Hong Kong is particularly a popular choice among foreign investors keen on Asian markets. Its low tax regime, pro-business environment, preferential access to the mainland market and more importantly the fact that Hong Kong is open to 100% foreign ownership are the key tractions for foreign enterprises, investors and entrepreneurs. There are three different types of entities available in the Companies Ordinance for foreign companies to set up and commence their business operations in Hong Kong SAR, namely Subsidiary Company, Branch Office and Representative Office. That being said, a Wholly-Owned Subsidiary remains a popular choice among foreign investors. The following is a guide to the steps on how to incorporate a subsidiary company in Hong Kong.
A subsidiary company is generally a private limited company incorporated in Hong Kong with a local or foreign company as its shareholder. A Hong Kong-incorporated subsidiary company, even if it is wholly-owned by a foreign entity, is treated as a local company for the purpose of taxation and is entitled to the tax benefits available to local companies. The subsidiary company has a separate legal entity, and the parent company’s liabilities are limited to the share capital that it has subscribed to.
Subsidiary Company Structure Requirements
To incorporate a subsidiary company in Hong Kong, it can have a minimum of one and maximum of 50 shareholders. There is no restriction on nationality or residency. 100% foreign shareholding is permitted. Thus a foreign company can incorporate a wholly-owned subsidiary company in Hong Kong. This gives complete independence and control over the subsidiary while the subsidiary gets to enjoy the tax benefits and other preferential treatment that is made available to local companies. In the case of a natural person, the person must be at least 18 years of age.
At least one director, who is either a natural person of at least 18 years of age or body corporate, must be appointed. There are no restrictions on nationality or residency. Therefore, local and foreign individuals, regardless of their residency, and body corporates can serve as a director. In the case of natural persons, the person must not be bankrupt or convicted. A sole shareholder can also serve as the director.
A locally resident individual or body corporate must be appointed as the Hong Kong company secretary. A sole shareholder/director cannot be the Hong Kong company secretary.
Local Registered Address:
To successfully incorporate a subsidiary company in Hong Kong, it must have a physical address registered in the records of the Company Registrar. After company incorporation, all formal notifications would be sent to this registered physical address. The company should maintain its relevant internal documents and mandatory registers in this address. P.O. box numbers will not be accepted for this purpose. Residential spaces besides commercial spaces are also not allowed as a registered address.
A Hong Kong subsidiary is required to submit an audited financial statement annually to the Inland Revenue Department (IRD). Therefore, a chartered accountant who is a member of the Hong Kong Society of Accountants and holds a practising certificate must be appointed as the company’s auditor.
There is no minimum or maximum requirement for share capital. While bearer shares are not allowed, usually companies are incorporated with an authorized share capital of HKD 10,000 and an issued/paid-up capital of HKD 1.00.
Subsidiary Company Incorporation Process in Hong Kong
1. Choose Company Name
The first and foremost step is to choose an appropriate name for the company that is in line with the guidelines issued by the Registrar. No provisional approval or reservations are allowed in Hong Kong. The Registrar is empowered to direct a company to change its name if needed. A proposed name could be decline if it is same as or similar to a name that appears in the ‘Index of Company Names’, or a name of another company that is already incorporated or registered under an Ordinance, or if it infringes on trademarks, or is deemed to offend public sentiments or conflict public interest. In case of names that contain specific terms such as ‘Council’, ‘Department’, ‘Bureau’, ‘Commission’, ‘Government’ etc. additional approval must be obtained. To avoid undue delay and rejections, it is generally advised to check for name availability with the Registrar online via Companies Registry’s CyberSearch Centre or Company Search Mobile Service.
Nevertheless, an applicant will not know if the proposed name is registrable or otherwise until the Registrar processes the application. If the proposed name/names are not registrable the application will be rejected and fee will not be refunded. Seeking help from professional service providers early in the process to incorporate a company in Hong Kongwill save time and effort.
It should be noted that a company name can be in English (must end with "Limited"), or in traditional Chinese (must end with "有限公司"), or an English name and a Chinese name. The combination of English and Chinese characters in a name is generally rejected.
2. Prepare the Documents Required
The following documents must be prepared and kept ready for the process of company registration in Hong Kong:
- Company’s Articles of Association.
- A Notice to Business Registration Office (IRBR1)
- A completed company incorporation form with the following information:
- Company name
- Registered company Hong Kong address
- Proposed business activities description
- Details of the director(s), shareholder(s) and company secretary
- Member’s liability
- Share capital register on company incorporation
- Number of shares subscribed by the subscribers
- In the case of non-resident director(s) and shareholder(s), passport copy and proof of overseas residential address
- In the case of resident director(s) and shareholder(s), Hong Kong identity card copy and proof of residential address copy
- In the case of corporate director(s) and shareholder(s), Company Incorporation Certificate and Articles of Association
3. Company Name Approval
Obtain Registrar’s approval for the chosen name. It must be noted that registration of a company name with the Registrar does not automatically confer the right to use the name as a trademark. For the name to be used as a trademark, an application must be filed with the Trade Marks Registry, which will approve if the name does not infringe with any existing trademarks. Therefore, if the company name is to be used as a trademark, it is prudent to check the Trademark Register to check if the chosen name potentially infringes with any existing trademarks.
4. Company Registration
Application to incorporate a subsidiary company in Hong Kong can be submitted to the Registrar via the e-registry (a 24-hour service portal) or a hardcopy at the Company Registrar. The approval time for an online application is normally quicker than for a hardcopy filing, with approval occurring the same day. However, in the case of hardcopy submission, it could take up to four days. Generally, if all required documents are ready, the entire process to incorporate a company in Hong Kong would take one week.
5. Collect Certificates
Depending on the mode of application submission, the Certificates will be issued in electronic form or hard copy form. Regardless of the form in which they are issued, the certificates have the same legal effect. Collect or download the Certificate of Incorporation(CoI) and Business Registration Certificate (BRC) upon approval. Typically, an application for company incorporation in Hong Kong made to the Company Registrar is deemed to have made a simultaneous application for a business registration certificate from the IRD. Therefore under the One-stop Company and Business Registration Service, which is a service jointly provided by the Companies Registry and the Inland Revenue Department, the CoI and BRC will be issued together. It must be noted that the BRC needs to be renewed annually and a BRC must be obtained preferably before commencing operations or within 30 days of commencing operations. When BRC is obtained simultaneously along with the CoI, the BRO must be notified on the commencement of business. Any changes in the details or nature of the business carried out by your company must be notified to the BRO within 30 days.
Post Company Incorporation Procedures in Hong Kong
Obtain Licenses and Permits
Most of the business activities can be operated in Hong Kong freely. However, certain businesses such as travel agencies, Food and Beverage retailers, insurance, investment and education service providers are required to secure a license or permit from the corresponding regulatory departments of Hong Kong Government. The license or permit must be registered within one month after company incorporation in Hong Kong to run the business. It can be attained in 2-8 weeks from the registration date.
Open Bank Account
Some banks require the directors to be physically present at the branch for opening an account, while phone interviews would suffice for others. The following list of documents (not exhaustive) is needed for opening accounts:
- Account application forms;
- Corporate registration documents;
- Copies of passports of the significant members;
- Personal resume;
- A bank reference letter of each significant member;
- A bank statement of each significant member, or any related corporates;
- Proofs of business such as agreements, invoices, contracts, etc. of the current company or any related one.
The process to incorporate a subsidiary company in Hong Kong is generally a breeze. However, attention to details such as choosing an appropriate name and ensuring all required documents are in order before proceeding with the company incorporation procedure in Hong Kong will result in quick and seamless incorporation. Engaging a professional service provider will not only ensure the initial incorporation but also help the subsidiary company to remain in compliance with the ongoing obligations as required by the Companies Ordinance. The following are the ongoing compliance requirements of a subsidiary company in Hong Kong:
- Annual renewal of the BRC by applying for the renewal one month before its expiry date;
- Holding of the Annual General Meeting (AGM) within 18 months from the date of incorporation and no more than 15 months gap between two AGMs thereafter;
- Filing of annual return with the Registrar within 42 days from the incorporation anniversary;
- Filing of annual tax return with the IRD along with audited accounts within the 18th month from the date of incorporation and then periodically every next 12 months.
- Filing of employer’s return with the IRD annually and as required within the prescribed period.
We understand that doing company incorporation in Hong Kong on your own can be a daunting task. Therefore at HKCR, we ease your company incorporation in Hong Kong through our comprehensive services tailored to your needs. Talk to us today on how you can easily incorporate a subsidiary company in Hong Kong with us.
- How many shareholders are required to incorporate a subsidiary company in Hong Kong?
- You are required to have a minimum of 1 and a maximum of 50 shareholders to incorporate a subsidiary company in Hong Kong.
- What are the key steps involved in the process to incorporate a subsidiary company in Hong Kong?
- The following outlines the 5 key steps to incorporate a subsidiary company in Hong Kong:
- Choose Company Name
- Prepare the Documents Required
- Company Name Approval
- Company Registration
- Collect Certificates
- What are the post procedures after incorporating a subsidiary company in Hong Kong?
- There are 3 post procedures after company incorporation in Hong Kong:
- Obtain Licenses and Permits
- Open Bank Account
- Ongoing Compliance
- When must the license or permit be registered to successfully incorporate a subsidiary company in Hong Kong?
- The license or permit must be registered within 1 month after company incorporation in Hong Kong. You are required to obtain it from the corresponding regulatory departments of the Hong Kong Government.
Our team of experts will guide you on company incorporation and beyond with our wide range of services.