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Doing Business in Hong Kong (1)

Belinda Wong

Belinda Wong

Author and Director of Leader Corporate Services Limited

In Hong Kong, there are 5 types of companies which can be incorporated. They are:

(a) a public company limited by shares;

(b) a private company limited by shares;

(c) a public unlimited company with a share capital;

(d) a private unlimited company with a share capital;

(e) a company limited by guarantee without a share capital.

Incorporation is done pursuant to the Companies Ordinance (Cap 622) by the Companies Registry. A certificate of incorporation will be issued to each company. There is also a need to apply for a Business Registration Certificate (BRC) which is renewal on an annual or 3 years basis at the choice of the company.

Incorporated companies enjoy the status of having separate legal identity, can sue or be sued in their names. They will continue to exist until dissolution.

Private company means the number of shareholders does not exceed 50 and that it cannot invite the general public to subscribe for its shares. Its shareholders cannot freely transfer their shares. At the very minimum, the board of directors has the right to refuse to register the transfer.

Limited’ means the liability of shareholders / members is limited. For shareholders, once the shares they subscribe for are fully paid up, there is no further liability unless they subsequently agree to e.g. giving personal guarantees. For members of a company limited by guarantee, the liability is stated in the articles of association e.g. HK$100. This amount is to be contributed in the event of the company’s liquidation.

Most of the companies carrying on business in HK are private company limited by shares. A smaller number is companies limited by guarantee without a share capital. These companies are usually used for the formation of alumni / fraternity associations or for registration as charities with the Inland Revenue Department (IRD). Separate tax guide has been issued by the IRD for charities.

Sole proprietorship and partnerships can also be registered for BRCs with the Business Registration Office, part of the IRD. Owners do not enjoy limited liability protection. Therefore, the relative sizes of these entities are small. If the owner is not resident in HK, an agent must be appointed.

A very small number of people form limited partnerships under the Limited Partnership Ordinance (Cap 37) to conduct business. Limited partners enjoy limited liability protection while the general partners not.

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