Choosing the right form of setup that can best suit a particular situation is important for a business owner. Our expert examines the three common forms of setup that foreign enterprises normally choose when registering a presence in Hong Kong. Watch our on-demand webinar to find out more.
Foreign enterprises looking to conduct business activities or create binding legal obligations in Hong Kong can either register a local company or as a non-Hong Kong company. To help companies choose the right form of set up, let's look at the three forms of business registration.
Registering for a representative office is a cost-efficient option for a foreign enterprise, if:
- the proposed activities will be limited to promotion, liaison, undertaking market research and/or coordinating activities on behalf of the foreign enterprise, and
- the enterprise will not transact any business (that is intended to make profit) in Hong Kong, which creates any legal obligations (except staff contract, office lease contract and utility arrangements).
From experience, this set up is typically suited to foreign enterprises who want to spend the least resources on testing a business environment and/or explore the viability of expanding in China or wider Asia.
Any foreign enterprise looking to set up a representative office has to register at the Business Registration Office.
Hong Kong company
In Hong Kong, a private company limited by shares is the most common form of set-up for foreign enterprises doing business in Hong Kong and it serves as an investment holding vehicle.
A company limited by guarantee is often used for setting up a club, an association, or any organisation with non-profit making or charitable purposes.
According to the Companies Registry (CR), there are 1,329,920 private companies and 13,160 companies limited by guarantee that have remained on the Companies Register as of January 2017.
Non-Hong Kong company
A foreign enterprise (ForeignCo) body corporate operating in Hong Kong may apply for registration with the Companies Registry as a non-Hong Kong company under Part 16 of the Hong Kong Companies Ordinance (HKCO). As defined in Section 2 of the HKCO, a non-Hong Kong company is required to register as "a company incorporated outside Hong Kong that establishes a place of business in Hong Kong".
In Section 774 of the HKCO, a place of business includes a share transfer or a share registration office, but a local representative office established or maintained with the approval of the Hong Kong Monetary Authority is not included. Practically, ForeignCos may not be able to rely on this definition to get a clear indication as to whether they have a "place of business" in Hong Kong or not. However, the corporate service providers can sometimes take reference to the settled case law as to what constitutes an established "place of business".
Under Part 16 of the HKCO, a registration can be exempt if a ForeignCo engages a third-party agent to conduct its business activities in Hong Kong.
Problems around company mostly occur with this form of setup. To help avoid this, we have provided some oversight below:
Estimated time frame
To register for a non-Hong Kong company under Part 16 of the HKCO, a ForeignCo should submit an application to the CR within one month of establishing a place of business in Hong Kong.
Upon an approval, a Certificate of Registration of Non-Hong Kong Company and the Business Registration Certificate will be issued to the ForeignCo at the same time. If there are no unforeseen complications, the Certificates are normally issued within 13 working days.
According to the current policy, the CR will prosecute all late registration cases.
Registration can be affected by whether or not the company has submitted a completed application form with the supporting documents and prescribed fees.
*Note: Generally, a ForeignCo is required to submit the following supporting documents to the CR:
- A certified copy of the constitution (e.g. charter, statutes or memorandum and articles of association)
- A certified copy of certificate of incorporation (or its equivalent)
- A certified copy of the latest accounts (if the ForeignCo is not required to publish or disclose its accounts to the public, it is not required to submit accounts, but the reason must be stated accordingly).
If these documents are not in English or Chinese,
- For the constitution and the latest published accounts in items 1 and 3, only a certified translation in English or Chinese should be delivered for registration.
- For the certificate of incorporation (or its equivalent) in item 2, a certified copy of the certificate in the original language, and its certified translation in English or Chinese should be delivered for registration.
Consequences for late registration
If a non-Hong Kong company fails to register within a month, any responsible person and agent of the company who authorises or permits the contravention, will commit an offence. If found guilty you can be liable to a fine of HK$50,000, and in the case of a continuing offence, to a further fine of HK$1,000 per day.
A "responsible person" is an officer or shadow director of a non-Hong Kong company who authorises or permits, or participates in, the contravention or failure. An "officer" includes a director, a manager (who performs managerial functions) or a company secretary.
A registered non-Hong Kong company must appoint at least one person who is an individual, a firm of solicitors, or accountants ordinarily resident in Hong Kong and authorised to accept on behalf of the ForeignCo the services of any process or notice required. Any changes to appointments, or changes regarding the particulars of an authorised representative, must be reported to the CR in a prescribed form within one month of the change taking place.
When the non-Hong Kong company ceases to have a place of business in Hong Kong, it has to notify the CR in a prescribed form within seven days after the date of cessation. From then, the company ceases to have further reporting obligations but is still obliged to remain on the Register for a year.
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.