Hong Kong

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Key Corporate Features

General Information

Occupied by the UK in 1841, Hong Kong was formally ceded by China the following year; various adjacent lands were added later in the 19th century. Pursuant to an agreement signed by China and the UK on 19 December 1984, Hong Kong became the Hong Kong Special Administrative Region (SAR) of China on 1 July 1997. In this agreement, China has promised that, under its "one country, two systems" formula, China's socialist economic system will not be imposed on Hong Kong and that Hong Kong will enjoy a high degree of autonomy in all matters except foreign and defense affairs for the next 50 years.

Hong Kong is on the south east coast of China and consists of a large number of islands and a part of the mainland totalling approximately 1064 sq km. On 1 July 1997 all of Hong Kong reverted from British Control back to China and became a Special Administration Region -SAR- within the People's Republic of China (PRC). The number of inhabitants is about 7 million.

Hong Kong elects its own legislature and maintains its own court structure. The future of Hong Kong under the one country - two systems philosophy: the SAR has executive, legislative and independent judicial power. The capitalist system, legal structure and lifestyle remain unchanged. Hong Kong remains a free port with a free flow of capital and a freely convertible Hong Kong dollar. With China pushing forward with the modernisation of its own economy, the PRC has expressed the wish that Hong Kong should assist in this endeavour. It has stated that its future development will be based on market led reforms with socialist characteristics and this has led to the opening up of its economy to foreign investments. It is widely recognised that Hong Kong is and will continue to be a significant gateway to China.

The official languages are English and Chinese, with English being used in the commercial and political context and Cantonese Chinese used widely in industry and domestic trade. The currency is the Hong Kong Dollar, which is officially pegged to the US Dollar. There is no exchange control. The type of law is Common Law based on English Common Law. The principal corporate legalisation is the Companies Ordinance (Cap. 32).

Company Information

Hong Kong adopts a territorial source principle of taxation. Only profits which have a source in Hong Kong are taxable here. Profits sourced elsewhere are not subject to Hong Kong Profits Tax.

The type of company for international trade and investment is the Private Company limited by shares.

The procedure to incorporate: submission of Memorandum and Articles of Association and a Declaration of Compliance. A notice of situation of registered office is also required to be filed within fourteen days of the date of incorporation.

The following restrictions on trading apply: it can’t undertake banking or insurance activities or solicit funds from or sell its shares to the public. A Hong Kong Company has all the powers of a natural person. The languages of legislation and corporate documents are Chinese and English.

A registered office is required, it must be maintained in Hong Kong. It is not possible to reserve a name. It is essential to check that there is no similar or identical name on the register, which would prevent the company being incorporated. Shelf companies are available. The time to incorporate: approximately two weeks from the submission of documentation.

The following name restrictions apply: a name that is 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 royal or government patronage.

Names requiring consent or licence: building society, Chamber of Commerce, co-operative, imperial, Kaifong, mass transit, municipal, royal, savings, tourist association, trust, trustee, underground railway, bank, insurance, assurance, reinsurance, fund management, asset management and investment fund. The following suffix denotes limited liability: Limited. There is no disclosure of beneficial ownership to authorities.

Compliance

All local limited companies or oversea companies which have established a place of business in Hong Kong must first be registered with the Companies Registry. Applications for business registration should be made within 1 month of the date of incorporation or registration with the Companies Registry. Form 1(b) should be submitted with a photocopy of the Certificate of Incorporation or Certificate of Registration of Oversea Company issued by the Companies Registry.

An oversea company that commences to carry on business in Hong Kong before the completion of its registration with the Companies Registry may still apply for business registration within 1 month of the commencement of business. For these cases, Form 1(b) should be submitted together with a copy of the relevant Certificate of Incorporation (or its equivalent) issued by the overseas authority and a certified copy of an English or Chinese translation if the original is not in English or Chinese.

The standard authorized share capital is HK$ 10,000 divided into 10,000 shares of HK$1.00 each. The minimum issued capital is two shares of par value. Shares of no par value are not permitted. The following classes of shares are permitted: ordinary shares, preference shares, redeemable shares and shares with or without voting rights. The types of shares permitted include deferred, founders and management shares.

If a business earns commission by securing buyers for products or by securing suppliers of products required by customers, the activity which gives rise to the commission income is the arrangement of the business to be transacted between the principals. The source of the income is the place where the activities of the commission agent are performed. If such activities are performed through an office in Hong Kong, the income has a source in Hong Kong.

Hong Kong has no double taxation agreement with any country, with the exception of a limited treaty with the United States of America relating to shipping matters only.

Withholding taxes, currently being 5,25%, are only imposed on royalties paid to non-resident recipients not related to the payers. If they are related parties then a tax rate of 17,5% will be applicable. The Business Registration Fee (BRF), currently HK$ 2,600, is due and payable within one month of the date of incorporation and then annually on the anniversary of the first payment.

A Hong Kong company must keep accounting records, which may be kept at the registered office address or elsewhere at the discretion of the directors. Every company must appoint an auditor who must be a member of the Hong Kong Society of Accountants and hold a practicing certificate. Although there is no requirement to file accounts with the Registrar, there is a requirement to file accounts with the tax authorities.

The minimum number of directors is two, who may be natural persons or bodies corporate. They may be of any nationality, and need not be resident in Hong Kong. A Hong Kong company must appoint a company secretary, who may be a natural person or a body corporate, but the company secretary must be resident in Hong Kong. The minimum number of shareholders is two. If the number of shareholders falls to one, the remaining shareholder is personally liable.

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