Five types of company in Hong Kong


The new Hong Kong Companies Ordinance, which came into effect on 3 March 2014, streamlined the eight different types of companies that could be formed under the old Hong Kong Companies Ordinance into five types:

01
Private companies limited by shares
02
Public companies limited by shares
03
Companies limited by guarantee without a share capital
04
Private unlimited companies with a share capital
05
Public unlimited companies with a share capital
Want to learn more about Private Limited Company in Hong Kong?

About the Hong Kong Private Limited Company


A Hong Kong Private Limited Company – or ‘private company limited by shares’ – is the most commonly used company type for small to medium-sized businesses or trading companies in Hong Kong. A Hong Kong private limited company is a separate legal entity and therefore protects the personal assets of shareholders from business liabilities.

A private limited company that is incorporated in Hong Kong is able to take advantage of all the tax benefits and concessions available to any fully incorporated business in Hong Kong, including the Closer Economic Partnership Arrangement (CEPA), a free trade agreement with Mainland China.

A Hong Kong private limited company must, by its constitution, restrict the right to transfer its shares, limit the number of shareholders to 50 (not including employees and former employees) and prohibits any invitation to the public to subscribe for any shares or debentures. Shareholders can be individuals or corporations of any nationality, domicile or residence.

A Hong Kong private limited company is required to have at least one natural person as director. There is no legal maximum for the number of directors, which can be individuals or corporations of any nationality, domicile and residence. A sole shareholder can be a director of the limited company.

The registered office of the Hong Kong private limited company must be situated in Hong Kong and is required to have a company secretary. If the limited company has one director only, the sole director cannot also be the company secretary. If the company secretary is a natural person, he/she should ordinarily reside in Hong Kong. If the company secretary is a body corporate, its registered office or place of business should be in Hong Kong.

There are no restrictions as to the place at which board meetings can be held. Generally the Articles of Association provide for written resolutions by the directors, as well as for meetings to be held by telephone or through video conference facilities.

Advantages


01
Taxation – Profits tax is payable at a rate of 16.5% by every company carrying on a trade, profession or business in Hong Kong on profits arising in or derived from Hong Kong. Profits that have a foreign source are therefore generally beyond the territorial scope of Hong Kong's taxation system, including those derived by locally incorporated companies. In practice this means that, with careful structuring, no tax is payable by a Hong Kong company that is not actually doing business in Hong Kong. Detailed advice on this aspect is available on request, please contact us.
02
Timescale – A Hong Kong Private limited company can be established in approximately one to two working days, but pre-registered Hong Kong companies are available for immediate use.
03
Distinct legal entity – A Hong Kong private limited company may acquire assets, enter contracts, go into debt, make legal agreements, etc. all in the name of the company.
04
Limited liability vehicle – The liability of the shareholders is limited to the amount of their investment. The personal assets of shareholders can generally not be targeted if the company goes into debt.
05
Ability to raise capital – Capital can be raised either by bringing in new shareholders or issuing more shares to existing shareholders. Hong Kong Private Limited Companies are well recognised by investors and banks.
06
Perpetual succession – As a legal entity, a Hong Kong company in good standing will continue despite changes in membership. Changes to the shareholders and their stakes can easily be made without a negative impact upon the company or its operations. In some instances, taxation or other expenses can be minimised if assets are held in a company.
07
Transfer of ownership – It is relatively simple to transfer the ownership of a company from one shareholder to another. A partial or complete transfer of ownership can be effected by selling all or part of the existing shares, or by issuing new shares to a new shareholder. This can simplify inheritance issues and the buying and selling of subsidiaries and properties, protecting assets for future growth.

Disadvantages


01
Initial and ongoing costs – Generally Hong Kong private limited companies are more expensive to set up and maintain than operating a business as a sole proprietor.
02
Audits and compliance – Hong Kong companies are required to file full audited accounts but small private companies, meeting certain criteria, may apply for a ‘reporting exemption' and prepare simplified accounts and simplified directors' reports. All Hong Kong companies must also prepare and file an annual return that provides details of the current directors and of the shareholders who have held shares in the company at any time during the year. Sovereign can help your company to remain compliant with local regulations. Please click to learn more about our accounting services.
03
Shareholder disclosure – A minimum of one shareholder is required, whose details must be filed on the public register. Corporate shareholders are permitted and confidentiality can be achieved by the use of nominee shareholders.
04
Director disclosure – A Hong Kong Private Limited Company requires at least one director and full details must be filed with the Public Registry. At least one natural person must be appointed as a director. Sovereign can provide professional director services for your company. Please click to learn more about the benefits of professional director services.
05
Registered office – A Hong Kong Private Limited Company must maintain a registered office address in Hong Kong and must also appoint a Hong Kong resident company secretary. The secretary may not be the sole director of the company. We would generally provide company secretarial services as part of our domiciliary service fee. Please click here for details.
06
Restrictions on names and activities – A company name is not permitted if it is identical to that of an existing company. There are also restrictions on the use of certain words in relation to government bodies or licensed activities. A company may be incorporated with either an English name, a Chinese name, or both.
07
Winding up costs and procedures – Terminating a Hong Kong Private Limited Company is generally a more costly and time-consuming process than for a partnership or sole proprietorship.
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