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Hong Kong Company Registration FAQs

1. What types of companies are recognized in Hong Kong?

There are two types of companies: limited companies and unlimited companies. Limited companies have their own legal status. The share holders‘ assets are "shielded" from that of the companies. The share holders‘ liabilities do not exceed the values of their shares. Unlimited companies include sole proprietorships and general partnerships. In an unlimited company, the owners have personal liability for all the business‘ debts and obligations.

2. What are the differences between a share holder (also known as a subscriber) and a director in a limited company?

The share holders of a limited company are the owners of the company. The ownership of each share holder depends on the percentage of shares he has. The directors are appointed and authorized by the share holders to run the company. The director may or may not receive salaries. The share holder can also be appointed as a director of the company.

3. How many directors are required in a Hong Kong limited company?

The company must have at least one director of any nationality.

4. Can a limited company be appointed as a director or share holder of another company?

Yes, it is because a limited company is an independent legal entity. However, an unlimited company cannot.

5. What are the differences between registered capital and issued capital? Does the amount of issued capital need to match the registered capital? Is capital certification required?

Registered capital is the maximum amount of share capital the company can issue. Issued capital is the actual amount of share capital the company issues. For example, a limited company has 10,000 registered shares with HK$1.00 for each share. Then the registered capital of the company is HK$ 10,000. The minimum number of issued share is 1 share, so the minimum issued capital is HK $1.00. One the other hand, the maximum number of issued share is 10,000 shares, so the maximum issued capital is HK $10,000. Hong Kong limited companies are not required to maintain fund (in a bank) to match the issued capital. In addition, there is no need to certify the amount of capital.

6. What are the restrictions for naming a Hong Kong company?

The company English name must end with "Limited". The Chinese name must end with "有限公司". There are some prohibited words, such as "Bank" and "Trust". If the name does not contain the prohibited words, and as long as the name is not taken, then the name can be used. Note that some wording arrangements are considered identical, eg Limited = Co. Limited, Hong Kong Limited = (Hong Kong) Limited, etc. Jinetic.com maintains a list of prohibited words and informs users when such words are used.

7. What businesses can a Hong Kong limited company conduct?

Except for some businesses such as banking, travel-related, insurance-related, etc. which require licenses, as long as the business is legal, there is no restriction as to what kind of businesses the company can conduct.

8. What are the differences between the Company Incorporation Certificate and the Business Registration?

The Company Incorporation Certificate is issued by the Companies Registry. It lists the Chinese and English company names, as well as company number and incorporation date. The Business Registration is issued by the Inland Revenue Department. All businesses are required to apply the Business Registration.

9. What is a registered address of a company?

A registered address is the legal address of the company. It facilitates communication between the government and the company. It must be a Hong Kong address. A P.O. Box address cannot be a registered address.

10. What is a company secretary?

A Hong Kong company must appoint a Hong Kong citizen or a limited company as a secretary. The job of the secretary is to submit and safe-keep company documents, such as the Annual Return.

11. What is the Annual Return?

The Annual Return is a document that records the names of directors, share holders, and share capital. The document needs to be prepared and submitted to the government every year, even if the company does not conduct business. A fine is imposed on failure of on-time submission. The fine for late submission is as follow: late between 42 days and 3 months: HK$ 870.00; between 3-6 months: HK$ 1,740; between 6-9 months HK$ 2,610; over 9 months: HK$ 3,480.

12. What is the Profits Tax Return?

The Profits Tax Return is a form issued by the Inland Revenue Department (IRD). The first one is issued 18 months after incorporation. If the company has profit in the first year, the form is issued on October yearly. If the company suffers a lost, then the form is issued after three to four years. If the company has profits but does not receive the form, it must inform IRD to issue the form. If the company conducts business, it must submit the Profit Tax Return form along with a financial statement audited by a Hong Kong Certified Public Accountant.

13. What are the differences between the Annual Return and the Profits Tax Return?

The Annual Return is issued by the Company Registry. A company needs to submit the form whether or not it conducts business. The Profits Tax Return is issued by the Inland Revenue Department which requires the company to complete accounting and audit within a specified time period.

14. What are the differences between pre-formed companies and brand new companies?

A brand new company does not have a name. The name is decided by the share holders. It takes longer to form a brand new company (about 11 days after governmental submission). However, it is cheaper to form a brand new company. A pre-formed company is a company that is already incorporated but is never operated. The share holders cannot decide the name of a pre-formed company. It takes shorter time to transfer the names of the share holders and directors than to incorporate a brand new company.

15. Rules and restriction of company names

Company name should not be same as those already in company register and can be

only English name

only Chinese name

in HK, Traditional Chinese is the official written language. Simplified Chinese is not acceptable.

For practical reason, we don‘t suggest using only Chinese name. English name is useful for daily use, including banking transaction.

o     English plus Chinese name

    In daily use, quoting only English name is enough.

       To check availability of a company name, client can visit this site: [Companies Registry ICRIS System]

      For restriction of using certain words, please refer to [Company Names Guidelines] from Companies Registry.

16. What is the difference between tailor made and ready made company?

Ready made means the company is formed and put in list for purpose of selling. There are already 2 shareholders each holding 1 share. Instead of forming a brand new tailor made company, we arrange to transfer the 2 shares to new shareholders. The company can be used instantly and saves time of at least 7 days.

Other than saving time, sometimes you may need a company with incorporation date several months ago. This helps for management to "ratify" (or "inject") certain business transaction into a company.

17. Is there any risk in buying a ready made company?

No. It is definitely no need to worry about buying a ready-made company from us and taking over any unknown responsibility. We issue letter of guarantee and indemnity to buyer stating that no business has ever been carried out by the company. The original shareholders are the one responsible for all financial liability before the date you bought the company.

18. When can I use the company ordered?

You can use the ordered company when you receive our confirmation. This means you can use the company name to enter into any contract. Of course, it takes time to arrange sending the company chop to you. However, you can use the company to start negotiation and document preparation.

Generally, for ready-made company, we can confirm your order once the payment is received. For tailor-made company, it takes 7 days because we need to ensure the approval of company name and this cannot be done until Certificate of Incorporation is received from the government.

19. What document & material I will get ?

For both tailor made and ready made company, you‘ll receive:

      Certificate of Incorporation

      Business Registration Certificate

      Copies of document filed to Company Registry

      Green Box -

      Memorandum& Articles

      Common seal (stainless steel)

      Signature chop

      Round chop

      Share Certificate book

      Statutory Book

Usually, the materials will be under the custody and maintenance of company secretary. Therefore, if we are appointed as your company secretary, you may select to leave them in our office.

20. What is "Green Box" ?

Green Box is a collective term of :

      Memorandum& Articles

      Common seal (stainless steel)

      Signature chop

      Round chop

      Share Certificate book

      Statutory Book

Together with

      Certificate of Incorporation

      Business Registration Certificate

      Copies of document filed to Company Registry

they are the material you will have after a company is formed. They may not be handed over to you because they are usually kept in hand of Company Secretary for custody and for convenience of work.

21. Can I change the company name or share capital of the company bought?

Company name -

Yes. You are free to change the name of a limited company. However name search has to be carried out to ensure the new name is still available. The government fee is around HK$300 (subject to latest government announcement) and it takes around 10 days. Once the name change is approved, a "Certificate of Incorporation on Change of Name " will be issued by the government. Contracts with old company name need not be signed again. However, new name need to be used for all new transactions and therefore new set of company chops need to be made.

Authorized share capital -

Yes. You can increase (or even decrease) the authorized share capital. The standard authorized share capital is HK$10,000 splitting into 10,000 shares. For every HK$1,000 authorized share capital, you need to pay HK$1 duty fee. This means you have to pay HK$1,000 duty fee to increase authorized share capital of HK$1 million. There is no limit on the maximum amount of authorized share capital. After the increase, you can freely allot them to shareholders.

22. What is the difference between authorized share capital and issued share capital?

Authorized share capital -

Authorized share capital is the maximum amount of shares that a company is allowed to issue. For example, the ready made company that we are selling comes with HK$10,000 authorized share capital splitting into 10,000 shares. This is the maximum amount of shares that we can sell. However, this does not mean that we can only raise HK$10,000 as share capital. Some people may pay you a premium to buy a share. This depends on how well the new shareholder is valuing your company. Even though he is paying HK$1,000 for a share of your company, HK$999 of it is premium. he is buying only 1 share and entitle to 1 voting right only.

Issued share capital -

Existing shareholders are free to pick new investors. They can "issue" ( or "allot") shares to new investors. The shares can be issued at par or at premium. Only issued share capital is considered paid up capital.

Stamp duty is levied in increasing authorized share capital, but not in issuing (allotting) shares. When old shares (shares already issued) are changing hand, stamp duty also needs to pay.

23. What is nominee shareholder?

Nominee shareholder is having another person appearing in the government record as the shareholder. The identity of real owner is hidden.

Many often, this is to fulfill the minimum requirement of having 2 shareholders. The benefit of the real shareholder can be protected by preparing Declaration of Trust and pre-signed share transfer documents. In case of necessity, the shares can be transferred back to real owner. The real owner is regarded as owning the shares from the very beginning. Not from the date of transfer back.

24. What is nominee director?

Nominee director is having another person appearing in the government record as the director. The identity of real business controller is hidden.

Many often, this is to fulfill the minimum requirement of having 2 directors. Documents (Letter of Indemnity etc) will be prepared to protect the interest of both the real business owner and the nominee.

25. How to use company chops?

The usual ways of using chops in Hong Kong are:

Signature chop - usually rectangular in shape. Together with signature of an authorized officer, most contract and bank transaction are regarded as valid.

Round chop - usual small in size and no place for signature. This is for daily casual use to acknowledge receipt of document from courier company. This chop is not for serious event.

Common seal - usually stainless steel. Only documents required to be signed in SEAL need to be chopped. Example of such documents including transfer of property.

In China, the official company chop is regarded as valid for contract even without signature. There is a big difference.

26. What is the meaning of "unlimited" company?

Contrary to Limited Liability Company, business owner of Unlimited Company has unlimited legal and financial liability of the business.

If the unlimited company is a Sole Proprietor business, the sole owner takes up all risk.

If the unlimited company is a Partnership business, each and every partner is jointly and severally liable. Generally, this means you may be liable to your partner‘s action in doing partnership business.

The worst financial consequence of a Limited Company is winding-up of the company. Shareholders have no financial risk other than their investment shares as long as they are acting in good faith. However, the worst financial consequence of Unlimited Company is bankruptcy of business owners.

27. Why people keep on using "unlimited" company?

The main reason is cost.

The use of a Limited Company is a 2-steps process:

1st - Incorporation of a Limited Company. This is just like give birth to a person.

2nd - Application for Business Registration Certificate for the person.

Use of Unlimited Company involves only the 2nd step.

Moreover, the legal and maintenance work is more complex and costly for Limited Company. The government has to protect the interest of public and business participants while granting limited liability "previlege" to business owner. Therefore, more work has to be done in order to increase the transparency and accountability of a Limited Company (Annual Filing and Auditing etc).

There is no difference in doing business as long as business owner is aware of and willing to take up the unlimited liability. In exchange for the simplicity of maintenance and cost, many people is still using Unlimited Company. Of course, generally speaking, unlimited company delivers the impression of a small business. This is inevitable because no one well structured company will tolerate the risk of unlimited liability.

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