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FAQ Page – HK Company Requirements2017-11-23T17:35:51+08:00

Frequently Asked Smart Questions

HK Company Requirements

Start-up: What are the minimum requirements of forming a new HK company?2016-12-08T15:49:32+08:00

  • STRUCTURE

    A private limited company must have at least:

    1 Shareholder (natural person/ corporate/ HK resident/ non-HK resident);
    1 Director (at least 1 natural person over 18 years old);
    a Company Secretary (must be a HK resident or HK company); and
    a Registered Office (must be based in HK)

    Any natural person or legal entity can at the same time be a shareholder and a director. However, if there is only 1 director, that “person’ must be a natural person and cannot be the company secretary of the same company.

    If the secretary is an individual person, there are no restrictions on his nationality but he must reside in Hong Kong. If the secretary is a corporate, that corporate must be a HK company.

    There are no restrictions on the nationality and domicile of the shareholder and director.

    The number of shareholders is limited to 49 or less. A public company is needed if there are 50 or more shareholders.

    There is no limit on the number of directors. From corporate governance perspective, it is recommended not to have too many directors though.

  • DOCUMENTS REQUIRED

    In addition to the company’s particulars, the following documents of Directors & Shareholders need to be uploaded to our Online Form:

    1) A copy of HKID card/ Passport
    2) A copy of Address Proof *

    * Utility/ Bank correspondence with Full Name and Residential Address printed on it, issued within the recent 3 months

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Start-up: What are the minimum payroll requirements for an Employer?2021-05-25T23:19:02+08:00

In Hong Kong, the minimum compliance requirements from Employers’ perspective are:

1) Complying with Hong Kong Employment Ordinance
2) Fulfilling minimum wage requirement (HK$37.5 per hour since 1 May 2019)
3) Contributing Mandatory Provident Funds (MPF) for employees
4) Taking out Employees Compensation Insurance
5) Issuing Payslips to employees
6) Filing Employer’s Returns to the tax authority
7) Keeping proper payroll records

AgendaCorp offers PayrollComplete to assist Employers to fulfil the above requirements

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Rest days, Holidays & Leave: How many days are employees entitled?2016-12-08T15:49:32+08:00

REST DAYS
An employee employed under a continuous contract is entitled to not less than 1 rest day in every period of 7 days.

STATUTORY HOLIDAYS

An employee, irrespective of his length of service, is entitled to the following statutory holidays:

1) the 1st January
2) Lunar New Year’s Day
3) the second day of Lunar New Year
4) the third day of Lunar New Year
5) Ching Ming Festival
6) Labour Day, being the 1st May
7) Tuen Ng Festval
8) HKSAR Establishment Day, being the 1st July
9) the day following the Chinese Mid-Autumn Festival
10) Chung Yeung Festival
11) National Day, being the 1st October
12) Chinese Winter Solstice Festival or Christmas Day (at the option of the employer)

PAID ANNUAL LEAVE

An employee is entitled to annual leave with pay after having been employed under a continuous contract for every 12 months. An employee’s entitlement to paid annual leave increases progressively from 7 days to a maximum 14 days according to his length of service:

Years of Service Annual Leave Entitlement
1 7
2 7
3 8
4 9
5 10
6 11
7 12
8 13
9 14
MPF: What are the requirements?2016-12-08T15:49:32+08:00

Employee and Employer

Employees and employers who are covered by the MPF System are each required to make regular mandatory contributions calculated at 5% of the employee’s relevant income to an MPF scheme, subject to the minimum and maximum relevant income levels. For a monthly-paid employee, the minimum and maximum relevant income levels are $7,100 and $30,000 respectively.

Monthly Relevant Income Mandatory Contributions
Employer Portion Employee Portion
Less than $7,100 Relevant income x 5% No contributions required
$7,100 to $30,000 Relevant income x 5% Relevant income x 5%
More than $30,000 $1,500 $1,500

The current minimum relevant income level of $7,100 per month applies to contribution periods commencing on or after 1 November 2013 while the current maximum relevant income level of $30,000 per month applies to contribution periods commencing on or after 1 June 2014.

Private/ Public: What are the differences between Private and Public limited companies?2016-12-08T15:49:32+08:00

  • Hong Kong Companies can be both limited liability companies as well as unlimited companies. Investors, however, rarely opt for an unlimited company.

    Private Limited Company
    This is the most common form of companies chosen by investors running small & medium sized business.  A company limited by shares has a share capital which is divided into a number of shares.  The value of the share capital is equal to the total contributions by all investors but the value of each share issued to each investor is not necessarily the same.  These shares are held by shareholders who are entitled to a share in the profits of the company and receive a dividend corresponding to their respective percentage of shareholding in the company.  Percentage of shareholding solely depends on the number (and the class, if any) of shares each shareholder holds instead of the values s/he has contributed.  In case of a loss, the shareholders will lose the amount limited to their investment only.

    Public Limited Company
    A public company limited by shares is a company in which the number of shareholders can be more than 50.  Most public companies are listed on a stock exchange.

Types: How many types of HK entities are there?2016-12-08T15:49:32+08:00

  • There are 3 main types of Hong Kong entities:

    Limited Company
    A Limited Company is the most commonly-used company type. This is a company which is incorporated in Hong Kong, which means that the owner can take advantage of all the tax benefits and concessions available to any fully incorporated business, including the Closer Economic Partnership Arrangement (CEPA), a free trade agreement with Mainland China.

    AgendaCorp: This is the most common type of entity for starting up profit-making business in Hong Kong by non-Hong-Kong residents.

    Branch Office
    Branch Office of Parent Company. If a company incorporated outside Hong Kong establishes a place of business in Hong Kong, it must register with the Companies Registry as a ‘Registered Non-Hong Kong Company’ within one month of establishment. Unlike a subsidiary limited company, a branch office is not a separate legal entity from the parent and the liability incurred from the Hong Kong business also is immediately passed through to the parent.

    Representative Offices
    Representative Offices cannot engage in profit-making activities and can only fulfil limited functions. If the company decides to enter into a transaction which creates a legal obligation, it must change the business to a limited company or branch office.

Common Seal: Is it mandatory for a HK company to have a common seal?2016-12-08T15:49:32+08:00

  • No.

    Since the new HK Companies Ordinance becoming effective on 3 March 2014, it is now optional for HK companies to adopt a common seal or not. A common seal is a bulky steel chop and was used mainly for chopping share certificates.

    Under the new HK Companies Ordinance (since 3 March 2014), directors’ signatures can replace the common seal fully (i.e. no of directors needed is stated in the new HK Companies Ordinance depending on what situations.).

    We don’t know why you still need this bulky steel chop which only creates unnecessary inconvenience. If you want to amend your Articles and get rid of it, simply Contact Us.

Name: What are the restrictions of naming a HK company?2016-12-08T15:49:32+08:00

  • Can a limited company be incorporated without the word “Limited Company” or “Limited” in its name?

    No. A Limited Company incorporated in Hong Kong shall have its name with the words “Limited Company” or “Limited” in order to indicate that shareholders shall bear limited liability for future obligation.

  • Can simplified Chinese characters be used in the Chinese name of a HK company?

    No. The Chinese name shall be written in traditional Chinese characters.
  • Can a company name be registered in languages other than Traditional Chinese and English?

    No.

    Hong Kong people are smart in doing business but not in multi-languages, sorry about that.

  • What letters/ numbers/ symbols can be used to name a HK company?

    Either Traditional Chinese (subject to several restrictions) or 26 alphabets of English (A-Z) plus Arabic numbers (0-9) can be included. No bilingual name and no symbol are allowed.

  • Are there any restrictions in words used in a name?

    Unless submitted application for related license, company names cannot contain the word “Bank” or “Insurance” as well as words which may mislead people to believe it has any relation with the Government.
Law: What law and official documents govern a HK company?2016-12-08T15:49:32+08:00

  • Hong Kong Companies Ordinance (i.e. Hong Kong law) and the Articles of the Hong Kong company (i.e. the Constitution of the company, amendable by shareholders in a general meeting) govern how a Hong Kong should be operated and maintained.

    Since 3 March 2014, the Hong Kong Companies Ordinance has been modernized and revised significantly. The Memorandum has been abolished and only the Articles remain as the only constitution of a HK company.  For HK companies which were incorporated before, they can still enjoy the benefits of the relaxation under the new HK Companies Ordinance if their Articles are amended accordingly. For details, simply Contact Us.

Capital: What are the requirements of share capital (e.g. authroised vs issued, fully paid vs partly paid, etc.)?2016-12-08T15:49:32+08:00

  • The concept of “authorised share capital” and “issued share capital” have been abolished since the new HK Companies Ordinance becoming effective on 3 March 2014. Instead, the share capital is “fully paid”, “partly paid” or “unpaid”. There is no requirement on the minimum amount of a company’s paid-up capital under the Companies Ordinance. Although there is no deadline for paying the share capital, certain rights of the respective shareholder who has only partly paid his/her shares may be lost subject to the Articles of the company.

    No capital injection audit is required in Hong Kong.

Power: Which person or committee is the executive body of a HK company?2016-12-08T15:49:32+08:00

  • The executive body of a company is its Board of Directors, responsible for the daily running of the company and implementing the decisions in board meetings or general meetings.

    Shareholders can appoint or remove directors in a general meeting subject to the Articles.

Mainland China and Hong Kong: Close Proximity & Preferential Tax Rate2016-12-08T15:49:32+08:00

  • China reason – If Mainland China is the market you will consider sooner or later, Hong Kong is still the best and safest place for you to feel the Mainland market from which over 40 millions of tourists visit HK every year. Not only you could be fed by all international media, local news reports always provide you peripheral but highly valuable local views of parties for or against hot topics ranging from interpretations of changing China policies to conflicts between Mainland tourists and local residents. So why HK? If you have an answer for “Why China?”, you have your own reason already.

    Remarks: If you have a Mainland China Wholly Owned Foreign Enterprise (“WOFE”), you could also enjoy 50% off withholding tax on dividends payable to the HK parent company which has proven substance in Hong Kong.

Hong Kong Tax: Simple & Low2016-12-08T15:49:32+08:00

  • Tax reason – Hong Kong tax system is comparatively simple (including only Profits Tax, Salaries Tax, Property Tax and Stamp Duty).  HK companies are taxed at 16.5% of their taxable profits. This low fixed rate and simple system has been in place for long. Some other countries may have high tax rates but offer preferential tax rates to some selected industries. Be careful when doing comparison as assumptions of fulfilling all conditions to enjoy preferential rates or perpetual existence of those government policies may not be valid.

    There is no VAT, sales tax nor capital gain tax.

True Reasons: Why We Love HK2016-12-08T15:49:32+08:00

  • Other true reasons – you may ask

    “Hey, why don’t you say something about

    (Mad) Lan Kwai Fong & Night Life,
    (Best) Worldwide Food,
    (Convenient) Shopping: globally sourced genuine products,
    (Educational & Playful) Ocean Park,
    (Super lovely) Natural Countryside,
    (Endless) Hiking Tracks,
    (Hidden) Heritages,
    (Primeval) Hexagonal Rock Pillars, etc.?”

    Ummmm, I know those are your true reasons but they are not something you could put on business agenda, so keep those to yourselves and mention only China to your boss please.

Tax: Should I form a HK company to run my e-commerce?2016-12-08T15:49:32+08:00

Territorial Source

Many entrepreneurs form Hong Kong companies to run their e-commerce for tax saving purpose.  Hong Kong adopts a territorial source principle of taxation. Only profits which have a source in Hong Kong are taxable here. Profits sourced elsewhere are not subject to Hong Kong Profits Tax.

As such, if your e-commerce does not have a territorial source in Hong Kong, no profits tax will be charged. Pure Hong Kong company and even presence of a server in Hong Kong by themselves will not satisfy this principle and be subject to profits tax in Hong Kong in general. Details are stated below.

DIPN 39
The only guidance related to e-commerce and issued by our Inland Revenue is the Departmental Interpretation and Practice Notes No 39 (DIPN 39), which was issued over 10 years ago.

DIPN 39 is for information and guidance only. It has no binding force and do not affect a person’s right of objection or appeal to the Commissioner, the Board of Review or the Courts.

DIPN 39 says that the Inland Revenue Ordinance should be applied to e-commerce on the same basis as to conventional forms of business. It is more appropriate to focus on the broad taxation principles in Hong Kong:

1) Carrying on trade, profession or business in Hong Kong
– A totality of facts should be considered when determining whether a person engaged in e-commerce is carrying on a trade or business in Hong Kong, e.g. locations of the following: storage of goods, services, payments, purchases & sales, bank accounts, etc.

– Presence of a server in Hong Kong, even if it is capable of concluding contracts, processing payments or arranging deliverable of physical/ digital goods, without involvement of human activities in Hong Kong would not generally amount to satisfaction of “carrying on business in Hong Kong” by itself.

2&3) Profits are arising in or derived from Hong Kong
– The taxpayer’s operations which produce the relevant profits need to be ascertained, and the locations of those operations
– Locations of the physical business operations usually weighs more than locations of servers

Want to know more?

Still, you need to assess your business as a whole and the effective tax rate after considering the tax assessable in all locations.  If you are interested in this area and would like to share your business model with us for more advice, simply Contact Us (CLICK HERE).

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