HONG KONG Company Formation

Location

Hong Kong is on the south east coast of China and consists of a large number of islands and a part of the mainland totaling approximately 1,025 sq. km. The principal areas are Hong Kong Island, Kowloon and the New Territories. These areas were ceded to Britain in perpetuity in 1842 under the treaty of Nanking, and in 1898, the New Territories were leased by Britain from China for a period of 99 years. On 1 July 1997 all of Hong Kong reverted back to China and became a Special Administration Region within the People’s Republic of China.

Population

The population of Hong Kong is currently around 7 million made up mainly of people of Chinese origin and is one of the most densely populated areas in the world.

Political Structure

Until 1 July 1997, Hong Kong was a British Crown Colony. A governor appointed by the Queen presided over the Hong Kong government, which consisted of the executive and legislative councils.

On 1 July 1997 Hong Kong elected its own legislature and maintained its court structure. The head of the government of the Hong Kong Special Administrative Region is the Chief Executive Officer. The Legislative Council is the legislature of the Hong Kong.

Infrastructure and Economy

Separating Hong Kong Island and the Kowloon peninsular is Victoria Harbour, which is recognised internationally as one of the world’s perfect natural harbours. It varies in width from two to ten kilometers. An additional 13,517 sq. km of land has been reclaimed in the New Territories to provide additional dockyard and warehousing facilities. It is estimated that well over 100,000 containers per month pass through the port.

Hong Kong is the leading South East Asian centre for both finance and commerce and ranks as the world’s third largest financial centre after New York and London. There are more than 160 licensed banks with more than 130 foreign banks having representative offices in Hong Kong and a further 225 licensed deposit taking finance companies all of which play an active role in the financing of international trade and commerce.

Type of Company for International Trade and Investment

Private company limited by shares.

Procedure to Incorporate

Submission of Memorandum and Articles of Association and Incorporation Form with Companies Registry.

Restrictions on Trading

Cannot undertake banking or insurance or financial activities unless relevant licences are obtained.

Powers of Company

A Hong Kong limited liability company has all the powers of a natural person.

Language of Legislation and Corporate Documents

Both Chinese and English, and either one of the two languages can be used in the corporate documents.

Registered Office Required

Yes, a company must maintain a registered in Hong Kong where the correspondence from Hong Kong Government can be served.

Name Approval Required

Name needs not be approved and it is not possible to reserve a name too. It is essential to check that there is no similar or identical name on the Register maintained by Companies Registry, which would prevent the company being incorporated.

Shelf Companies Available

Yes, shelf companies are commonly used and are available for immediate delivery.

Time to Incorporate

Tailor-made company: 6-7 working days

Readymade company: can be completed within one working day

Name Restrictions

A name that is too similar to or identical to an existing company. A name that constitutes a criminal offence or is otherwise contrary to the public interest. A name that implies government patronage.

Names Requiring Consent or Licence

Building society, Chamber of Commerce, chartered, co-operative, mass transit, municipal, savings, tourist association, trust, trustee, underground railway, bank, insurance, assurance, reinsurance, department.

Suffixes to Denote Limited Liability Limited

Disclosure of Beneficiary Ownership to Authorities

The particulars of the shareholder(s) are available to the general public. While anonymity can be preserved by using nominee services or setting up an offshore IBC to hold the share(s).

COMPLIANCE

Authorised and Issued Share Capital

The standard authorised share capital is HKD10,000 divided into 10,000 shares of HKD1 each. The minimum issued capital is one share of HKD1.

Classes of Shares Permitted

Ordinary shares, preference shares, redeemable shares and shares with or without voting rights.

Bearer Shares

Company incorporated in Hong Kong is not allowed to issue bearer shares. However, privacy can be achieved by utilizing nominee services or setting up an offshore IBC to hold the share(s).

Taxation

The principle of Hong Kong income tax is that it is a tax on income that has its source in Hong Kong rather than a tax based on residence. Hong Kong does not therefore impose tax on non-Hong Kong source income even when remitted to Hong Kong. Consequently, if a Hong Kong company's trading or business activities are based outside Hong Kong, no taxation will be levied in Hong Kong. Hong Kong companies with Hong Kong source income currently pay a rate of taxation on profits of 16.5%.

There is no tax on capital gains. Interest income and dividend income is also tax free. There are no withholding taxes. The local currency is the Hong Kong Dollar which is freely interchangeable but has a pegged exchange rate against the US Dollar.

One of the major advantages of utilising a Hong Kong company is that there is no immediate suggestion that the company is a tax avoidance vehicle as Hong Kong is major trading entity in its own right. Hong Kong is one of the world's largest importer and also one of the world's largest exporter. The vast majority of the 50,000 Hong Kong companies incorporated annually are local trading companies doing real business in the region.

Double Taxation Agreements

Hong Kong has no double tax agreement with any other country, with the exception of the Mainland China.

Licence Fee

The Business Registration and Levy Fee, currently USD315 (HKD2,450), is due and payable within one month of the date of incorporation and then annually on the anniversary of the first payment.

Financial Statement Requirements

Hong Kong companies are required to prepare full audited accounts under the company laws. Also, a copy of the audited financial statements is to be furnished with Inland Revenue Department together with Profits Tax Return and tax computation schedule. The audited financial statements are not available to the public or to the foreign authorities except those of a listed company.

Director(s)

A minimum number of one (1) director is required and full details of the director(s) must be filed with the Companies Registry are available for public's inspection. While anonymity can be preserved by using nominee services. The director(s) can be of any nationality and be resident anywhere. There is no requirement for board meetings to be held within Hong Kong and directors may be resident anywhere in the world. Corporate nominee directors are permitted.

Company Secretary

Every private Hong Kong limited company must appoint a company secretary, who may be a natural person or a body corporate, but the company secretary must ordinarily reside in Hong Kong or in case a corporate company secretary, it must have a place of establishment in Hong Kong.

Shareholder(s)

A minimum number of one shareholder is required whose details are filed on the Companies Registry and are available for public's inspection. Corporate shareholders are permitted and anonymity can be achieved by the use of nominee shareholders or an offshore IBC holding company holding its share(s). The shareholder(s) can be of any nationality and be resident anywhere in the world and meetings can take place anywhere.