As one of the world’s leading international financial centres, Hong Kong attracts countless entrepreneurs and business owners to establish companies and pursue their commercial dreams. While setting up a company in Hong Kong might sound straightforward – a few forms, a few days, and an address are all it takes to establish an international enterprise – the reality is often more complex than many imagine…
Many businesses preparing to set up in Hong Kong often harbour misunderstandings regarding the processes, responsibilities, taxation, and even legal requirements, which can ultimately lead to failure. To address this, Capital Business Centre provides a comprehensive breakdown of the procedures, requirements, and key considerations for establishing a company in Hong Kong. We also aim to clarify common “company setup myths,” helping you to lay the right foundation for your business venture from the very first step.
I. The Company Registration Process in Hong Kong
Hong Kong’s company registration system is transparent and efficient. If an entrepreneur has all the necessary documents ready, the entire registration process can be completed in as little as a few working days:
Step 1: Choose Company Type and Name
First, you need to determine your company’s structure: will it be an unlimited company or a limited company? Generally, for SMEs and start-ups, a private limited company is often the preferred choice. This is primarily because shareholders of a limited company are only liable for the amount they initially invested. Creditors cannot pursue shareholders’ personal assets to settle company debts.
Next, select a unique company name and check for duplicates via the Companies Registry (CR) website. To avoid delays due to name duplication, consider preparing several potential names and checking them one by one until you find an available one.
Step 2: Prepare Required Documents
After reserving your company name, you can prepare the registration documents, which include:
● Incorporation Form (NNC1 or NNC1G)
● Articles of Association
● Business Registration Notice (IRBR1)
● Consent to Act as Director (NNC3) (if applicable)
Step 3: Submit Application and Pay Fees
Once all registration documents are prepared, you can submit the application forms and pay the requisite fees either through the CR’s e-Services portal or in person. The registration fees are approximately HKD $1,720 (incorporation fee) + $2,200 (business registration fee).
Step 4: Collect Certificates
Upon successful registration, the Companies Registry will issue a Certificate of Incorporation and a Business Registration Certificate. With these certificates, the entrepreneur can proceed to open a corporate bank account.
▲ Note: Banks have varying requirements for account opening approvals. Some may require directors to attend an interview in person. It is advisable to understand the specific bank’s requirements beforehand and prepare relevant documents (e.g., business plan, proof of business).
II. Basic Requirements for Establishing a Hong Kong Company
Hong Kong is highly open to entrepreneurs; individuals of any nationality or residence can register a company, provided they meet the following conditions:
Shareholders and Directors:
— Must be natural persons aged 18 or above.
— No nationality restrictions. A single person can act as both the sole shareholder and director.
Company Secretary:
— Must appoint a Company Secretary responsible for statutory records and compliance matters.
— If there is only one director/shareholder, that person cannot simultaneously hold the position of Company Secretary.
Registered Address:
— Must provide a physical local address in Hong Kong (a P.O. Box is not acceptable).
— Using a registered address service provided by a business centre is a convenient and legitimate option.
III. Key Considerations for Company Setup
E-Application is Faster: The electronic filing system allows for instant document submission, reduces manual errors, and typically delivers approval results within 24 hours.
Importance of the Company Secretary: The Company Secretary is not just a “statutory position” but also a gatekeeper for the company’s legal operations. Key responsibilities include submitting annual returns to the Companies Registry, updating director information, and maintaining statutory registers.
Do Not Use Personal Bank Accounts for Business Receipts: Hong Kong regulations stipulate that commercial transactions should be conducted through a corporate bank account. Using a personal account for company income and expenses may be viewed by the Inland Revenue Department as tax evasion or financial non-transparency.
Seek Professional Assistance: If this is your first venture, it is advisable to seek help from a professional business centre or corporate secretarial firm to save time and avoid legal risks.
Myth 1: Does a Limited Company Equal “Zero Risk”?
There are two main types of companies in Hong Kong: Limited Companies and Unlimited Companies.
A Limited Company primarily embodies “limited liability.” It operates as a legal entity separate from its owners. The liability of shareholders and directors is limited to the amount of share capital they have subscribed. This means that if the company faces financial difficulties or even bankruptcy, shareholders’ personal assets are generally protected. However, this does not mean escaping all liabilities; shareholders can still face unlimited liability in cases of fraud or illegal activities.
The liability for an Unlimited Company means that the proprietor or partners bear joint and several unlimited liability for the company’s debts. In other words, debts that the company cannot repay can be pursued against personal assets. Therefore, before starting a business, it is crucial to fully consider the business risks and your personal financial capacity to choose the appropriate company structure.
Myth 2: Low Hong Kong Tax Rate = Easy Tax Filing?
Limited Companies are required annually, under the Hong Kong Companies Ordinance, to prepare financial statements, have them audited by a practicing CPA, and then file tax returns with the Inland Revenue Department for profits tax assessment.
Unlimited Companies in Hong Kong are not required to undergo an audit. They only need to prepare accounting records and report the information on the tax return form to the Inland Revenue Department for tax declaration.
However, it is important to note that when operating a company in Hong Kong, whether limited or unlimited, the business operator is responsible for retaining relevant company records (including all accounting vouchers and receipts) for at least 7 years.
Myth 3: Small Companies Don’t Need to Worry About Company Law?
In Hong Kong, both limited and unlimited companies must strictly comply with relevant laws and regulations. For example, operating a Hong Kong limited company requires adherence to the Companies Ordinance (Cap. 622).
Furthermore, the compliance requirements for limited companies under the law are more stringent than for unlimited companies. They are required to appoint a qualified Company Secretary to ensure the company complies with the Companies Ordinance. This includes timely disclosure and filing of specified information about the company, its officers, and shareholders with the Companies Registry, and reporting any changes to this information. This ensures the public can access the latest company details maintained by the Registrar of Companies.
Myth 4: If I Stop Operating the Company, Can I Just Leave It Dormant?
In Hong Kong, whether it is a limited or unlimited company, if you decide to cease operations, you must follow the relevant legal procedures for deregistration. This involves settling tax matters, paying all outstanding government fees, and submitting written notification and necessary documents to the Business Registration Office and the Companies Registry.
Additionally, before applying for deregistration, a limited company must obtain a “Letter of No Objection” from the Inland Revenue Department.
Setting up a company in Hong Kong is indeed faster, lower cost, and more transparent than in many other jurisdictions. However, “easy to set up” does not mean “easy to operate.” Many startups encounter subsequent problems due to overlooking legal details or believing common misconceptions.
Therefore, if you are preparing to start a business in Hong Kong, remember to:
Clearly define your company type and liability boundaries.
Prioritize tax filing and regulatory compliance.
Engage a professional Company Secretary or business centre for assistance.
Regularly review your company’s operational status to ensure long-term, stable development.
In summary, setting up a company in Hong Kong is more than just obtaining a certificate; it is the first step towards entering the international market. Understanding the system and avoiding common myths will enable your company to embark steadily on this world-class commercial stage.