Hong Kong Company Formation FAQ
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.
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.
How many directors are required in a Hong Kong limited company?
The company must have at least one director of any nationality.
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.
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.
What are the restrictions for naming a Hong Kong company?
The company English name must end with "Limited". The Chinese name must end with "q". 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.
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.
What are the differences between the Company Incoporation Certificate and the Business Registration?
The Company Incoporation 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.
What is a registered address of a company?
A registered address is the legal address of the company. It faciliates communication between the government and the company. It must be a Hong Kong address. A P.O. Box address cannot be a registered address.
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.
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.
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.
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.
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.