Hong Kong: Hong Kong - Establishing a Business - D. Special Kinds of Business

Last Updated: 20 November 1995
Most Read Contributor in Hong Kong, September 2016
1. Banking

1.1 Introduction

The Hong Kong Banking Ordinance prescribes three kinds of authorised financial institutions: licensed banks, restricted licence banks ("RLBs") and deposit-taking companies ("DTCs").

Banking business is supervised by the Hong Kong Monetary Authority. Licensed banks, RLBs and DTCs are all regulated and must comply with the capital adequacy and liquidity requirements, reporting requirements, ownership and management rules, and financial restrictions imposed by the Banking Ordinance.

1.2 Licensed banks

Licensed banks perform the functions of typical banks, including the operation of current and savings accounts and the acceptance of deposits of any size or maturity. The interest rates banks can charge are subject to the interest rate rules of The Hong Kong Association of Banks, which sets the maximum rates payable on bank deposits of original maturities of up to 15 months less a day, with the exception of deposits of HK$500,000 or above for which banks may compete freely. Locally incorporated banks are required to have a minimum paid-up share capital of HK$150 million.

An overseas applicant for a banking licence must be incorporated in a country where the authorities exercise satisfactory supervisory control, the banking group of which the applicant is a member must have assets in excess of US$16 billion and there must be some acceptable form of reciprocity in the applicant's country of origin for Hong Kong banks. If the applicant is of undoubted standing or if granting the licence would serve Hong Kong's best interests, then licences can be issued even though the assets requirement is not met.

A local applicant must have been an authorised institution under the Banking Ordinance for at least 10 years, it must not be a subsidiary of a licensed bank and it must have a paid-up capital of at least HK$150 million, deposits from the public of at least HK$3 billion and total assets of at least HK$4 billion.

The Governor retains the discretion to refuse any application for a banking licence even though all the specified criteria are satisfied.

1.3 Restricted Licence Banks

Restricted Licence Banks ("RLBs") may accept deposits of any maturity from the public, but only in amounts of not less than HK$500,000. They cannot operate current or savings accounts nor carry on the business of paying or collecting cheques of customers. There are no restrictions on the interest rates that RLBs may offer.

An applicant for a restricted banking licence must have a paid-up capital of at least HK$100 million and it must be a fit and proper body to be granted a licence. There are various factors which will be taken into account in determining whether a company is "fit and proper" but overall discretion is given to the Financial Secretary. These factors include the competence of the management of the company, its general standing or, if newly formed, its parent company's general standing, in the financial community, the number of persons resident in Hong Kong who have effective control of the business (there must be at least two) and the identity of any owner of 10% or more of the voting share capital of the applicant. In the case of an overseas applicant, it must be subject to adequate supervision by the regulatory authorities in its country of incorporation.

If an RLB is an overseas bank and has the word "bank" or a derivation of that word in its name, it must use the term "restricted licence bank" in conjunction with its own name.

1.4 Deposit-Taking Companies ("DTCs")

DTCs are restricted to taking deposit of not less than HK$100,000 with a term to maturity of at least 3 months. DTCs are subject to the same restrictions as RLBs in that they cannot operate current or savings accounts and cannot carry on the business of paying or collecting cheques for customers.

Applications for registration as a DTC will be considered only if the paid-up capital of the applicant is at least HK$25 million and the applicant is a fit and proper body to be registered. The Banking Commissioner will take into account factors similar to those taken into account for RLBs when determining whether an applicant is "fit and proper" but has power to refuse an application even if all the usual conditions are satisfied.

1.5 Licensed Money Lenders

The Money Lender's Ordinance regulates the activities of those who carry on the business in Hong Kong of lending. However, licensed banks, RLBs, DTCs and their subsidiaries are exempt from the scope of the Money Lender's Ordinance and certain kinds of loan are exempt. Broadly speaking, a person who is not exempt from the Ordinance must obtain a money lender's licence in order to make unsecured loans to individuals or to companies with a paid-up share capital of less than HK$l million. In addition, the terms of a licensed money lender's loan documentation must comply with somewhat restrictive statutory requirements in order to be valid. Money lenders are supervised by the Royal Hong Kong Police and not by the Hong Kong Monetary Authority.

2. Securities

2.1 Introduction

Securities business in Hong Kong is regulated primarily by the Securities Ordinance which regulates dealing in securities, advising on securities and investment management business and by the Protection of Investors Ordinance which governs advertising in relation to securities and investment arrangements. The Securities Ordinance is administered by the Securities and Futures Commission ("SFC"). The definition of "securities", for the purpose of the Securities Ordinance, is very broad and includes shares, stocks, debentures, loan stock and bonds. Some items are excluded, including bills of exchange, promissory notes, certificates for cash deposits and the shares of private companies.

It is an offence for a person to carry on the business of dealing in securities unless that person is registered as a dealer or declared an exempt dealer.

A person is regarded as dealing in securities if, in return for a commission, rebate or other remuneration, that person:-

(a) receives from another person an offer to effect a dealing or to acquire or dispose of securities and communicates it to a registered dealer or an exempt dealer; or

(b) effects an introduction between a registered dealer or an exempt dealer and another person in order that that other person may effect a dealing or make an offer to acquire or dispose of securities; or

(c) on behalf of another person, effects a dealing through a registered dealer or an exempt dealer or makes an offer to a registered dealer or an exempt dealer to acquire or dispose of securities.

On the other hand, a person will not be regarded as dealing in securities, so that the Securities Ordinance will not apply:-

i) in the case of transactions which are effected on that person's behalf by a registered or exempt dealer or where offers are made by that person to a registered or exempt dealer; or

ii) where that person, acting as principal, acquires, subscribes for or underwrites securities; or

iii) where that person, acting as principal, effects transactions with a professional investor (meaning a person whose business involves the acquisition or disposal or the holding of securities) whether the professional investor is acting as principal or agent; or

iv) where offering documents issued by that person meet certain criteria prescribed in the Securities Ordinance, for example an approved prospectus.

There are four principal types of authorisation: registered dealers, exempt dealers, registered investment advisers and exempt investment advisers.

2.2 Registered Dealers

Applications to register are made to the SFC. The applicant will have to satisfy the SFC that it is a fit and proper body to be registered. The SFC will take into consideration the financial status, educational or other qualificational experience, honesty and reputation of the directors and officers of the applicant. The SFC will also take into consideration matters relating to any employee or substantial shareholder of the applicant.

Registration involves (i) registration of the corporation as a dealing corporation, (ii) the registration of at least one director who will participate directly in and be responsible for the supervision of the applicant's securities business as a dealing director and (iii) the registration of any member of the applicant's staff (other than a director) who is involved in conducting securities business for the applicant as a dealer's representative.

A registered dealer is required to maintain a minimum net capital (currently HK$5 million) and a minimum liquidity margin (currently HK$500,000). In addition, it must pay clients' monies into a designated trust account and carry out an annual audit of its accounts relating to its securities business. These accounts must be separate from the accounts of any other business carried on by the registered dealer.

In January, 1992, the SFC published a Consultative Document containing a review of the capital adequacy requirements for securities and futures intermediaries and recommendations regarding revised financial resources rules. These rules came into operation on 1st December 1993. The new liquid capital requirement for each dealer varies with the level of business undertaken but only after a certain level of activity has been reached. Hong Kong's capital requirements are in line with those existing in other financial centres.

2.3 Exempt Dealers

The SFC is entitled to declare any person who deals in securities as an exempt dealer. This is available if (i) the applicant can satisfy the SFC that its main business is different from securities business or its main business is dealing in securities through underwriting and/or effecting transactions with professional investors who are acting as principals and (ii) its securities business in Hong Kong is conducted primarily through registered or exempt dealers or a member of a foreign stock exchange.

2.4 Registered Investment Advisers

It is an offence to carry on the business of advising on securities for remuneration unless registered as an investment adviser or an exempt investment adviser. However, if a registered dealer or exempt dealer gives investment advice which is incidental to its securities business, there is no need to register as an investment adviser or exempt investment adviser.

There are no formal qualifications prescribed for a person who applies to become a registered investment adviser. There is no statutory minimum capital requirement but the SFC expects a registered investment adviser to be capitalised to a level commensurate with the type of investment advisory and management business it proposes to conduct and at all times to maintain net tangible assets of not less than zero. The SFC is primarily concerned as to whether the applicant is "fit and proper" and will take into account various factors concerning each of the directors and officers of the applicant, including their financial status, their qualifications and experience, their reputation, character, financial integrity and reliability.

The registrations, in the case of investment advice and management, are similar to those for a registered dealer in securities involving (i) the corporation, as an investment adviser, (ii) at least one investment advising director and (iii) any investment adviser's representative (other than a director) involved in the business of giving investment advice on the corporation's behalf. The registration fees are HK$4,900 for a corporation, the same for an investment advising director and HK$1,850 for each investment adviser's representative.

A registered investment adviser must report various matters to the SFC, including any litigation, any changes in its board of directors or change of its ultimate holding company, any change in its nominal or issued share capital, any change in its registered representatives, any change of address and any intended change to the location of the premises at which it keeps the records of its investment advisory business. It must make annual returns to the SFC. It must also keep a register of securities in which it has an interest and of particulars relating to their acquisition and disposal. The SFC has wide general powers of supervision over registered investment advisers.

2.5 Exempt Investment Advisers

Exempt investment adviser status is available if the SFC is satisfied that investment advice is given either mainly to persons whose business involves the acquisition and disposal of or the holding of securities (professional investors) or to persons residing outside Hong Kong. The application fee is currently HK$7,000. The advantage of being an exempt investment adviser, as opposed to a registered investment adviser, is only that the reporting and recording regulations referred to above do not apply to exempt investment advisers. As these regulations are not considered onerous, it is usual for an applicant to apply to become a registered investment adviser.

3. Insurance

3.1 General

The Insurance Companies Ordinance provides that insurance business can be carried on in or from Hong Kong only by:-

i) a company authorised to carry on that class of insurance business;
ii) Lloyds; and
iii) an association of underwriters approved by the Governor in Council.

3.2 Authorisation

Any company may make an application to the Insurance Authority for authorisation to carry on any class of insurance business. This authorisation will not be given to a company unless its director(s) or controller(s) are fit and proper persons to hold these positions. In addition, there are further requirements which the applicant must meet, the main ones being: net asset requirements (which vary depending on the amount of premium income received by the applicant in its last preceding financial year and the type of insurance business the applicant company intends to carry on); the company's share capital must exceed HK$5 million or HK$10 million (depending on the type of insurance business the applicant intends to carry on); the company must have covered its risks adequately; the company must be able to meet its obligations; that it would not be contrary to the interests of any existing and potential policy holders of the company for the company to be permitted to carry on the form of insurance business applied for.

3.3 Exemptions

Insurers carrying on any class of insurance business in the United Kingdom are exempt from the provision of the Insurance Companies Ordinance, subject to certain conditions.

3.4 Regulation of Insurers

Every authorised insurer is required to file its accounts with the Insurance Authority within six months after the end of the period to which they relate. Each insurer pays an annual fee to the Insurance Authority which is currently HK$50,000 and insurers must maintain the appropriate net asset value. In addition, the Insurance Authority is given wide powers of intervention under the Insurance Companies Ordinance in order to regulate authorised insurers.

NOTE: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

If you would like further advice please contact: David Ellis, Johnson Stokes & Master, 16th Floor, Princes Building, 10 Chater Road, Hong Kong; Tel 2843 4226; Fax no. : 2845 9121. Alternatively do a text search "Johnson Stokes and Master" and "Business Monitor"

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.