By Vlad Cuc, specialist in company formation matters
The Companies Ordinance is the reference legislation for any company in Hong Kong. It stipulates important matters about company law and regulation in Hong Kong, the manner in which companies can be established and contains details about corporate personality, corporate governance and other issues like liability, financing and administration.
If you want to open a company in Hong Kong
you should know that a new Companies Ordinance has been enforced starting with March 2014 and it brings new, progressive changes to company related matters. The New Ordinance does not completely replace the previous legislation, however, the changes are important because they refer to core issues for the formation of companies and the manner in which they are operated in Hong Kong. Some of the provisions that have not been altered include company insolvency and winding up or the disqualification of company officials.
The New Company Ordinance is an important step in the evolution of the corporate regulatory regime in the Special Administrative Region because of the fact that, ultimately, it contributed to the modernization of the legal framework under which companies operate in this jurisdiction. The contribution is an important one as the legal changes have contributed to the further improvement of the city’s position as an international financial and commercial center.
In this article we refer to some of the most important provisions of the Ordinance, referring to company registration in Hong Kong, corporate governance and others.
Types of companies in Hong Kong as per the Companies Ordinance
- - sole proprietorship: the simplest business form and the one with the fewest requirements.
- - private limited liability company: the most popular business form, suitable for different types of businesses.
- - public limited company: similar to the private limited one, suited to large businesses.
- - company limited by guarantees: used mainly by non-profit companies, there are no shareholders but members who guarantee.
- - general partnership an association between business partners where they bear full liability.
- - limited partnership: in this form, only one of the partners needs to have unlimited liability, the other/s being the limited partners.
Additionally, foreign companies can open branches and subsidiaries in Hong Kong.
The Ordinance has had significant importance for the facilitation of business formation. This is partly due to the fact that the requirements for company registration, as far as the constitutive documents are concerned, have been simplified. With the introduction of the New Ordinance, the importance of the Memorandum of Association has been diminished in the sense that its role as a separate constitutive document from the Articles of Association was decreased. Mandatory for any company incorporated in Hong Kong, the Articles of Association will now contain the Memorandum of Association, a previously independent document containing the duties of the company. The company can be incorporated by using the company incorporation form and by presenting the Articles of Association, along with other documents.
The appointment, removal and resignation of Directors in Hong Kong is regulated by law and companies also need to observe accounting and audit requirements. Our company formation agents in Hong Kong
can detail the general requirements for company incorporation
The Companies Ordinance contains information about the Registrar of Companies and the Companies Register
, company formation and other related matters and also about re-registration, the share capital for each type of company and transactions related to the share capital.
The role of the Companies Register in Hong Kong
The Companies Ordinance includes important provisions about the Companies Register, the manner in which corporate documents are registered and the powers of the Register. The Registrar of Companies can refuse the registration of a certain document should this document be unlawful, incomplete or altered. Moreover, for the purpose of company formation in Hong Kong, documents must be signed (digital signatures are also an option) and the lack thereof can constitute grounds for the refusal of the document.
According to the New Companies Ordinance, the Registrar has the power to make annotations on the Companies Registy
and issue information such as whether or not a certain public corporate document has been corrected or replaced. Under the new provisions, the Registrar can send notifications to companies when information in inconsistent and it also has the right to require company officials to make the necessary updates to the information submitted to the Companies' Register.
Changes in Hong Kong’s companies’ law
The Companies Ordinance Chapter 622 of the Laws of Hong Kong brings certain progressive changes, aimed at improving the business climate in Hong Kong and creating new opportunities for foreign investments. Some of the provisions included in the new ordinance make it easier for smaller companies to do business in Hong Kong.
One important change is the elimination of the nominal value of shares. The sum will be merged with the total share capital of the company. Some other changes include the following:
- • Accounts and audit: the criteria for companies that need to prepare the simplified director’s and financial reports are simplified, among others.
- • Share capital transactions: the reduction of capital and the option for share buy-backs, the adoption of a uniform solvency test.
- • Company director appointment: restrictions for corporate directorship in private companies for those that are members of a group of companies.
- • Company director duties: the New Ordinance maintains the requirement for a director to have reasonable care, diligence and skills for this position.
- • Company administration: a general meeting may be held at more than one location (by using different technological means).
The Ordinance is of interest not only for those who open a company in Hong Kong but also to those investors who are looking towards setting up a place of business for a non-Hong Kong company. The filing requirements for these legal entities have been simplified, and there have been some clarifications on the changes that can be operated to the company name for non-Hong Kong companies.
The measures taken for the enhancement of corporate governance as well as the simplification of the company incorporation procedure and for better regulation have contributed to the evolution of the corporate regime in Hong Kong.
Our company formation representatives in Hong Kong
can give you additional details about the taxation for companies
as well as other information about the main requirements for company incorporation, management and control as per the Companies Ordinance.
You can contact us
for any questions and to set up an appointment.