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Doing Business with Hong Kong: Transparency

Hong Kong is an international city.  More than 1.4 million companies are registered here,  many of them focusing on overseas business.  Likewise, many overseas companies also want to do business with or through Hong Kong for other Asian countries.  It is, therefore, important for foreign enterprises to know the local companies first and how they are doing before placing orders.

 

The easiest way to achieve this goal is to conduct some searches in Hong Kong.  They can be done online.  To check if a company is actually incorporated in Hong Kong, the website of the Companies Registry (CR) has lots of information available. This includes:

 

  1. Types of companies:
  2. a public company limited by shares;
  3. a private company limited by shares;
  4. a public unlimited company with a share capital;
  5. a private unlimited company with a share capital;
  6. a company limited by guarantee without a share capital.

 

Private companies limited by shares are used mainly for conducting business.  Limited companies offer their shareholders / members the benefits of limited liability.  For companies limited with share capital, as long as the shareholders have paid up their shares, they are not liable for the debts of their companies unless they have taken separate personal liability commitments.  Liability of the members of a company limited by guarantee is the amount stated in the articles of association to be paid when the company does not have sufficient assets to pay off its debt in the event of liquidation.  This amount is usually very small e.g. HK$100.

 

Companies limited by guarantee are usually used for alumni / fraternity associations.  Most are not-for-profit.  Some of them are registered as charities with the Inland Revenue Department.

 

  1. If the company is live, dormant or dissolved. A company can be dormant if it does not have any financial transaction and has registered with the CR to this effect.  Before it re-commences business, it must register the relevant document with the CR to make itself live again.

 

  1. If it is a listed company. This is not common for Hong Kong incorporated companies.  Most companies listed with the Hong Kong Stock Exchange (HKEx) are non-Hong Kong companies ie incorporated in offshore jurisdictions such as British Virgin Islands, Cayman Islands etc.  They have to go through different registration procedures with the CR.  Announcements and interim / annual reports can be located at the Market Data Section of the HKEx website.  These companies are also required to maintain their own websites for transparency as well as ease of communication with shareholders.

 

  1. If a company has created a charge on its assets, such information will be shown.

 

  1. A company can conduct money lending business. The list is available at the CR.  If it holds itself out to be in the finance or banking industry,  this could also be verified at the relevant Government websites.

 

  1. Incorporation / trustee services etc. are now licensed. One should check if the service provider is on the approved list before engaging its service.

 

  1. Documents have to be filed for incorporation, annually and on changes of directors, shareholders, company secretary and registered office address. They are available for download at a small fee per document.

 

  1. The following documents could shed some lights on the current status of a company:

 

  1. NAR1 which is to be filed on an annual basis. For companies with share capital, details of share capital, directors, directors, company secretary and registered office have to be inserted thereon.  If a company has created a charge, the amount of outstanding indebtedness is also available. If NAR1 is missing for one or more years, the company is probably in default.
  2. Changes in director(s), company secretary and registered office address have to be filed. Change in shareholding is only required to be shown in the NAR1.  The general public will not be aware of such change during the year.
  3. To verify whether there are discrepancies in the documents, ‘company particulars. should be downloaded. In order to count the number of directorship or acting as company secretary of a particular person or company, separate index / register can be ordered.
  4. Only public companies have to file financial statements. Non-Hog Kong companies are only required to do so if their own jurisdictions have such disclosure requirement.
  5. Any person who has been declared by the Court not suitable to act as a director will have his / her name in the Register of Disqualification Order. If a business transaction involves such a person, do consider risk management.
  6. Companies limited with guarantee also need to file NAR1. They do not have share capital.  The existing number of members is stated on this form but details of members are not included therein.
  7. Articles of association ie constitution governing the operation of a company has to be filed on incorporation. Subsequent changes also require to be filed. To understand if a company is under proper management, this document should be inspected carefully.
  8. Some other documents are also required to be submitted to the CR on various corporate matters such as capital changes, if, in doubt, seek the help of a professional.

 

  1. Sole proprietors and partnerships can also carry on business. The names and owners / partners can be checked through business registration. Companies incorporated or registered in Hong Kong also have business registration information.

 

First published on: https://www.pwfo.org/blog/doing-business-with-hong-kong-transparency

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