Viewpoints

Foreign Investment Incentives Hong Kong offers no special incentives to overseas investors or foreign-owned firms. Nevertheless, its free-port status, low tax rates, good infrastructure, relative freedom from government interference and substantial available capital make it attractive to potential investors and thus competitive with other countries in the region that do offer specific incentives. Restrictions on Foreign Investment The simplicity of procedures for investing, expanding and establishing a local company is a major attraction for foreign investment in Hong Kong. It is relatively easy to start a company: ready-made company, also known as shelf companies, are widely available and enable a businessperson to walk off a plane in the morning and start operating a firm in the afternoon. The government’s special industrial-land policy features somewhat more complex rules, but it is still less demanding than the policies of many other Asian investment centres. Controls on new investments are almost non-existent, and […]

The Revenue (Abolition of Estate Duty) Ordinance 2005 [“the Ordinance”] came into effect on 11 February 2006. No estate duty affidavits and accounts need to be filed and no estate duty clearance papers are needed for the application for a grant of representation in respect of deaths occurring on or after that date. The estate duty chargeable in respect of estates of persons dying on or after 15 July 2005 and before 11 February 2006 (“transitional estates”) with the principal value exceeding $7.5 million will be reduced to a nominal amount of $100. The old law is set out in the Estate Duty Ordinance. Estate duty had the following characteristics: It was based on the territorial principle and was thus only levied on property situate in Hong Kong. The deceased’s nationality, residence or domicile were completely irrelevant in determining whether an estate duty charge arose. The following examples show when […]

The law governing Estate Duty in Hong Kong is set out in the Estate Duty Ordinance. Estate duty has the following characteristics: 1. It is based on the territorial principle and is thus only levied on property situate in Hong Kong. The deceased’s nationality, residence or domicile are completely irrelevant in determining whether or not an estate duty charge arises. The following examples show when a charge arises and when a charge does not arise: Bank accounts: A charge arises if the bank account is in the territory. Contract Debts: A charge arises on monies owing to the deceased by way of a contract debt if the debtor resides in Hong Kong. Registered Shares: Registered shares are located in Hong Kong if the share register is situated there. Bearer Instruments: are located at the place in which they are physically present at the time of death. Patents and Trademarks: are […]

Table of Content Part (1) Summary of Maintenance and Compliance Part (2) Filing Obligations with the Companies Registry Part (3) Change of Name Part (4) Changes to Memorandum and Articles of Association Part (5) Issue of Shares (Increase Issued and Paid up Capital) Part (6) Share Transfers Part (7) Filing of Employer’s Return (for the purpose of reporting the payment of salaries to its employees, including director(s) during the financial year) Part (8) Filing of Profits Tax Return Part (9) Application and Renewal of Business Registration Certificate Part (10) Internal Management Part (11) Keeping Proper Business Records Part (12) Accounting and Auditing Requirements of a Hong Kong Company Part (13) Application for Dormant Status Part (14) Closing Down a Company in Hong Kong by Deregistration (Strike off) Part (15) Closing Down a Company in Hong Kong by Liquidation (Winding Up)

Closing down a company in Hong Kong involves a certain number of formal steps and the overall process can take many months to complete. The most common reasons for closing a company are:  failure of the company to carry on business  company is no longer profitable  inability to pay its debts  falling out between shareholders  non-compliance with statutory requirements, including mismanagement of company affairs  corporate restructuring of the group to which the company belongs Companies can be closed down either by “Deregistration” or “Winding Up”. Although both the procedures will result in the dissolution of a company, the processes they entail are significantly different. This part deals with the liquidation of a Hong Kong private company. 1. Types of Winding up Available to a Hong Kong Company There are two paths to winding up a company in Hong Kong – voluntary winding up or […]

Closing down a company in Hong Kong involves a certain number of formal steps and the overall process can take many months to complete. The most common reasons for closing a company are:  failure of the company to carry on business  company is no longer profitable  inability to pay its debts  falling out between shareholders  non-compliance with statutory requirements, including mismanagement of company affairs  corporate restructuring of the group to which the company belongs Companies can be closed down either by “Deregistration” or “Winding Up”. Although both the procedures will result in the dissolution of a company, the processes they entail are significantly different. This part deals with deregistration of a defunct Hong Kong private company. 1. Introduction to 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 […]

If you have an inactive company, or where you registered a company for a specific project but that project for whatever reasons has been postponed and you may need to use that company again in the future, it may be cost effective to declare it in dormant status. If the company is dormant it does not have to file an annual return, hold an AGM, prepare audited accounts or appoint auditors. That means savings on both time and money. Definition of Dormant Company The term “dormant” applies to a Hong Kong limited company that, in legal terms, has “no significant accounting transactions” during a financial year. It is not the same as a “non-trading company”, a term that has no legal meaning. No significant accounting transactions means no entries in the company’s accounting records. The amount paid for shares when the company is first formed and a few costs that […]

1. Book-keeping (Keeping of Books of Accounts) Requirements In accordance with the requirements of Section 121 of the Hong Kong Companies Ordinance, every company shall cause to be kept proper books of account with respect to- (1) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place; (2) all sales and purchases of goods by the company; (3) the assets and liabilities of the company. For the purposes of the above requirements, proper books of account shall not be deemed to be kept with respect to the matters aforesaid if there are not kept such books as are necessary to give a true and fair view of the state of the company’s affairs and to explain its transactions. The books of account shall be kept at the registered office of the company or at such other place […]

Keeping of Proper Business Records as Required by the Hong Kong Tax Authority Every year, the Hong Kong Inland Revenue Department will issue a Profits Tax Return (PTR) to every company. When the company receives the tax return, it has to complete and return it together with a copy of audited accounts and a tax computation. Only in the case that the company has not yet commenced its business or is a small size company or all operation and business are carried outside Hong Kong. However, the exemption from filing audited financial statements by the Inland Revenue Ordinance does not exemption the company from auditing of its financial statements. Therefore, every company must to prepare its account and engage a Hong Kong public accounting firm registered with HKICPA (the statutory body regulating the accounting profession in Hong Kong) to carry out an audit of the financial statements of the company. […]

Directors and Board Meetings   Responsibility for the overall management of a Hong Kong company typically rests with its board of directors. Generally, the board authorizes the actions of the company through board resolutions passed at board meetings or, if authorized by the articles, by written resolution signed by all the directors or a stated proportion of them. There is no requirement that board meetings be held in Hong Kong or at any specific intervals. Normally, reasonable notice of meetings must be given to each director, but the Articles of Association can modify this general obligation. The board of directors may delegate its powers to certain persons. A certain degree of delegation is, so far as third parties dealing with the company are concerned, normally implied in the case of managing directors and senior employees of a company.   Shareholders and Shareholder Meetings Certain decisions however must, by law, be […]