Choosing the right form of setup that can best suit a particular situation is important for a business owner. Here, we outline the major characteristics of the three forms of registration that foreign enterprises normally choose when registering a presence in Hong Kong.
In part 1 and 2 of the article series, we have looked at the risks of improper registration and the three common forms of registration that foreign enterprises would choose when registering a presence in Hong Kong. To help you better understand the registration requirements, the table below outlines certain major characteristics of the three forms of registration.
|Requirements at Hong Kong level||Hong Kong private company||Non-Hong Kong company||Representative office|
|1||Company name||Need not be the same as the foreign enterprise and the name must be ended with the word “Limited” in English or “有限公司” in Chinese||Must be the same as the foreign company, except if a similar name has already been on the Companies Register maintained by the Companies Registry|
|2||Business activities||Can conduct all types of legitimate business activities – subject to special licensing requirement if the business is regulated in Hong Kong (such as banking, insurance and money operating business)||Cannot conduct any business activities or earn any profit in Hong Kong|
|3||Legal status||Separate legal entity||Extension of the foreign enterprise in its place of incorporation|
|4||Liability||Ordinarily, shareholders’ liability is limited to the issued share capital of the company||The foreign enterprise in its place of incorporation shall be liable for all debts incurred by the Hong Kong office|
|5||Local share capital requirement||Has no minimum requirement but each company must have at least one shareholder with one share issued at any value more than zero||Not applicable|
|6||Local director requirement||No local requirement - every private company must have at least one individual (of any nationality) as director||No local requirement - directors will be those appointed by the foreign enterprise at its place of incorporation|
|7||Mandatory local appointment||Appointment of named company secretary and auditors (being a practicing member of Hong Kong Institute of Certified Public Accountants)||Appointment of authorised representative||Not applicable|
|8||Audited financial statements||
Every company must arrange for the audit of its financial statements for each financial year.
Audited financial statements are generally not required for filing with the Companies Registry.
|Branch accounts are not required to be audited in Hong Kong – published accounts and the annual return of the foreign enterprise must be filed at the Companies Registry||Not applicable|
|9||Filing of profits tax return and employer's return||
The Inland Revenue Department may decide not to require the Hong Kong entity to file these returns if they have already been notified that the Hong Kong entity does not generate income or profits with a Hong Kong source, or has not engaged any employees.
For a representative office, it is likely that any profits tax return filed will be a "nil" return because the office is not allowed to do business nor generate profits.