Principal Forms of Business Entities in Hong Kong
The principal
forms of business organisation are the limited-liability company
(both public and private), branch, partnership and sole proprietorship.
Most foreign investors form limited-liability companies, but
in some cases they opt to form branches. All of these entities
are subject to profits tax. A private limited-liability company
is one that restricts that right to transfer its shares, limits
and number of shareholders to 50 and prohibits any offers
to the public of its shares or debentures. Companies that
do not have these restrictions are public companies.
Limited Liability Company (Limited by Shares)
(Unless otherwise stated, Hong Kong company in this website
refers to private company limited by shares)
A company can be incorporated with limited or unlimited liability,
by registration with the Companies Registry under the Companies
Ordinance. Most are limited companies. A limited company generally
has a share capital, and the shares carry a bundle of rights
and obligations relating to the company. ¨Limited liability〃
means that the shareholder's personal liability to the company
is limited to the price of the shares, or to the amount they
have guaranteed. If a company enters into a transaction with
another party and incurs a debt to that other party, the shareholders
are not obliged to pay the debt, unless they specifically
agree to do so.
Limited companies can also be divided into public companies
and private companies. A private company is a company with
50 shareholders or less, the shares of which cannot be freely
transferred or offered to the public for subscription. Only
public companies can be listed on The Stock Exchange of Hong
Kong.
See also;
Features of a Hong Kong company
Registration and Maintenance
Costs of a Hong Kong company
Detailed Registration Procedures
of a Hong Kong Company
Limited Liability Company (Limited by Guarantee)
A company limited by guarantee is a company which is often
used as a device for setting up of a club, association, school
or charitable body.
The liability of its members is limited to the amount which
they agree to contribute to its assets in the event of the
company being wound up. The members are not required to make
monetary contribution to the company at the time of incorporation.
They are only required to give an undertaking to pay a certain
amount to the company if the company is in liquidation. In
practice, the amount is merely nominal, e.g. $100.
It is also possible to incorporate a company limited by guarantee
with a share capital. This is to cater for the situation that
it is necessary to have a capital for the operation of the
company, or that such company may distribute any incidental
profits. Nevertheless this form is uncommon in Hong Kong.
Back to top
Branch Office (Non-Hong Kong Company, Overseas Company)
An overseas corporation that intends to set up a business
in Hong Kong may register a branch office with limited liability.
A branch is the same legal entity as its head office, and
the establishment of a branch office is governed by Part XI
of the Companies Ordinance. The overseas company must register
its branch office within one month of commencing business.
The procedure is quite simple and involves the preparation
and submission of a list of required documents to the Hong
Kong Companies Registry. If the Registrar is satisfied with
the documents filed, a Certificate of Registration will be
issued and the name of the company will be entered into the
register of overseas companies maintained by the Registrar.
Related Topics
Advantages of Overseas Company
(Branch Office)
Overseas Company (Branch Office)
Registration Procedures and Costs
Representative Office
Like a branch, this is a means by which a company incorporated
outside Hong Kong establishes a place of business in Hong
Kong. A representative office can only however fulfil a limited
range of functions. Representative Offices are particularly
useful for foreign companies that wish to analyse the Hong
Kong market before making a bigger investment in the city.
See also: Step by step guideline and costs to register a Hong Kong Representative Office
Partnership
A partnership is formed where a person joins with other people
to conduct business for profits. Partnerships may be set up
for a certain period or for an indefinite period, or may be
dissolved upon the completion of a specific venture if the
partnership was initially conceived for that venture.
A partnership can be either a general partnership or a limited
partnership. The liability of the partners for the debts of
a general partnership business is unlimited. In a limited
partnership, as organised under the Limited Partnerships Ordinance,
there are one or more limited partners who may not take part
in the management and cannot bind the other partners to his
actions. The liabilities of these limited partners for the
debts of the business are limited. There must be at least
one general partner whose liability for the debts of the limited
partnership is unlimited.
The English equitable principles of partnership apply in
Hong Kong to the extent that they are not overruled by the
Partnership Ordinance and the Limited Partnership Ordinance.
All partnerships are required to obtain a business registration
under the provisions of the Business Registration Ordinance.
Limited partnerships must register as such with the Registrar
of Companies, failing which they are deemed to be a general
partnership with unlimited liability on each and every partner.
Apart from that, there is no other registration requirement
or commencement procedure.
The acts of any partner in carrying on the business of the
partnership bind all the other partners. The rights and obligations
of the partners in a partnership business are governed by
their partnership agreement, which can be verbal or written,
and the Partnership Ordinance or the Limited Partnerships
Ordinance, as applicable.
Sole Proprietorship
The establishment and operation of a business in the form
of a sole proprietorship are relatively simple, as the owner
of a sole proprietorship is personally entitled to all the
profits and is responsible for all the liabilities arising
from the business. Sole proprietorships are required to be
registered under the provisions of the Business Registration
Ordinance.
Back to top
|
