Viewpoints from Kaizen

The Hong Kong new Companies Ordinance was published in the Government Gazette in August 2012. It will become effective on 3 March 2014. From the Commencement Date, all the provisions in the Existing Ordinance will be repealed and replaced by provisions in the New Ordinance, except for the prospectus, and winding-up and insolvency provisions. These two areas will remain in the Existing Ordinance which will then be renamed the Companies (Winding Up and Miscellaneous Provisions) Ordinance. The Securities and Futures Commission has indicated that it will lead the review of the prospectus regime and plans to move the prospectus regime into the Securities and Futures Ordinance (Cap 571). Separately, the Hong Kong Government has said the winding-up and insolvency regime will undergo a separate law review exercise. This article aims to explain the requirements of the new Companies Ordinance regarding the appointment of individual director by private companies. Introduction The […]

1. Introduction The new CO introduces a new “administrative restoration” procedure, which is a new process to administratively restore a company to the Companies Register by the Registrar of Companies (“the Registrar”) without the need for recourse to the Court of First Instance as required under Cap. 32. 2. Application for Restoration (1) Restoration of Local Company A local company dissolved pursuant to striking off action by the Registrar may apply for administrative restoration if the following conditions set out under section 761 of the new CO are met: (a) the company was in operation or carrying on business at the time its name was struck off the Companies Register; (b) if the company has any immovable property situate in Hong Kong which has become vested in the Government as bona vacantia, the Government has confirmed that it has no objection to the restoration; (c) the applicant must bring up […]

Overview Although Hong Kong does not have any specific law that governs offshore company formation, it is one of the most popular jurisdictions for setting up an offshore company owing to its low tax regime, absence of foreign exchange controls, political and economic stability, ease of offshore company setup, etc. Setting up an offshore company in Hong Kong is the perfect vehicle for conducting offshore banking activities, international trade, investment activities, and for asset protection. This guide sets out the advantages of Hong Kong incorporation, the options for registering an offshore company in Hong Kong, Hong Kong Offshore Company formation requirements and Hong Kong incorporation procedure and timeline. Hong Kong Offshore Company Incorporation Benefits The most common reasons behind setting up an offshore company in Hong Kong are: Ease of offshore company setup Hong Kong is ranked as one of the easiest places to do business in the world. Setting […]

Introduction The new Hong Kong Companies Ordinance (the ‘New Ordinance’) was passed by the Legislative Council on 12 July 2012 and is set to take effect from 3 March 2014. The last major review and amendment of the existing Companies Ordinance (Cap 32) (the ‘Existing Ordinance’) was undertaken in 1984. The majority of the provisions of the Existing Ordinance originated from the UK Companies Act 1929 and the statute was generally felt in need of overhaul. Upon its implementation, the New Ordinance replace the Existing Ordinance to become the legal framework for the formation and operation of companies in Hong Kong (including overseas companies operating in the jurisdiction). The changes to be introduced by the New Ordinance are extensive and will affect not just companies themselves but also parties who have dealings with companies, such as members and creditors. This article aims to explain in brief changes in respect of […]

Introduction The new Companies Ordinance (“the new CO”) introduces changes in relation to directors with a view to enhancing corporate governance, improving regulation and facilitating business. Directors’ Duty of Care, Skill and Diligence The new CO clarifies the standard of directors’ duty of care, skill and diligence. Section 465(2) of the new CO sets out a mixed objective and subjective test for the standard of a director’s duty to exercise reasonable care, skill and diligence. It also clarifies the rules on indemnification of directors against liabilities to third parties. Section 469 of the new CO permits a company to indemnify a director against liability incurred by the director to a third party if the specified conditions are met. Certain liabilities and costs must not be covered by the indemnity, such as criminal fines, penalties imposed by regulatory bodies, etc. Directors’ Conflicts of Interests To avoid directors’ conflicts of interests, the […]

1. Office Premises When deciding on premises for your company, you should consider: (1) Whether to work from home, a shop, an office, a managed workspace or a factory; (2) The size of your workplace and whether it will be sufficient for future requirements; (3) The location of your premises, particularly if you will be relying on passing trade; (4) Whether to rent or buy, and the costs involved in each; (5) Insurance, local crime rates and security requirements; (6) Car parking facilities; (7) Maintenance and running costs: and (8) Necessary refurbishment costs such as telephone, fax, office equipment and furniture. 2. Leasing Customs and Practices in Hong Kong When renting office/retail shop premises for business purposes, you should bear in mind the following leasing customs and practices: (1) Tenancy agreements A tenancy agreement is a legally binding contract which specifies the detailed rights and obligations of both the tenant […]

Overview Hong Kong’s financial services industry has seen unprecedented growth in recent years. As a result, Hong Kong has become a key financial services center in Asia. In Hong Kong, an intermediary needs a valid license to conduct financial services regulated activities. The regulated activities include securities dealing; futures dealing; leveraged foreign exchange trading; advising on corporate finance, securities and futures; securities margin financing; providing automated trading services; and asset management. The Securities and Futures Ordinance SFO governs the securities and futures markets, establishing regulations for intermediaries, offers of investment products and general conduct in these markets. Types of Financial Service Licenses The SFO regulates 10 types of regulated activity. Generally, no person may carry on a business (or to hold itself out as carrying on a business) in a regulated activity unless, the person is a corporation licensed or registered by the Securities and Futures Commission SFC for that […]

Introduction The new Hong Kong Companies Ordinance (the ‘New Ordinance’) was passed by the Legislative Council on 12 July 2012. The last major review and amendment of the existing Companies Ordinance (Cap 32) (the ‘Existing Ordinance’) was undertaken in 1984. The majority of the provisions of the Existing Ordinance originated from the UK Companies Act 1929 and the statute was generally felt in need of overhaul. From the Commencement Date, the concept of authorized capital and nominal value will be abolished. All company shares will cease to have a nominal or par value, whether issued before or after the Commencement Date. Any provisions in a company’s constitution which state the amount of the company’s authorized capital and the nominal or par value of its shares will be regarded to have been deleted from the constitution. The nominal or par value amount of issued shares, together with the amounts standing in […]

A Hong Kong limited company can be dissolved in the following two ways: Deregistration/Strike Off of a Hong Kong Company A Limited company, which is defunct and solvent, wants to cease its business must officially apply to the Companies Registry to deregister it or strike it off from the Register of Companies. A company is still required to file Annual Returns to the Companies Registry before it is officially deregistered. A penalty will be imposed on the Company and/or the management for failure of submission of Annual Return. In applying for deregistration, certain declarations should be made by the applicant. Any person who knowingly and recklessly gives information to the Companies Registrar that is false or misleading in a material particular is liable to a fine and to imprisonment. As the deregistration process is more technical and affecting company’s property. A company should seek professional advices before making an application. […]

The differences between a Hong Kong branch and a Hong Kong subsidiary of a foreign company stem from the fact that, unlike a branch, a subsidiary is an entity which, under Hong Kong law, is entirely separate from its parent. The business activities available to a company in Hong Kong are generally not dependent upon whether the company is locally incorporated and there is generally little practical difference between operating a branch and a subsidiary company in respect of profit computation. The rate of tax levied on profits is the same for local and foreign companies and dividends are not subject to separate taxation in Hong Kong. Reasons for preferring a subsidiary over a branch The usual reasons for preferring a subsidiary over a branch include the following: the parent company will not be liable for the debts of its subsidiary; its legal liability will be limited to the amount […]