Information on Hong Kong Company Formation

Hong Kong - General Information
 
Hong Kong is located in the South China Sea 100 miles south east of Guangzhou (formerly known as Canton). As of the 1st July 1997 under the Sino-British Agreement of December 1984 Hong Kong became a Special Administrative Region (HKSAR) of the People's Republic of China. The Basic Law, which is the Constitution of the HKSAR, is intended to maintain the HKSAR and the PRC as separate governmental, legal and economic systems. This is known as the "One Country, Two Systems" concept.
 
The legal system of Hong Kong is English Common Law supplemented by locally enacted Ordinances. Under the Basic Law the UK court system and UK law, except that a local Court of Final Appeal has replaced the Privy Council in London, are guaranteed to remain in place for 50 years unless the matter in question involves a threat to PRC national security. There is now a bilingual legal system with Ordinances being translated into Chinese but English will continue to prevail.
 
The local currency is the Hong Kong Dollar which is freely interchangeable but has a pegged exchange rate against the US Dollar. There are no exchange controls.
 
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 the world’s eighth largest trading economy calculated in terms of total value of trade undertaken.
 
Additionally, Hong Kong does not appear on the OECD list of tax havens and is not a member of the OECD so, unlike all other OFCs does not have to introduce the exchange of information procedures required by the OECD. Hong Kong only has two Tax Treaties (with Belgium and Thailand). It is possible to create a Hong Kong registered corporate entity in two different ways:
  1. by incorporating a new Hong Kong company;
  2. by registering an existing foreign company in Hong Kong under Part XI of the Hong Kong Companies Ordinance.
 
This latter procedure, although more expensive, can have substantial advantages and these are summarized in later pages.
 
 
A company incorporated in Hong Kong has the following characteristics:
 
  • Taxation
The rate of taxation is 16.5% on Hong Kong source income only. In practice this means that, with careful structuring, as long as a Hong Kong company is not actually doing business in Hong Kong it would normally be possible to arrange the affairs of the company so that no tax would be payable.
 
  • Directors
A minimum of one director is required and full details must be filed with the Public Registry. Currently corporate directors are permitted but as of early 2014 a Hong Kong Company must appoint at least one natural person as a director. There is no requirement for board meetings to be held within Hong Kong and directors may be resident anywhere in the world.
 
As the director is legally responsible for compliance with the Hong Kong Companies Ordinance and the Inland Revenue Ordinance, in cases where we act as a director, an amount of US $2,225 (HK $17,225) will have to be deposited in order to guarantee such compliance. This amount may be returned when business operations cease and the company has been wound up in the manner required by law.
  • Shareholders (aged 18 or over)
A minimum of one shareholder is required whose details are filed on the public register. Corporate shareholders are permitted and anonymity can be achieved by the use of nominee shareholders.
 
  • Annual Reporting
HK companies are required to file full audited accounts but small private companies meeting certain criteria may apply for “reporting exemption” and prepare simplified accounts and simplified directors’ reports. All Hong Kong companies must also prepare and file an annual return which gives details of the current directors and of the shareholders who have held shares in the company at any time during the year.
 
  • Time Scale
Incorporation of a HK company normally takes about 7 working days but ready-made companies are available for immediate use.
 
  • Restrictions on Name and Activity
Names which suggest any connection to the UK head of state are generally prohibited and certain words which suggest specialist activity can only be used when the appropriate licenses have been obtained e.g. bank, insurance company and other specialist financial enterprises.
 
  • Local Requirements
As a matter of local company law, the company MUST maintain a registered office address within Hong Kong and must also appoint a Hong Kong resident company secretary. The secretary cannot be the sole director of the company.
 
 
Advantages of Hong Kong Limited Company
 
  • Limited Liability
The obvious advantage of a Limited Liability Company is the financial security that comes with business. The company’s shareholders will only be liable for any debt the company accrues according to the levels of their own investment and will not bear any debt beyond such investment. This can provide a comfortable feeling of security for shareholders in the company.
 
  • Separate Entity
Due to its very nature, a limited company is deemed to be a separate legal entity from its owners. The company will exist beyond the life of its owners. If they retire or die, the company will continue to exist and operate.
 
  • Ownership & Control
In the case of private limited companies, the directors are usually the main shareholders of the company. Thus both the ownership and control of the business remain in their hands. Decisions can be made quickly and easily, allowing for a more successful business management platform.
 
  • Taxation Benefits
All profits made internationally will not be taxed as long as it is booked and structured in a non-resident Hong Kong company.
 
  • Management Efficiency
Management is observed by the shareholders of the corporation. The shareholders appoint directors to represent them. These directors are there to monitor the progression of the daily affairs of the business.
 
For more information on Hong Kong companies, please contact us at info@multilysis.com.
Office Address: 5 Amathountos street,
Pirilides Building, 4th-5th Floor,
3105 Limassol-Cyprus 51252, 3503