FAQ

Hong Kong Company Formation

1. What are the conditions of establishing a limited company?

The new company ordinance permits the formation of company by one or more persons. Any person (natural or legal person) cannot at the same time be a shareholder, a director and also a secretary. If the secretary is an individual person, there are no restrictions on his nationality but he must reside in Hong Kong. There are no restrictions on the nationality and domicile of the shareholders and directors. The executive body of a company is its board of directors, responsible for the daily running of the company and implementing the decisions in the annual general meeting (AGM). The AGM is the highest body of a company. It must be held at least once a year and must not be held more than 18 months since the last AGM. There is no upper limit of the capital of limited companies, but it must not less than 1 Hong Kong dollar.

2.What are the advantages of using limited companies to engage in commercial activities in Hong Kong?

Limited companies are companies with limited liabilities. From a legal perspective, a limited company is a separate legal entity and thus has the capacity to institute proceedings against others or vice versa. Since the liability of shareholders is limited to the nominal value of their shareholdings, the maximum possible loss of the shareholders could only be the total sum of their investments. Generally speaking, the directors and shareholders of the companies are not personally liable for the debts of the company.Where the investors prefer to adopt other forms, such as sole proprietor or partnership, to run their businesses, the liabilities of the investors are unlimited. The creditors can hence institute legal proceedings directly against the investors. Where the investors cannot repay the debts, the investors are forced into personal bankruptcy. Nevertheless, incorporating and running a limited company is comparatively more costly.

3. What can I do if I want to start business quickly?

If investors wish to start business quickly and cannot spend time for establishing limited companies, they can acquire, through law firms, ready-made shelf companies that have not commenced business and thus have no liabilities or debts. The shelf companies have been registered in the Companies Registry and have acquired the Certificate of Incorporation. The fees are more or less the same as for fresh incorporation and the procedures can be completed in a few days. After the completion of the above procedures, the company must obtain a Business Registration Certificate from the Business Registration Office in order to engage in commercial activities.

China Company Formation

1. What’s the minimum registered capital of Chinese company states by the PRC Company Law?

According to PRC Company Law, a limited liability company’s registered capital shall not less than the following minimum amount:

2. What are the investment vehicles commonly used in China according to the Foreign Investment Laws?

Investment vehicles commonly used in China are Sino-foreign equity joint ventures (EJV); co-operative (or contractual) joint ventures (CJV); wholly foreign-owned enterprises (WFOE); joint stock companies; holding companies; representative offices (RO); assembling and processing contracts (APC), and branches. Among these vehicles, RO’s, APCs and branches are not separate legal entities. Under China’s WTO and CEPA commitments, wholly foreign-owned enterprises are permitted in more and more industries.

3. What’s the minimum registered capital of Foreign Investment Enterprise under the CEPA?

The minimum registered capital for Foreign Investment Enterprise (FIE) is different from one industry to another. According to “the Administration Measure for Foreign Investment in Commercial Sector”, the minimum registered capital amounts are substantially reduced. For instance, the minimum registered capital requirement for a wholesaling enterprise is RMB 500,000 and for a retailing enterprise is RMB 300,000. (possible reduction subject to further legislation)

Offshore Company Formation

1. How do I register an IBC?

You would need to do this through a locally licensed registered agent and you could do this through International Corporate Agents Limited – a licensed registered agent and trustee from 1996.

You would normally submit the name of the desired IBC to the agent who would seek a name approval. This is granted instantly. Once the Memorandum & Articles of Association of the company are presented to the Registrar of IBC and these comply with the law, a certificate of incorporation may be issued. The Registrar’s office is automated, which enables incorporation to be done within 24 hours.

2. Are non-English language names permitted?

Yes, the name of a company may he expressed in any language but where the name is not in a national language a translation and transliteration of the name in English or French shall he given.

3. What are Name endings to denote Limited Liability?

“Limited”, “Corporation”, “Incorporated”, “Sociutu Anonyme”, “Public Limited Company”, “Berhad”, “Proprietary”, “Aktiengesellschaft”, “Besloten Vennootschap” and others or their abbreviations. Other name endings such as NV, S.A.R.L., LLC, GmbH may also be used.

Accounting Services

1. Why accounting work is required?

Accounting work is required for several major reasons:

1. required by tax department;
2. required by management;
3. required by fund provider, such as shareholder and banker.

2. What do you need to prepare for accounting work?

a. Last year record

1. financial statements and audit report
2. tax demand note and corresponding

b. Company information

1. For limited company – the latest Company Registry annual return copy
2. For unlimited company – a summary of partnership and share information

c. Bank account transactions

1. Bank account list stating all bank accounts opened
2. Bank statements
3. Cheque book stubs
4. Outward cheques copies (if any)
5. Inward cheques copies (if any) (if any)
6. Bank deposit and withdrawal record books (if any)

d. Income

1. Invoice copies of sales just before year start and just after year end (for cut off verification purpose)
2. Sales record book (if any)

e. Accounts Receivable

1. Invoice settlement record
2. Outstanding invoice (unsettled) as at year end
3. Outstanding invoice (unsettled) as at year end for those appear as at last year end (aged invoice over 1 year)

f. Expenses & Accounts Payable (A/P)

1. Bills (or invoices) received during the year
2. Unpaid bills as at year end
3. Unpaid bills as at year end which appears as well in last year end
4. Goods or services received but bills not received – amount and supplier list

g. Stock (if applicable)

1. Stock list and value as at last year end
2. Stock list and value as at this year end
3. Stock purchase record during the year
4. Stock movement record (in and out)
5. Stock-take record as at year end

h. Salary and commission

1. List of recipients with name, ID number, address and amount received during the year (including those resigned)
2. MPF contribution record

3. What material you can have after accounting work?

1. Profit & Loss Statement
2. required by management;
3. required by fund provider, such as shareholder and banker.

Auditing Services

1. Are all companies’ accounts required auditing?

Yes for all Hong Kong companies.
No for BVI, Clayman Island, Mauritius, Bahams.

2. Do I need to audit the accounts if my Hong Kong company is inactive or the turnover is small?

The requirement to audit the accounts of the company is set down by the Hong Kong Companies Ordinance. The Ordinance does not provide any conditions under which no audit is required.

3. The Tax Department has recently informed me that it will not send tax returns to the company. Does it mean that I do not need to audit the company’s accounts?

No. The audit of the company’s account is still necessary even audited accounts is not required to be submitted because the Tax Department does not issue the tax return.

4. How long does it take before I can have the audited accounts?

Audit time required depends on the size of the job. Normally, the bigger the company the longer the time is required. However, the time schedule can be agreed upon before engagement is confirmed.

Company Secretarial Services

1. Who should act as the company secretary?

Anybody may act as the Company Secretary of a private limited company. A person may consent to act as both the Company Secretary and the Director of the same company (provided that there are at least two people). If you wish to form a company and only have one director you can use our Company Secretarial service to act as your Company Secretary. There is a small fee for using this service in addition to fees for completing and filing documents at Companies House. Some documents also require the payment of a filing fee to Companies House.

2. What rights does a company secretary have?

They depend on the terms of his or her contract with the company. The secretary has no special rights under the Act.

3. Why does my company need secretarial services?

All companies incorporated in Hong Kong are required to comply with the Companies Ordinance which requires the company to submit various information each year or in case there are changes in information previously submitted. Heavy penalty will be added if the requirements are not met. Poken’s associate ABBA International Corporate Services Ltd helps you to make sure that you do not violate from the law.

Taxation Services

1. We close our accounts on 31st December. Can we file form I.R.56Bs in accordance with our accounting date?

No. The basis period for Salaries Tax runs from 1st April of the current year to 31st March of the succeeding year. Hence, form I.R.56Bs must be completed for the relevant year ended 31st March.

2. Is it necessary to report the income paid to shareholders / directors of a limited company? How about the income paid to proprietor or partners of an unincorporated business?

There is no need to report dividends paid to shareholders of a limited company because dividends are not taxable. On the other hand, salaries and directors’ fees received by directors are chargeable to Salaries Tax and should therefore be reported by means of form I.R.56B.

There is, however, no need to file form I.R.56B for the proprietor / any partner of an unincorporated business or his spouse. The remunerations paid to such person are not allowable deductions under the Inland Revenue Ordinance and have to be adjusted in computing the profits chargeable to Profits Tax.

3, Are the contributions made by employee to an MPF scheme deductible under Salaries Tax?

Employee can claim a tax deduction under Salaries Tax for the mandatory contributions that he makes to an MPF scheme. The maximum amount deductible for each year of assessment is $12,000. However, any voluntary contributions made by him are not deductible.

4. Are contributions made by a self-employed person for himself to an MPF scheme deductible under Profits Tax?

Self-employed person can claim mandatory contributions which he has made for himself to an MPF scheme as allowable business expenses under Profits Tax. The maximum amount that can be claimed for deduction is $12,000 for each year of assessment. Any voluntary contributions made by him are not tax deductible.

Trademark Registration

1. Why is it important to register my trade mark?

The importance of having your own brand is undisputable. Registering your company/product trade mark is the first step to establishing your own brand. It is of utmost importance to register it before your competitor does and to obtain a early trade mark registration filing date to protect your brand.

To be able to benefit from the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) and obtain the Zero Tariff for China trade, having your own brand is a important factor to facilitate you in obtaining that status.

2. What is a trade mark?

A trade mark is a distinctive sign that distinguishes the goods and services of one trader from those of others. Its origin dates back to ancient times, when craftsmen reproduced their signatures, or “marks” on their products. Over the years these marks evolved into today’s system of trademark registration and protection.

Typically a trade mark can be words (including personal names), indications, designs, letters, characters, numerals, figurative elements, colors, sounds, smells, the shape of the goods or their packaging or any combination of these. A sign must be capable of being represented graphically by way such as drawing or description in order for it to be registered as a trade mark.

3. What is the procedure?

Generally there are 4 stages:

Pre-filing Search – It is important to conduct a search of the trade mark prior to application to see if your trade mark is already registered or has been applied for by another trader.

Application – After filing the application to the Trade Marks Registry, the Registry will issue a response to the application within 2 months. If the application is approved, the mark will be published. However if the Registry raises any objection to the application, it is possible to raise counter objection persuading the Registry to withdraw their objection.

Publication – Once the trade mark has been accepted by the Trade Marks Registry for registration, it will be published in the Hong Kong Intellectual Property Journal for 3 months. Within this 3 months period, anyone can view your trade mark and may lodge opposition to it. If no objection is raised within this 3 months period, then an application can be filed for registration certificate.

Registration – Once the 3 months publication period is over and your trade mark has been accepted for registration, the details of your trade mark will be entered into the trade marks register and a certificate of registration will be issued. The registration of your trade mark will date back to the filing date of your application which means your rights take effect from the filing date of the application.

Virtual Office

1. What is a Virtual Office?

A virtual office is not an actual office. It is a bundle of services that provide all the elements of a real office. These include a commercial address, handling of your mails, private phone number and receptionists answering your calls with your company name.

2. Can companies share one account or phone number?

Normally, we answer calls with one company name for one phone number. However, we can associate up to 2 persons per phone number.

3. What is “direct transfer” of incoming calls?

Direct transfer of incoming call means we can transfer your incoming calls to your mobile immediately, hence you can have a direct conversation with your clients.

4. What address should I use for business registration?

The address will be exactly the same as our address. If you signed up for Causeway Bay, you should use our Causeway Bay address. Similarly, if you signed up for Central, you have to use our Central address. If you signed up for Mongkok, our Mongkok’s address is what you should use.

MYOB Accounting Software

1. Does it handle invoicing?

Yes – and all your invoices, POs, checks and statements are fully customizable. This includes relocating fields, adding text and graphics, changing fonts and more! You can make your forms look exactly the way you want them to look.

2. Will it handle my inventory?

Yes – including component building and buying and selling in different quantities (e.g. buying in cases of 12 and selling single units).

3. Does it have any password protection?

Absolutely – down to the individual window or report. You can even control who is permitted to make corrections, when necessary.

4. Does it handle Sales Taxes?

Yes – it handles complete calculation and reporting of sales taxes, including state and municipal levies.

Company Wind Up

1. What are the conditions of deregistration of limited company?

According to Section 291AA of Companies Ordinances, a Hong Kong Limited Company could apply for deregistration only if the company:

1. Never commence business since incorporation; or
2. Has ceased business over 3 months before the application; and
3. No outstanding liabilities.

2. If company still has liability, can it apply for deregistration?

Yes, it can. But it is subject to the following situations:

1. The liability is taken up by the parent company, related parties, director, shareholder or organizer;
2. The creditor is willing to give up the liability. For example, creditors are a group of parent company, related parties, organizer, director and shareholder that have been made signatures on agreement to confirm the wavier.

3. What documents are required for applying for deregistration?

The required documents are outlined as follows:

1. Photocopy of Certificate of Incorporation
2. Photocopy of Business Registration License
3. The latest Annual Return or D1, D3, R1 and etc.
4. The latest audited Financial Statements.

Opening Bank Account

1. What is “bank account opening kit”?

“Bank account opening kit” is a set of documents certified by Hong Kong Certified Public Accountant. Most banks in Hong Kong ask for these documents to open bank account for a limited company. The documents include:

1. Certificate of Incorporation
2. Business Registration Certificate
3. Memorandum & Articles
4. Company Registry forms D1, D2, D3, R1 and R2 whenever applicable
5. Appointment of Directors and Consent of Acting as Directors
6. First Directors’ Meeting Minutes
7. Directors’ Minute approving bank account opening

2. How can I move the money in my bank account when I am not in Hong Kong?

Most banks in Hong Kong provide services under this situation:

a. Moving fund to another bank account in Hong Kong

1. Take cash from bank account first by ATM card. However, banks may not issue ATM card for company bank account if none of the authorized signatures can sign singly.
2. Use signed instruction form and you have to confirm whether the bank accepts fax. Otherwise, you have to send the signed original to the bank by mail or courier. Moreover, please don’t forget to take spare copy of those instruction form.
3. Use telephone and internet banking. For most banks, this is free-of-charge service but 3rd party bank account has to be registered before you can transfer money to him. Some banks may not accept such registration over the phone and internet.

b. Moving fund to another bank account NOT in Hong Kong

As remittance of money is involved, remittance fee will be charged in most of the case:

1. Use signed instruction form and you have to confirm whether the bank accepts fax. Otherwise, you have to send the signed original to the bank by mail or courier. Moreover, please don’t forget to take spare copy of those instruction form.
2. Use advanced features of telephone and internet banking and this is not free-of-charge. Approximately, the annual fee is HK$500 and varies according to bank and services provided.

As banks always update their service, please refer to our staff for detail information.