Set up a company in Hong Kong

Hong Kong, as one of the world’s busiest financial centers, has long been an ideal destination for entrepreneurs and investors. This place not only provides a huge consumer market but also an important bridge for businesses to access emerging markets in Asia and globally. With a modern legal system, world-class infrastructure and preferential tax policies, Hong Kong has become an ideal business environment, attracting thousands of businesses to establish and develop. Viet An Law would like to guide you through the procedures for establishing a company in Hong Kong through the article below.

Choosing the type of company in Hong Kong for setting up

Limited Liability Company (LLC)

A Limited Liability Company (LLC) is the most popular form of business in Hong Kong. This type is chosen by many businesses because of the flexibility, ease of management and limited responsibility of shareholders.

Main features:

• Limited Liability: The most prominent feature of this type is that the liability of the shareholders is limited to the amount of capital contributed to the company. This means that the personal assets of the shareholders will not be affected if the company is in financial difficulty.
• Number of shareholders: There can be one or more shareholders, depending on the size and needs of the business.
• Legal entity: An LLC company is considered an independent legal entity, with the right to own assets, sign contracts and take legal responsibility before the law.

Advantages of a Hong Kong LLC Company:

• Protection of personal assets: Limited liability helps protect the personal assets of shareholders within the scope of the capital contribution.
• Easy to set up and manage: The incorporation procedure is relatively simple and the management process is flexible.
• Taxes: Hong Kong has a preferential tax system, especially for foreign-sourced revenue.

Shortcoming:

• Regulations on financial statements: LLC companies must comply with regulations on financial statements and annual reports, although not as strict as public companies.

Private Limited Company

Distinctive features of a private company

• Non-Listing: Self-Employed Companies are not allowed to publicly offer shares on the stock market. This means that the company’s shares can only be transferred between existing shareholders or through private channels.
• Size: Usually suitable for small and medium-sized businesses. This type is flexible and easy to manage, especially suitable for startups or family companies.
• Number of shareholders: There is a limit to the number of shareholders, usually no more than 50 people.
• Limited Liability: Like other limited liability companies, the liability of shareholders is limited to the amount of capital contributed to the company.

Advantages of Tu Nhan Company

• Information security: Due to non-listing, information about the company is not widely publicized, helping to protect internal business information.
• Flexibility: Shareholders are free to decide on matters of management and administration of the company without much constraint from outside investors.
• Easy to set up and manage: The procedure for setting up and managing a private company is usually simpler than that of a public company.
• Taxation: Enjoy the same preferential tax policy as other limited liability companies in Hong Kong.

Shortcoming

• Difficulties in raising capital: The fact that public offerings are not allowed makes it more difficult for the company to raise capital from outside investors.
• Low liquidity: Shares of private companies are often illiquid, which means that they are difficult to convert into cash quickly.

Sole Proprietorship:

Outstanding features

• A single owner: The entire ownership and management of the company belongs to one individual.
• Unlimited Liability: The owner is liable for unlimited liability for all the debts and liabilities of the company. This means that the owner’s personal assets can be used to pay off the company’s debts if the company is in financial difficulty.

Advantage

• Easy to establish: The incorporation procedure is simple and fast, and does not require a lot of administrative procedures.
• Flexibility: The owner has the right to decide all the company’s affairs without having to consult other shareholders.
• Low costs: The cost of setting up and managing is usually lower than other types of companies.

Shortcoming

• Unlimited liability: This is the biggest risk of this type of company. If the company is in trouble, the owner’s personal assets may be affected.
• Difficulty in raising capital: Raising capital for a one-member company is often more difficult than other types of companies.

In addition, there are many other types of companies such as joint venture companies, foreign companies, non-profit companies, etc. But these types are more popular for investing.

Preparation of company setting up documents in Hong Kong

Choose a company name

• Check availability: You can use the online search tool of the Business Registration Office to check if the desired company name has been used.
• Avoid restricted names: Certain words or phrases are restricted from use in the company name as offensive words, cause disorder, or affect national security.

Prepare the necessary documents

• Charter: The charter should clearly state the company’s charter, including the objectives, powers, and rights and obligations of directors and shareholders.
• Form 1A: The form includes basic information about the company, such as name, registered address, and names and addresses of directors and shareholders.
• Identification: Provide identification documents of directors and shareholders, such as passports or identity cards.
• Proof of Address: Provide proof of the addresses of directors and shareholders.
• Letter of Consent to be a Director: Obtain written consent from each director to assume that role.

Submit business registration dossiers

• Where to submit: You can submit your application directly at the Office of the Business Registration Office or by post.
• After submitting the application: The Business Registration Department will review the customer’s application. If the application is complete and valid, you will receive a Business Registration Certificate. With this certificate, customers can carry out the next procedures such as opening a bank account, registering for tax, etc.

Registration for issuance of outward investment certificates

• Accordingly, Vietnamese investors register to invest abroad if the establishment of the company uses capital sources (money, machinery, value of intellectual property rights, property rights) transferred from Vietnam to Hong Kong.
• In Clause 13, Article 3 of the Law on Investment 2020, it is stipulated: “Outward investment activities are the transfer of investment capital from Vietnam to abroad, using the profits earned from this investment capital to carry out overseas business investment activities”
• Thus, if money and assets from Vietnam are used to invest in establishing a company in Hong Kong, they must carry out procedures for registering outward investment at the Ministry of Planning and Investment. If the investment capital in foreign currencies transferred to Hong Kong is equivalent to VND 20 billion or more, the Ministry will consult the State Bank.
• The time limit for issuance of outward investment certificates according to the Law is 15 working days, if the dossier is valid.

Register for Forex Trading

After being granted an outward investment certificate or an overseas business license, the investor shall register foreign exchange transactions at the State Bank of Investor, investment capital, investment capital account opened at a licensed credit institution to carry out overseas investment activities and the progress of remittance of investment capital in cash abroad.

A dossier of registration for foreign exchange transactions related to outward investment activities comprises:

• Application for foreign exchange trading related to outward investment activities.
• A copy of the outward investment certificate.
• A copy of a foreign language, a Vietnamese translation of the written approval or a business license or a document proving the right to conduct investment activities in the host country.
• The original of the written certification of the licensed credit institution on the opening of the investor’s investment capital account, clearly stating the account number and type of foreign currency.
• The original of the authorized credit institution’s written certification of the amount of money the investor has transferred abroad before being granted the outward investment registration certificate.
• Written explanation of the need for remittance of investment capital abroad in Vietnam dong in case of remittance of investment capital abroad in Vietnam dong.

Remittance of investment capital abroad

After completing the registration of foreign exchange transactions, the investor transfers the investment capital abroad according to the registered project schedule.

In case of change in capital transfer schedule, it must be registered with the competent State Bank.

If you have inquiries to set up a company in Hong Kong, kindly contact Viet An Law for the best support!