5 Feb 2016
Types of Companies in Hong Kong
Investors may establish companies limited by shares, companies limited by guarantee and unlimited companies in Hong Kong. The procedures involved are simple. Provided that the documents required are complete, a company can be set up within one hour (via the e-Registry portal) or four working days (submission of documents in hard copy form) at the earliest. For investors who wish to engage the services of professional firms, there are many solicitors, accountancy or secretarial firms in Hong Kong providing such services.
There are various ways for investors from the Chinese mainland to operate a business in Hong Kong. The major types of business entities include company, sole proprietorship, partnership, joint venture and branch. To set up a company, the applicant should register with the Companies Registry in accordance with the Companies Ordinance. There are many types of companies in Hong Kong, but over 99% of the new businesses opt for private limited companies (hereinafter referred to as “private companies”). In Hong Kong, there are over 500,000 private companies but only less than 2,000 public companies.
Based on the extent of shareholder liability, companies can generally be classified into three types:
Company limited by shares: there are private companies and public companies (listed companies). Given below is information on private companies:
Maximum liability of shareholders: their unpaid share capital. In other words, when a company is being wound up, the shareholders are not required to make further contribution to pay the company’s debts.
Scope and applicability: smaller-scale businesses.
Advantages and disadvantages:
|Limited liability||Public disclosure obligation|
|Greater continuity||High cost of documentation|
|Ease of capital acquisition||Need to comply with cumbersome procedures under Companies Ordinance|
|Independent legal entity||The only way to dissolve a company is winding-up|
|Ease of share transfer||--|
|Ownership is separate from management||--|
Company limited by guarantee: generally refers to companies without a share capital.
Maximum liability of shareholders: the amount of capital contribution agreed upon and stated in the company’s articles of association.
Scope and applicability: non-profit organisations such as clubs, societies, schools, charities etc.
Maximum liability of shareholders: no ceiling. When a company is wound up and becomes insolvent, the shareholders are obliged to make further contribution to pay the company’s debt.
Scope and applicability: businesses in general.
Non-Hong Kong companies wishing to operate in Hong Kong may register in the form of a branch. The branch and its head office must be the same legal entity. The establishment of a branch is subject to the provisions of Part XI of the Companies Ordinance. The non-Hong Kong firm must have an office address in Hong Kong and must authorise a representative to take charge of its business. The authorised representative may be an individual, a law firm or a professional accounting firm, but should be resident in Hong Kong.
A branch must register with the Business Registration Office within one month from its date of commencement of business.