong Kong

While it can be complex, the process of opening a business in Hong Kong as a foreigner doesn’t have to be difficult. Our team of company incorporation experts at BoardRoom can guide you through every step of the incorporation journey to make it as smooth and seamless as possible.

Not only can our team help you incorporate with ease, but we can also take care of your company secretarial needs. Our comprehensive range of company secretarial services helps you to ensure that your company remains compliant with all legal and regulatory requirements in Hong Kong. As a result, you have more time to focus on what really matters: growth and profitability.

Speak to one of our specialists today to get started in setting up your business in Hong Kong.

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What to look for in company secretarial services in Hong Kong

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What to look for in company secretarial services in Hong Kong

5 qualities to look for when choosing a company secretarial service provider in Hong Kong

The pressure of complying with the ever-evolving schedule of corporate legislative requirements in Hong Kong can be overwhelming. The pace of change is relentless, and corporate compliance obligations are only becoming more complex.

This evolution is necessary in ensuring companies operate safely and fairly. Yes, it’s a short-term inconvenience – but there are multiple benefits for your company in the long run.

Outsourcing your company secretarial functions to an expert provider can relieve your team of the time-consuming administrative burden of corporate compliance in the here and now. It can also reduce overheads by freeing up key staff to focus on the core functions of your business.

However, there is a caveat. Failing to meet statutory obligations can have severe legal, reputational and financial ramifications for your company. That is why partnering with an experienced, qualified and knowledgeable corporate secretarial service provider is so essential.

To help you find the right solution for your company, here are the top five qualities to look for when selecting a company secretarial services provider in Hong Kong.

01 Corporate governance qualifications and experience

In Hong Kong, every company must appoint a company secretary. This secretary must be either a resident of Hong Kong or a company whose registered office or principal place of business is in Hong Kong.

In private companies, a director may take on the role of company secretary, unless they are the sole director. Putting a director to work as your company secretary can initially be an attractive option from a cost perspective. However, as your company grows, so too do the corporate governance requirements.

This is why so many private companies choose to outsource their company secretarial duties, the role requires the specialist knowledge of a professional, but often doesn’t justify creating another role within the company. Although not a necessity, outsourcing is often the most efficient and cost effective option here.

For publicly listed companies, requirements regarding who can perform the company secretary role are stricter. The chosen person or company must either have suitable professional or academic qualifications or relevant experience to be acceptable under the Hong Kong Stock Exchange Listing Rules (“Listing Rules”).

corporate governance in corporate secretarial

The professional or academic qualifications considered ‘suitable’ under the Listing Rules include being:

  • a member of The Institute of Chartered Secretaries;
  • a solicitor or barrister under the Legal Practitioners Ordinance; or
  • a certified public accountant under the Professional Accountants Ordinance.

Experience that is considered ‘relevant’ under the Listing Rules includes the proposed company secretary’s:

  • length of employment in the company;
  • previous company secretary roles;
  • familiarity with the Listing Rules and other relevant laws;
  • planned or completed relevant training (the minimum training required is 15 hours per financial year); and
  • professional qualifications in other jurisdictions.

Clearly, experience and qualifications matter when choosing a corporate secretarial services provider. Our expert BoardRoom team has solid experience and members are all suitably qualified to proactively manage even the most complex corporate governance challenges.

02 In-depth local knowledge and global expertise

A company secretary with detailed knowledge of the local regulatory landscape is an invaluable asset to your company. Equally important is an understanding of the subtle nuances of local cultures, traditions and customs.

At the same time, if your company is international – or even global – you need a company secretary that is familiar with your international legal obligations who can work alongside your legal or compliance agent.  The subtle changes in both law and best-practice throughout different regions can be too easily overlooked without the correct resources on your side. Engaging the right people could help you avoid financial implications, large or small.

The Corporate Secretarial team at BoardRoom brings together both in-depth local knowledge and international expertise. We can seamlessly guide your company across multiple markets while managing all of the cross-border complexities of tax, trade, currency conversion and contractual rules.

03 A wide service offering that meets all of your corporate needs

As your business grows, outsourcing non-core functions to a single corporate expert provider can save key staff members time and allow them to focus on business strategy and performance.

At BoardRoom, we offer a full range of corporate services all under one roof. We make it easier for you to get on with business while we take care of the time-consuming, operational tasks.

We can help you by accurately and efficiently:

04 Dedicated, personalised customer care

An excellent company secretarial services provider will assign a dedicated company secretary for your organisation. This is essential to give you a single point of contact who understands the exact needs of your business.

Having a dedicated company secretary also reduces your risk of non-compliance. It is all too easy for an inexperienced company secretary to miss important corporate governance milestones. Non-compliance means costly penalties for your company.

You can feel confident working with the team at BoardRoom, knowing that we are dedicated to ensuring you meet all your compliance obligations in relation to corporate secretarial matters.

05 Ability to evolve with you as your company changes

What is your vision for the future of your company? If going public is on your agenda, your corporate secretarial services provider will need the expertise to guide you through Hong Kong’s Initial Public Offering (IPO) process.

Alternatively, suppose you are thinking of evolving your corporate structure. In that case, you need to be aware of the many specific compliance requirements involved. You also need to prepare for the significant administrative work needed to make the change happen.

Whichever direction you choose to take your company, look for a corporate secretarial services provider that offers an extensive range of corporate services. Only with this offering breadth can the provider adapt to your company’s changing needs and evolve with you.

Looking for quality company secretarial services in Hong Kong?

Save yourself from the worry and time-consuming nature of corporate compliance by outsourcing your company secretarial functions to our expert BoardRoom team.

We have a proven track record of helping companies, from large multinational corporations to fast-growing SMEs, to stay compliant. Ultimately, we will save you time and money by letting you get on with growing your business.

Get in touch with one of our specialists today to learn more about how they can help you with your company’s corporate secretarial and compliance needs.

 

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