Hong Kong Companies booklet – English

A G L O B A L A P P R O A C H T O L E G A L S O L U T I O N S

Hong Kong Companies

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This booklet is designed for the exclusive use of our clients for easy reference in

respect of Hong Kong Companies.

We believe our colleagues and other professional advisors will find this booklet

especially useful, as it contains a comprehensive but brief explanation of the main

aspects of the current Hong Kong legislation.

ii | H o n g K o n g C o m p a n i e s

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TABLE OF CONTENTS

Applicable Laws

1

1. Formation 1

2. Shelf companies 1

3. Incorporation / Time frame 1

4. Continuation 1

5. Memorandum of Association (MofA) 2

5.1. Name clause 2

5.2. Restrictions on the choice of name 3

5.3. Registered office 3

5.4. Objects clause 5

5.5. Capital clause 5

5.6. Subscription of the MofA 5

6. Articles of Association (AofA) 5

6.1. Amendment to the AofA 6

6.2. Statutory Requirements 6

6.2.1. Annual General Meeting (AGM) 6

6.2.2. Annual Return (AR) 8

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6.2.3. Annual audited accounts to be submitted to

the IRD (Inland Revenue Department)?

10

6.2.4. The Profit Tax Return (PTR) to be submitted

to the (IRD) the Inland Revenue Department

10

6.2.5 Business Registration Certificate (BRC) 12

7. Employer's Return of Remuneration and Pensions 12

8. Other Documentation 13

9. Frequently Asked Questions (FAQ’s) 14

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1 | H o n g K o n g C o m p a n i e s

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HONG KONG COMPANIES

Applicable Laws: The Hong Kong Companies Ordinance (Cap. 32) (the

“Ordinance”) and the Inland Revenue Ordinance (the “IRO”).

1. Formation:

One founder member (provided by our company) may incorporate a Hong

Kong company.

The Memorandum and Articles of Association are standard.

We only require information regarding the company’s name, the names of the

shareholder(s), director(s), copies of her/his/their passports, physical address(s),

occupation of shareholder(s), Certificate of Incorporation or business

registration documents if the shareholder(s) and director(s) is/are corporate

entities.

2. Shelf companies:

We have a number of already existing companies for sale. These companies are

“clean”, that is to say, they have never traded or entered into any transaction

whatsoever.

3. Incorporation / time frame:

The time frame for incorporation is seven (7) working days upon receipt in

Hong Kong of the signed documents from the client for registration.

4. Continuation of a foreign company.

Companies cannot be continued to or from Hong Kong.

However, if the client wants keep the Company’s place of jurisdiction but at the

same time, have business registration in Hong Kong, the client would have

below two options


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Option 1: Apply for the Business Registration Certificate with the Inland

Revenue Department as a Representative office. This registration is just for a

Liaison office, not for conducting regular business operations

Option 2: The offshore companies can be registered in Hong Kong as an

Overseas Registered Company at the Companies Registry and Inland Revenue

Department

5. Memorandum of Association (MofA):

The MofA of a Hong Kong company may be written in either English or

Chinese and the company’s name may be in either or both languages.

We provide below a brief explanation of some of the main points found in the

MofA. For further details, please refer to Appendix 1.

5.1 Name clause:

A company may be registered with its name in English or Chinese or in both

languages. If the name of a company limited by shares or guarantee is in

English, the word “Limited” must

be included in the name ending. If the name is in Chinese, with “有限公司” as

the last 4 Chinese characters of the name. If the name is in both English and

Chinese, with “Limited” as the last word of the name in English and “有限公司

” as the last 4 Chinese characters of the name in Chinese respectively.

Abbreviations such as “Co.” or “Inc.” are acceptable. Words such as “Bank”,

“Department”, “Government”, “Commission”, “Bureau”, “Federation”,

“Council”, “Authority”, “Building Society”, “Chamber of Commerce”,

“Cooperative”, “Kaifong”, “Mass Transit”, “Municipal”, “Savings”, “Tourist

Association”, “Trust”, “Trustee”, “Underground Railway” and others in

corporate names, need to be approved by the Government.

No reservation of names can be made when checking the availability of the

names before the incorporation with Companies Registry.


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5.2 Restrictions on the choice of name:

A. No company will be registered with a name that is the same as:

(a) a name appearing in the Registrar’s index of company names;

(b) that of a body corporate established under an ordinance (a statutory

company) – for example, the Urban Council of the Hong Kong China

Gas Company Ltd.

B. The use of certain words in a corporate name is subject to approval by the

Registrar of Companies.

5.3 Registered office:

The statement in the MofA that the company’s registered office must be in

Hong Kong, as required by the Ordinance, establishes the nationality of the

company.

The Registered Office’s address needs to be reported on the incorporation form

(NC1) and submitted together with the MofA to the Company Registry for the

incorporation. Such form must include the following information:

Proposed English or Chinese Company name

Type of company

Address of the Company’s Registered Office

Share Capital

Particulars of Founder Member(s)

First Secretary / Corporate Secretary

Particulars of First Director(s)

The Registered Office will exist once the Company is incorporated.

A post office box in HK is not acceptable.

A. In order to change the registered office address, the following procedures

must be followed:


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(a) the director(s) of the company must pass a resolution, either at a duly

convened meeting or by way of written resolution, to decide where the

registered office will be situated;

(b) the minutes of the directors’ meeting/written resolution referred to in

(a) above are entered in the company’s minute book (directors’

meetings); and

(c) Form R1 is then prepared, signed by a director or the secretary and filed

with the Registry within 14 days of the change.

B. Note that, in applying for a business registration certificate, a company will

be required to state its registered office address. If the registered office is

changed to a new address, notice must be given to the IRD on the

prescribed form (Form IRC 3111A) within one month together with the

current business registration certificate (original document). An amended

business registration certificate will then be issued by the IRD.

C. Any change of a company’s registered office may also necessitate

reprinting of stationery (e.g. letterhead and business cards), amendment of

information appearing on the company’s Internet web site (if any) and

notification to third parties such as the company’s bankers, customers and

suppliers.

Various registers and documents must also be kept at the company’s

registered office, including:

Register of shareholders

Register of mortgages and charges and copies of instruments creating

charges

Register of directors and secretaries

Minutes of the proceedings of general meetings and meetings of directors

Register of debenture holders

Statutory records

Register of Transfers


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However, if the entries in these registries are done in some other office in

Hong Kong, such registries may be kept in such other office, but the Registrar

must be notified of their location.

5.4 Objects clause:

Our standard MofA does not state the company’s objects since, according to

the Ordinance, the company has the legal capacity and thus the rights, powers

and privileges of a natural person. Stating the objects of a company in its

MofA would limit the activities it can engage in.

5.5 Capital clause:

The MofA must specify the total amount of the authorised capital, how the

capital is divided and the nominal value of each share.

The company may increase or reduce its share capital and issue any part of its

capital, with or without preference priority or special privileges or subject to

any postponement of rights or any conditions or restrictions.

No par value shares are not allowed, nor are bearer shares. There is no

obligation to issue or pay up the authorised share capital (this may be done

when desired).

The transfer of shares is subject to a stamp duty.

5.6 Subscription of the MofA:

One or more persons may, for any lawful purpose, by signing his or their

name or names on the MofA (which must be printed in the English or

Chinese language) may form a company with or without limited liability. No founder member may take less than one share.

6. Articles of Association (AofA):

The AofA prescribe regulations for the internal management of a company.

Our standard AofA makes reference to the First Schedule (Table A) of the

Ordinance, which covers all aspects of the management of a company.


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The following are the subjects covered in the AofA:

(a) Preliminary

(b) Transfer of Shares

(c) Chairman of Directors

(d) Powers of Directors

(e) Seal and Cheques

(f) General Meeting

(g) Votes of Members

(h) Division of Profits

(i) Secretary

(j) Notices

6.1 Amendment of the AofA:

A company may at any time, by a special resolution, amend or add new

regulations to its Articles.

6.2 Statutory requirements:

Hong Kong companies are required under the Ordinance and the IRO to fulfill

certain obligations and responsibilities, especially in respect of:

6.2.1 Annual General Meeting (AGM).

A. A company must hold its first annual general meeting (“AGM”)

not later than 18 months after its date of incorporation. Thereafter,

an AGM must be held each year and not more than 15 months may

elapse between AGMs. If a company fails to comply with such

requirements, a member may apply to the court for an order

calling, or directing the calling of, an AGM.


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B. The ordinary business to be transacted at an AGM includes

(a) declaration of a dividend, if recommended by the directors;

(b) receiving the accounts and the reports of the directors

(c) depending on the Articles, the election of new directors in place

of those required to retire; and

(d) appointment of auditors and authorising the directors to fix their

remuneration.

It should be noted that not every company’s articles of association

contain provisions requiring all or any of the directors to retire at

each AGM and for directors to present themselves for election/re-

election by the members. If there are no such provisions, the

notice of the AGM does not need to include item (c) above.

Also, it is common for members to authorise the directors to issue

new shares. If so, the notice of the AGM should include the text of

the proposed resolution.

C. At least 21 clear days’ notice must be given to members of any

AGM. “Clear days’ notice” does not include the date of the AGM

itself, the date when the notice was given or the date of deemed

service of the notice. The notice of the AGM should be

accompanied by copies of the company’s accounts (with directors’

and auditors’ reports).

D. In every notice of an AGM, there must appear with reasonable

prominence a statement that a member who has the right to attend

and vote at the AGM may appoint a proxy or, if allowed, one or

more proxies, to attend and vote instead of him and that a proxy

need not also be a member. A proxy has the same right to speak at

the AGM.


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E. Proxy forms are used by individual members (i.e. natural persons).

If the appointing member decides to attend and vote at the AGM,

the proxy’s appointment is thereby automatically revoked.

F. By contrast, a member which is another limited company or body

corporate would appoint a corporate representative.

G. Care should be taken to ensure that the company’s Articles do not

require proxy forms to be in a particular format. If so, the Articles

should be followed.

H. The usual notice requirement does not apply if all members (other

than those not entitled to attend) consent to short notice.

I. In place of an AGM, the members may sign a written resolution to

transact the business. This will apply where the company has only

one member. In such cases, the company must, before any such

resolution is signed, provide members with copies of the

documents (including accounts) which would otherwise have to be

presented at an AGM.

J. Minutes of the AGM/written resolution referred to in point I above

are then placed in the company’s minute book (general meetings).

6.2.2 Annual Return (AR).

A. Every company must once in every year file an Annual Return

(“AR”) with the Registry. However, it is not necessary to file an

AR in the year of the company’s incorporation.

B. The AR must be in the prescribed format, Form AR1 (and

accompanied by the statutory filing fee.

C. The AR must be signed by a director or the secretary of the

company and should be sent to be filed before the company’s

anniversary date of incorporation.


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D. The AR must include certification to the effect that the company

has not since the date of the previous AR (or date of incorporation)

issued any invitation to the public to subscribe for shares or

debentures of the company and that, if the number of members

exceeds 50, the excess number consists wholly of certain

categories of person (employees and former employees who were

members during their employment).

The following is the information that needs to be included in the AR:

(a) Company’s name, its registered number and business name

(if any);

(b) Kind of company;

(c) Address of the registered office;

(d) Date of the return;

(e) Mortgages and Charges

(f) Number of Member(s) of a Company not having a Share Capital

(g) Share Capital

(h) Details of Member(s) of a company having a Share Capital

(i) Information of Individual Secretary / Corporate Secretary

(j) Information of Individual Director / Corporate Director /

Reserve Director

(k) Registers

(l) Period Covered by Accounts Submitted with this Form.

If the annual return is not filed within the prescribed time period (before the

anniversary date of incorporation), the company, every director, secretary

and manager of the company are liable to face prosecution and, if convicted,

default fines. The maximum penalty is $50,000 for each breach together

with a daily default fine of $700. In addition, substantially higher

registration fee is also payable for the late filing of an annual return of a

company having a share capital.


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6.2.3 Annual audited accounts to be submitted to the Inland Revenue

Department (IRD).

Under the Ordinance, companies are required to keep and disclose

information in respect of their affairs and their financial status. Such

financial information is essential to members and creditors. The

accounts comprise a set of financial statements, a board of director’s

report, tax computation and auditors’ report.

Procedure to be followed: Every year, the accounting books/records

are turned over to an auditor for review or auditing.

After such examination, the directors of the company and the auditor

sign the audited accounts to certify its veracity and correctness.

In the case of a private company, annual accounts are not required to

be filed with the Companies Registry, a private company being a

company whose right to transfer its shares is restricted, whose number

of members is limited to 50 and which is not allowed to invite the

public to subscribe for any of its shares or debentures. Such audited

accounts must also be shown to shareholders at an AGM within 9

months of the end of the financial year.

Failure to keep proper business records may result in a fine of up to

HK$100,000.00.

6.2.4 Profit Tax Return (PTR) to be submitted to the Inland Revenue

Department (IRD).

Normally, the Inland Revenue sends a Profit Tax Return within 18

months of the company’s date of incorporation to the address reflected

in the Business Registration Certificate. The company must file such

PTR within one month of its date of issue. After reviewing this first

profit tax return, the IRD will temporarily exempt the company from

filing annual tax returns if it seems such company is not liable to

Hong Kong profit tax.


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However, it is the IRD’s practice to carry out periodical reviews of the

taxation status of exempt companies by requesting them to file returns

and audited accounts periodically, at intervals of around three (3)

years. We will arrange for the preparation of the PTRs for signature

by the directors. If a company has income, it must inform the IRD.

An annual return over or under HK$50,000, needs to file audited

accounts with the IRD. Every company is required to keep supporting

documents relating to the audited accounts for not less than seven (7)

years.

The IRD requires each person carrying on a trade, profession, or

business in Hong Kong to keep sufficient records of his income and

assets and liabilities in relation to that trade, profession or business to

enable his assessable profits to be readily

ascertained. Such records should be retained for at least 7 years after

the transactions to which they relate, or until the corporation is

dissolved, if this is

sooner. Failure to keep sufficient records may result in a fine of up to

HK$100,000.

The IRD provides heavy penalties for any person who:

(a) Fails to comply with the requirements of a notice to make a

return without reasonable excuse;

(b) Makes an incorrect return without reasonable excuse;

(c) Makes a false return with a fraudulent intent to evade tax;

(d) Fails to keep sufficient business records of income and

expenditure and assets and liabilities without reasonable

excuse;

(e) Fails to notify a change of address without reasonable excuse;

or

(f) Fails to notify a change of ownership of property in respect of

which exemption from Property Tax has been granted.


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Evasion of tax is a criminal offence. Maximum penalty is a fine of

HK$50,000 plus a further fine of 3 times the amount of tax

undercharged and imprisonment for 3 years.

If there are salaries, wages, commission and subcontracting fees

charged in the accounts, these payments should also be reported in

your Employers Return file references with this Department.

6.2.5 Business Registration Certificate (BRC)

The Business Registration Ordinance requires every person who

carries on a business in Hong Kong to apply for business registration

within 1 month from the date of commencement of the business, and

to display a valid Business Registration Certificate (the BRC”) at the

place of business. In addition, these companies must renew their BRC

once every calendar year with the Inland Revenue Department before

the anniversary date of incorporation.

If the registered particulars of the business have changed, the business

operator has to notify the Inland Revenue Department in writing

within 1 month of the change.

7. Employer's Return of Remuneration and Pensions.

The client has to confirm if the company had employed / hired any workers in

Hong Kong during the current year. Not complying with this filing will incur

penalties imposed by the Inland Revenue Department.


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8. Other Documentation:

Documents

Name of the

form/initial

Submitted to Companies

Registry(CR) or Inland Revenue

Department(IRD)

Description

Memorandum and Articles of Association M&AA CR Information of the

Company Certificate of Incorporation C.I. CR

Business Registration Certificate BRC IRD

Incorporation Form NC1 CR

Information of

Director(s) and

Secretary

Notification of change of Secretary and

Directors (Appointment / Cessation)

D2A CR

Notification of change of Particulars of

Secretary and Director

D2B CR

Notification of Resignation of Secretary of

Director

D4 CR

Notification of Situation of Registered Office R1 CR Location of the

Registered Office

Return of Allotments SC1 CR

Information for the

issued authorized

share capital

Instrument of Transfer --- IRD

Bought & Sold Note --- IRD

Notification of change of company name NC2 CR Change of the

Company name

Application for Deregistration of a defunct

private company

DR1 CR

Deregistration Requests under section 88B of the Inland

Revenue Ordinance (Cap. 112) for a Notice of

No Objection to a Company being Deregistered

1263 IRD

Notification of Cessation of Business --- IRD

Annual Return AR1 CR Reporting the Company Structure up to the anniversary date of the Company

Profit Tax Return PTR IRD Reporting on the Company’s business turnover issue yearly

Employer’s Return ER IRD Reporting on the Company employees’ issue yearly


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Frequently Asked Questions (FAQ’s)

The following are the most frequently asked questions (FAQ’s) in respect of Hong

Kong companies.

1. Directors

Minimum number of Directors?

One (1)

Who appoints the first Directors?

The Founder Member(s)

How can the number of Directors may be increased?

By a resolution passed at the Directors Meeting and completion of the

relevant forms. New directors should accept her/his appointment and send

the copy of passport and physical address.

Do Directors need to be shareholders or reside in Hong Kong?

No.

How can a Director resign?

The Director(s) should sign the D2A, D4 forms, a resolution and a letter of

resignation. The form D2A and D4 should be filed into the Registry within

14 days of the changes.

How can a Director be removed?

A Director can be removed from office by a special resolution of the

shareholders and the filing of the relevant form.

Is it possible to hold meetings by electronic means (fax, e-mail, telephone,

etc.)?

Yes, all electronic means are allowed.


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2. Secretary

If the Secretary is a corporate body, who may act on its behalf?

It may act and sign by the hand of any one or more of its duly authorised

directors or officers.

3. Annual Return and Annual Accounts

What is the difference between the annual return and annual accounts and

when do they need to be filed?

Every company must submit a return to the Companies Registry in the

specified form (AR1) at least once in every calendar year, except that a

company need not make its first return until it is required to hold its first

annual general meeting. A company’s first annual general meeting must be

held within 18 months of its incorporation.

Under the Companies Ordinance, companies are required to keep and

disclose information in respect of their affairs and their financial status.

Such financial information is essential to members, creditors and to the

general public. The accounts comprise a set of financial statements and

usually consist of profit and loss accounts, a balance sheet, a directors’

report and an auditor’s report. Annual accounts are required by the Inland

Revenue Department in support of the profits tax return that is filed by the

company.

4. Dormant companies

When is a Hong Kong company considered dormant and what are the filing

requirements for such a company?

A Hong Kong private company is considered dormant if it has not, since any

particular day, entered into any “relevant accounting transaction” and has

applied to the Companies Registry for dormant status by passing a special

resolution authorising its Directors to: make a statutory declaration that the

company will become dormant and that prior to the company becoming

active again (i.e., prior to it entering into a relevant accounting transaction)


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the Directors will deliver to the Registrar a further statutory declaration; and

to deliver a copy of the declaration to the Registrar.

A dormant company is exempt from the statutory obligations to hold annual

general meetings, file annual returns, appoint auditors and prepare annual

audited accounts. The company must nevertheless continue to observe

reporting requirements such as filing details of any change in the particulars

of the officers and registered office of the company. It is also required to

appoint a company secretary, maintain a registered office in Hong Kong and

pay the annual business registration fee.

If a company only has activities outside Hong Kong, can it be considered to

be dormant?

No.

5. Relevant accounting transactions

What are considered as “relevant accounting transactions” according to

Hong Kong laws?

A “relevant accounting transaction” is defined as a transaction required by

law to be entered in a company’s books of accounts (that is, a receipt or

expenditure of money, a

sale or purchase of goods or a change in the company’s assets or liabilities).

However, the payment of fees by a company in order to comply with other

Ordinances (for example, the business registration fee) is excluded from the

definition of “relevant account transactions”.

6. Holding of a Bank Account

Does the holding of a bank account outside of Hong Kong by a company,

without commercial purposes, need to be declared in the annual return or

accounts?


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This does not need to be declared in the annual return. However, any cash in

the bank account will need to be stated in the company’s balance sheet as an

asset.

7. Other information to be included in the Annual Return

Does the fact that a company: (a) is a trustee or settlor in a trust; (b) is a

founder of a private foundation; (c) undertakes commercial activities that

have no relation with Hong Kong; (d) is a holder of shares, manager or

director of companies from jurisdictions other than Hong Kong; or (e) is

solely used as the holder of real estate property or a vessel outside Hong

Kong, constitute a situation which must be included in the annual return or

account?

These facts do not need to be disclosed in the annual return. However, they

may be required to be disclosed and included in the annual accounts.

8. Consequences of not filing the Annual Return

What are the consequences of not filing the annual return? Are there any

consequences for the shareholders or directors?

If a company fails to submit an annual return within the prescribed time limit

(within 42 days after the company’s return date. The company’s return date is, in

respect of any particular year, the anniversary date of incorporation for the

company in that year.), the company and every director, secretary and manager

will be liable to prosecution and, if convicted, to a default fine. The maximum

penalty is HK$50,000.00 for each breach together with a daily fault fine of

HK$700.00. If the relevant return is not filed on time, a Summons will be issued

against the company. Even if the Return is submitted before the Summons is

issued but after the deadline, it will be considered to be a late submission. There is

an additional penalty for the Court Hearing.

9. Consequences of not filing the Annual Accounts

What are the consequences of not filing the annual accounts? Are there any

consequences for the shareholders or directors?


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If annual accounts are not submitted to the Inland Revenue Department as

required, a penalty will be levied on the company, and/or legal proceedings

instituted against it.

10. Consequences faced by the directors for filing misleading annual returns

or accounts.

What are the consequences faced by the directors for filing inaccurate or

misleading annual returns or accounts, either intentionally or unintentionally?

The Companies Registry will take whatever action (including legal action)

that it thinks necessary based on each individual case and circumstance if the

annual return contains inaccurate or misleading information.

A director failing to take reasonable steps to ensure that proper books of

accounts are kept or an officer recklessly or knowingly making false

statements, etc. to auditors is liable to imprisonment and a fine.

11. Consequences of not holding AGMs or Board meetings

What are the consequences of not holding annual shareholder meetings or board

meetings and not submitting evidence of the meetings?

If a company fails to hold an Annual General Meeting, the company and

every director, secretary and manager of the company will be liable to

prosecution and, if convicted, to default fines. The maximum penalty is

HK$50,000.00.

There is no requirement to hold annual board meeting. A board meeting will

be held whenever there is business to be discussed or transacted by the

directors at a meeting.

Every company shall cause minutes of all proceedings at general meetings

and at meetings of its directors to be entered in books kept for that purpose.

If the company fails to comply with this, the company and every officer of

the company who is in default will be liable to face prosecution and, if

convicted, to default fines. The maximum penalty is HK$10,000.00 together

with a daily default fine of HK$300.00.


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12. Holding of corporate books

Where should all corporate books or registers be held?

All corporate books and registers shall be kept at the registered office of the

company, except that,

(a) if the work of making up the books is done at an office of the company

other than the registered office of the company, they may be kept at that

other office; and

(b) if the company arranges with some other person for the making up of the

books to be undertaken on behalf of the company by that other person,

they may be kept at the office of that other person at which the work is

done, always provided that they shall not be kept at a place outside Hong

Kong.

LA/APR.2012

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