There are mainly 3 methods of closing down a business in Hong Kong. Whichever method you choose, it is important for your business to follow the proper procedures required. If you fail to do this, it may result in legal consequences. You can: Deregister your business Wind up your business Put your company in a “dormant” state* *A dormant company is not exactly “dissolved”. It is temporarily not engaging in accounting transactions, but the dormant status is reversible. A non-trading company can register for an inactive status with legal implications i.e., dormancy. Deregistering your business In Hong Kong, it is most common to close a business by company deregistration as it has the main advantage of being inexpensive. Notice of No Objection A private company or a company limited by guarantee that has ceased its operations and is solvent can apply for de registration to the Company Registrar. A request for the “Notice of No Objection” can be made by the director of a company or the director may authorize a member or nominate another person of the company to make the said request. Generally, the evidence of authorisation for a nominated person may not be required if such person is a practising professional (e.g. accountant/solicitor). Conditions for Deregistering: All members of the company agree to the deregistration; The company has never commenced business or operation, or has ceased business for more than three months immediately before the deregistration application; The company has no outstanding liabilities; The company will not start/resume business in the future; The company is not a party to any legal proceedings;The company has disposed of all trading stock, landed property and securities, if any; If the company is a holding company, none of its subsidiary’s assets consist of any immovable property situate in Hong Kong; The company has no outstanding obligations under the Inland Revenue Ordinance.

Essentially, an annual general meeting (“AGM”) is a meeting held by the company once a year to update its members on its financial performance and allow members to engage in management. In general, AGM is a statutory requirement under the Companies Ordinance (Cap. 622). What is an AGM? An AGM generally has the following functions: To keep the members posted on the company’s finances and performance;To elect the managing body of the company; and To provide a platform for the members to ask questions. For instance, the appointment of directors/company secretaries, declaring dividends to shareholders, and voting on resolutions are examples of some of the matters discussed in the AGM. When should you hold an AGM? Under the new Companies Ordinance, a company must hold an AGM in respect of each financial year of the company, rather than in each calendar year. The time limit for a private company (not a subsidiary of a public company) or company limited by guarantee to hold an AGM is 9 months after the end of its financial year. In case of any other company, the time limit is 6 months after the end of its financial year. If it is the first AGM, the time limit is nine months after the first anniversary of the company’s incorporation or three months after the end of the first accounting reference period. Exceptions: Despite the necessity of holding an AGM stated in the Companies Ordinance (Cap. 622) and the model Articles, there are situations where an AGM is not required, they are as follow: When the company has only one member;If everything to be done at the meeting is revolved by written resolution and copies of the documents that had to be shared in the meeting are provided to the members of the company before the circulation date of the written resolution; If there is unanimous consent of members that the AGM can be dispensed with; orWhen the company is dormant. Notice of AGM A 21-day written notice is required when calling

Essentially, all businesses in Hong Kong must obtain a business registration certificate from the Inland Revenue Department (the “IRD”) and display a valid certificate at the place of business. Businesses in the form of sole proprietorship and partnership have to be registered with the IRD. Registration must be done within a month of commencement of business. Note that you can only register your business after commencement, any application to register a business yet to commence operation would not be accepted by the IRD. If you failed to register your business, you will be liable to a fine of $5,000 and to imprisonment for 1 year. Registration Procedure Choose an appropriate business name You can register a Chinese name, an English name, or both. You can register a Chinese name with English alphabets but not English words. There are certain symbols you can include the name(s). There are also limitations, for example: The name must not suggest that business is incorporated with limited liability when it is in fact not;The name must not suggest a connection with the Government or any public body when no such connection exists or has existed; andFor an incorporated business with limited liability, its business name must not give the impression that the incorporation is done under a different name. E.g., an incorporation named “John Doe Ltd” cannot be registered under the business name “ABC Ltd”. How to Register? Below are the general steps to register your business–you have to: complete the prescribed application form pay the business registration fee & levy; andproduce your proof of identity https://www.ird.gov.hk/eng/tax/bre_abr.htm#a3ty. Registration of a limited partnership with Company Registry On top of business registration with the IRD, limited partnership must be registered with the Companies Registry using the prescribed form. Otherwise, it would be considered a general partnership. Registration of a limited

When starting a business, one of the most important steps is to select the right legal structure for your business. In Hong Kong, the most commonly-used business vehicles are sole proprietorships, partnerships and limited companies. Sole proprietorship A sole proprietor is also known as a sole trader. It is an unincorporated business where the business is owned and operated by a single individual. Its key features are: there is no concept of a separate legal entity i.e. there is no legal distinction between the business and its owner; the liability of the owner is not limited i.e. the owner can be held personally responsible for all the liabilities; and the sole proprietor can keep all profits but also be completely responsible for all the liabilities incurred by the entity. A sole proprietorship is ideal if you are looking for: Low-cost and quick set up;Operating a small business; and Running a business with low or no risk. Pros of sole proprietorship Cons of sole proprietorship It is the most flexible and simplest business structure with low administrative costIf the business fails, the sole proprietor will have no protection of personal assetsThe registration procedure is simple. See further in the FAQ on companies - business registrationIf the sole proprietor dies or becomes seriously ill, the business will automatically come to an endThe business owner has full control over policies, capital investments, business operations and profitsIt is hard to raise additional capital from investors as they are generally wary of unincorporated entitiesIt is simple to close down the businessMinimum tax reporting (File annual tax return with the Inland Revenue Department); and the profits are taxed at sole proprietor’s marginal tax rate, which may be lower than tax rate for a limited company.To understand more about tax rates, you can read ‘How does the profits tax regime work in Hong Kong?’ Since sole proprietorship is easy to set up, small

A Memorandum of Understanding (“MOU”) document sets out the preliminary terms of a commercial transaction agreed by the parties in the course of negotiations. This is often used to ensure both parties are on the same page as regards the major aspects of the transaction and prevent misunderstandings. It is also known as a heads of term agreement, letter of intent or heads of agreement. Key elements Names of the parties; including contact numbers, companies involved, etc.Purpose of the agreement; goals and intentions of the parties; state if parties intend for the MoU to not be legally binding and is subject to a final agreementResponsibilities and roles of the parties; the framework of the negotiations, e.g. stages of negotiation and meeting timesDetails of the project; other parties involved, deadlines, a summary of the transaction, key issues Non-disclosure, confidentiality clauses Even though an MOU is essentially “subject to contract/agreement” and hence not legally binding, they may still contain certain binding provisions, such as confidentiality, applicable law, exclusivity, non-solicitation or good faith negotiations, which the parties will have to abide by. Why is it important? Having a mutual agreement on the major aspects of the deal prevents likelihood of any misunderstandings and allows for effective communication. Thus, MOU is particularly important if you are negotiating a complex deal or are engaged in a matter for a long period of time as it will further reduce disagreements when drafting the final agreement. When do you need it? They are used in the beginning stages of negotiations, to agree upon preliminary terms before detailed formal and binding agreements are made. Parties can enter into more than one MOU during negotiations, especially if they are lengthy. In the joint venture context, the joint efforts and possible merger of businesses would take lengthy negotiation and the commercial impacts to all

There are two common types of joint venture: Incorporated Joint VentureContractual Joint Venture Small businesses may consider setting up a joint venture with a local enterprise in Hong Kong. Below are the different characteristics of incorporated and contractual joint ventures to enable you to choose the structure that best suits your requirements. Incorporated Joint Venture An incorporated joint venture is often formed as a limited liability company. It must be registered in the Company Registry in accordance with the Companies Ordinance.The parties may determine terms and conditions relating to sharing of profits and losses, right to vote, ownership structure in a shareholder agreement or joint venture agreement. Since this joint venture will be a separate legal entity, the parties will have limited liability and profits can be distributed as dividends. Essentially, this structure is regulated by the articles of association and shareholders agreement. Keep in mind that if the joint venture is conducted in the form of a company, it is governed by the Companies Ordinance (Cap. 622) and the common law. Though if the company is incorporated in the BVI or Cayman Island, it would be governed by the laws of the respective jurisdiction. Contractual Joint Venture In a contractual joint venture, the parties enter a contract to cooperate to achieve a business goal. Unlike the incorporated joint venture, no new corporate body is formed. This form of joint venture is advantageous if parties are working on a one-off undertaking for a short period of time, since there is no filing or continuous compliance requirement except for the mandatory business registration.Therefore, the cost is lower and parties can maintain a higher level of privacy. Key takeaway Joint ventures can be incorporated or contractual in Hong Kong. Incorporated joint venture is often structured as a limited liability companyContractual joint venture is formed by entering into a

A joint venture can be understood as a short-term partnership that comes to an end once its purpose is served. There would be a specific task that the joint venture is established to complete, and the concert ends upon completion. On the other hand, a partnership is usually set up for conducting continuous business. Joint venture A joint venture consists of two or more parties contributing resources to accomplish a specific task. It may have a separate legal personality from the parties. It can refer to several types of business arrangement between undertakings. There are two types of joint ventures in Hong Kong i.e., incorporated and contractual. Corporate joint ventures registered in Hong Kong are governed by the Companies Ordinance and the common law; while contractual joint ventures are largely regulated by agreement between the parties. Partnership Partnership is an arrangement where two or more individuals co-own the business with a plan to share the profits in the manner mutually agreed between the partners. There are in general two types of partnership, namely general and limited partnerships. They are governed by the Partnership Ordinance, the Limited Partnerships Ordinance and the common law in Hong Kong. To see more on partnership, read the FAQ on Partnership. Comparison Joint VenturePartnership If the joint venture is set up as a limited liability company then the parties will be liable only to the extent of their investment. In case of contractual joint venture, each party may give the other an indemnity in respect of loss caused by his failureThe partners are jointly and severally liable for any debts or liabilities of the PartnershipIt involve two or more companies combining their resources and efforts for a common business goal It is comprised of individuals who are running the business togetherEnds once the task is completed Usually last for a longer period of time and ends when the partners decide to dissolve or exit the

A joint venture consists of two or more parties contributing resources to accomplish a specific business project. There are two main types of joint venture in Hong Kong: Incorporated Joint Venture where the joint venture is a separate corporate body and is registered with the Companies Registry in accordance with the Companies Ordinance. For more information on the registration of a company, read “How do I register a company in Hong Kong?”.Contractual Joint venture where the parties enter a contract to cooperate to achieve a business goal. The relationship between the joint venture parties is governed by the agreement between the parties. For more information on business registration, read “What is a business registration certificate? If my business is owned by a company, do I need to register my business in Hong Kong?”. To understand more about the types of joint ventures in Hong Kong, read “What are the different types of joint ventures?”. Why joint ventures? A joint venture is advantageous in the following ways: The parties can share and combine resources to achieve the venture’s goal;The parties can enjoy the benefits of economies of scale, since purchasing and production in bulk will generally result in lower per-unit cost; and The parties can benefit from expertise and talents from all parties. The Competition Ordinance Joint ventures are subject to the Competition Ordinance in Hong Kong, which prohibits any conduct that harms competition in Hong Kong. The Ordinance contains two conduct rules: The First Conduct Rule prohibits agreements that harm competition in Hong Kong. This implies that undertakings are prohibited from making or giving effect to an agreement if the object or effect is to prevent, restrict or distort competition in Hong Kong. This rule does not apply, for instance, if the joint venture amounts to a merger as defined in the Competition Ordinance; or enhances the overall economic efficiency. The

If your company, unfortunately, goes insolvent, the relevant stakeholders, including the creditors, shareholders, liquidators, etc. can wind up the company. Alternatively, directors are given power by the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) to wind up the company under special circumstances. Creditors’ voluntary winding up Creditors’ voluntary winding up is similar in procedure to members’ voluntary winding up. The main difference is that the creditors have a major role to play in this process since the company might not be able to pay off the debts owed to the creditors, so creditors are given a more active role to better secure their interests. The general procedures of creditors’ voluntary winding up are as follow: The company has to call a meeting of shareholders. The notice for the meeting has to be advertised in the Government Gazette and in Chinese and English newspapers. Click on the link to see the template of a notice of Extraordinary General Meeting. The shareholders have to pass a special resolution for voluntary winding-up. See the template of a special resolution to put the company into voluntary liquidation by clicking on the link.A notice of the resolution has to be posted in the Government Gazette within 14 days of the passing of the resolution. During the meeting, a liquidator may be nominated and appointed. The liquidator might be supervised by an inspection committee. The liquidator will deal with the affairs of the company. To see the template of a special resolution to appoint a liquidator, click on the link. The company has to call a meeting of creditors within 14 days of the shareholders’ meeting. The creditors may appoint their own liquidator if they are not happy with the shareholders’ choice and/or form a committee to monitor the winding-up procedure, etc. While a liquidator is appointed, the powers of directors will be suspended. The liquidator then can liquidate all assets of

A board resolution is a formal written document that records the decisions taken by the board of directors in a meeting. Board minutes are a list of actions and discussions that took place in a board meeting. If a board resolution is passed in a meeting, then the minutes will record the discussion and that the resolution is passed. Hence, the minutes of that meeting will contain the board resolution. Board resolutions Board resolution is a legal record of the decisions taken by the board members. The following matters would generally require a board resolution: The appointment of managing director and company secretary;Opening of company bank accounts; andThe preparation of summary financial reports. Click on the link for a template of board resolution. In addition, a board resolution may act as a compliance document to external bodies when the company has to provide proof of the decisions made by the shareholders/directors of the company. For example, a bank would require a board resolution when opening a company bank account. This is to verify the Board’s decision to open an account. Board minutes On the other hand, a board minute is a document that lists out all matters discussed in a meeting. For example, if a decision is made and a resolution is passed, the minutes will contain the resolution details. If multiple resolutions are passed then the minutes will include details of all the resolutions. Generally, it also includes the date, time, venue and quorum. The company secretary would normally be responsible for preparing the minutes. Click on the link for a template of board minutes. Key takeaway Board resolution and board minutes are an important part of a board meeting.A board resolution is a record of the decision taken by the board members.A board minutes is a written document describing all actions and decisions taken in a board meeting, including discussing and passing of any resolutions.

Put simply, there is no requirement as to board meetings to be convened or at any particular intervals unless required by the shareholder’s agreement or the articles of association. It is advisable to hold a board meeting whenever a significant matter needs to be approved/discussed. The director(s) must give reasonable notice to the rest of the board in the manner as prescribed by the Articles of Association. In general, the notice has to contain the time and place of the proposed meeting. Click here to see a template of notice of board meeting that you may tailor according to your requirements. Can companies hold virtual board meetings? With the outbreak of COVID-19, it is rather difficult to hold any physical board meetings without putting everyone’s health at risk. For a private company limited by shares, the Articles of Association will determine whether the board meeting can be held virtually. If it is explicitly provided in the Articles that a board meeting must be held physically, you will have to amend your articles to allow virtual meetings. A company incorporated after 2014 that adopted the model Articles, non-face-to-face meetings for directors are allowed. However, companies incorporated before 2014 and using the old articles might have to amend the articles to allow a virtual meeting. Bear in mind that the quorum and procedural requirements must be met even if you are holding a virtual meeting. Key takeaway Holding a board meeting at regular intervals is not mandatoryYou can hold virtual board meetings as long as it is permitted under the Articles

A company’s power to issue and transfer shares and the limitations are prescribed in the company’s article of association (“the Articles”) and the Companies Ordinance (Cap. 622). The procedures of issuing and transferring shares are different, therefore it is essential to distinguish the two so you can comply with the respective requirements. What’s the difference? Transfer of shares Issue of shares Parties involvedExisting shareholder(s) → new / existing shareholder(s)Company → new / existing shareholder(s)Shares involvedExisting shares New shares MotivesRestructuring the company Cashing out shareholdingsRaising new capital developing employee share schemesStamp DutyStamp duty is payable on the transfer of sharesNo Stamp Duty is payable on allotment of shares Issue of shares There are in general four steps to the issuance of shares. Shareholder’s consent: In order to issue shares, you must obtain prior approval from the shareholders in a general meeting. Second, in a private company setting, it is common that the company would offer to allot a specific number of shares to the potential allottee(s). If the offer is accepted, an allotment contract is formed. Registration of the Allotte’s to the Companies Register of Members: After that, the company has to enter the allottee(s)’ names(s) into the register of members. Issuance is completed when the register of members is updated accordingly. This must be done in two months since the allotment of shares. Otherwise, the company would be in breach of the allotment contract. File Return of Allotment: Last, the company must deliver the Return of Allotment (Form NSC1) to the Companies Registry within one month from the date of the allotment. Non-compliance may result in refusal by the Hong Kong Companies Register to approve the return of allotments. If you are considering issuing new shares, you should consider the followings: Issue price: it is usually the market value of

The directors are responsible for the overall management of the company.The process for appointment and removal of director(s) is governed by the article of association (“the Articles”) and the Companies Ordinance (Cap. 622) (the “CO”). Appointment of Directors Age: Any person, who is 18 years old or above, can be appointed as a company director regardless of their nationality. Minimum number of directors: As per the CO, a Hong Kong private company limited by shares must have at least 1 director who is a natural person (i.e. an individual). This is not applicable to non-Hong Kong companies registered in Hong Kong. For public companies and companies limited by guarantee, both must have at least 2 directors. Body corporate as a director: Yes, if the private company is not a member of a group of companies of which a listed company is a member, a body corporate can continue to act or be appointed as its director. Sole shareholder as a director: Yes, a sole shareholder can be the director of the company. However, you must nominate a Reserve Director if the sole shareholder is the director in a company. To understand more about the process for nominating a reserve director, read “Can a private limited company have a sole shareholder who may also be the sole director?” Procedure: A Hong Kong company can pass an ordinary resolution(s) to appoint a director. Within 15 days from the appointment/removal, you will have to notify the Companies Registry of such change with form ND2A. While the board of directors can appoint director(s) to fill a casual vacancy(ies) until the next annual general meeting, where the director(s) must retire but can be reappointed. Removal of director(s) As per the Companies Ordinance, a company can remove a director by passing an ordinary resolution of shareholders in a general meeting. However, a special notice of at least 28 days must be given by the shareholder (proposing the resolution) to the

Here are the steps for changing the company name of a local limited company: Choose a new name for your company. To understand more about the guidelines on choosing a company name, read “ How do I register a company in Hong Kong?”Pass special resolution to authorize name change and amend the articles of association to reflex the change of nameWithin 15 days of passing the special resolution to authorize name change, submit the Notice of change of company name i.e. form NNC2 to the Companies RegistryCollect the certificate for change of name The change of name will be effective from the date of issue of the Certificate of Change of Name. Here are the steps for changing the business address: Notify the Business Registration Office in writing within 1 month of the change. Submit the form IRC 3111A and address proof (if required) to the Registry Whether you are changing business name and/or business address, notify the IRD of the change within one month from the date of the change by submitting a written notification or a completed IRC 3110A (business name), IRC 3111A (business address) or IRBR 193 (nature of business). Key takeaway You have to pass a special resolution to change your company name and alter the Articles of association. The company name and business address can be changed by submitting a form and notifying the IRD. Bibliography Companies Registry: specified forms: https://www.cr.gov.hk/en/forms/specified.htm Inland Revenue Department, “‘Business’ Required to be Registered and Application for Business Registration”: https://www.ird.gov.hk/eng/tax/bre_cbp.htm#a2Inland Revenue Department, “Notification of Change of Business Registration Particulars”: https://www.ird.gov.hk/eng/tax/bre_cbp.htmInland Revenue Department, “Q & A for One-stop Company and Business Registration and One-stop Notification of Change of Company Particulars”: https://www.ird.gov.hk/eng/faq/osbrq.htm

A business name in Hong Kong is like a nickname of your company. It is the name by which your business is known to the public. It is used for promotional and advertising purposes. A business name can be different from the name of your company or the individual who owns the business. In this article you will understand the (a) difference between business name, company name, trademark and domain name; (b) the process for registering a business name; and (c) the process for changing a business name. Difference between business name, company name, trademark and domain name A business name is a name a business goes by in operation for better promotion and identification to its customers. It should not be confused with company name, trademark and domain name. The company name is the legal entity's name. A business name can be the same as the company’s legal name, but it is not necessarily so. Company name must be in accordance with the Guideline on Registration of Company Names for Hong Kong Companies and should be registered with the Company Registry.A trade mark is a type of intellectual property and consists of a mark (i.e. a sign, expression or design) that can distinguish the products and/or services from others of its kind. It has to be registered with the Trade Marks Registry under the Intellectual Property Department. A domain name is an address that can be typed into the URL bar to direct the users to a designated website. Registration of a domain name has to be applied to a domain name registrar. You can find the list of domain registrars on the Hong Kong Internet Registration Corporation Limited’s website. Therefore, even if you have registered a business name you do not have the right to use it as company name or trademark or domain name as all of them are required to be registered separately. Importantly, if you are coming with a new name for your business, registering it with the IRD does not mean you are immune from trade mark

A Shareholders’ Agreement (“the Agreement”) is an agreement between the shareholders of a company to define the rights and obligations of the shareholders. Some of the key provisions are: voting rights, dividend policy, restrictions on transfer of shares, protection for minority shareholders. Given the contractual nature of the Agreement, if one of the shareholders breach the Agreement, the remaining shareholders, as contracting parties of the Agreement, have the right to bring an action against the shareholder in breach. The Article of Association (“the Articles”) governs the internal affairs of the company. It is like a contract that regulates the relations between the company and shareholders as well as between shareholders inter se. It is a mandatory document for all companies incorporated in Hong Kong. The Articles generally govern the appointment and removal of directors, rights and responsibilities of directors, procedure for issuing shares/transfer of shares. The Articles is a statutory document and the company is bound by law to ensure compliance with the provisions of the Articles. In view of above, let’s understand the difference between the shareholders agreement and the Articles: Shareholders’ Agreement Articles of Association An optional document Mandatory under company law Providing more detailed terms, such as ratchet clauses to align the interest of the management team with the company’sContaining more general terms, such as power-conferring clauses stipulating directors’ powers and responsibilities (unless otherwise constructed)Private agreement amongst the shareholders of a companyPublic documents and needs to be registered with the Company Registry Every new member has to execute an accession agreement to be a partyShareholders are automatically made a party Does a shareholder agreement override the Articles? Shareholder agreement generally has a ‘supremacy clause’ which provides that the shareholder

In short, a company incorporated in Hong Kong is governed by the Articles of Association (the “Articles”). The Articles specify rules and regulations on how the company will carry out its operation. Therefore, if the Articles sets out any restrictions on what the company can/cannot do then any powers exercised to the contrary will be prohibited. Acts done in breach of the Articles are generally considered void, unless ratified by the company. Importantly, The new Companies Ordinance (“the new CO”) has abolished the requirement to have a Memorandum of Association (the “Memorandum”) as a constitutional document for a company in Hong Kong. The corporate constitution Every company has its own set of internal laws and regulations, which form the corporate constitution. Historically, the constitution consisted of two documents - the memorandum of association and the articles of association. The Articles sets out rules of internal governance, liability of the members, initial capital and initial shareholding, allocation of risk and profit as well as control within the company. The Memorandum contains the name clause, the registered office clause, the capital clause, and the Objects clause. The Objects clause is often regarded as the most important clause in the Memorandum. It defines and limits the scope of activity and operation of a company. For example, suppose the objects clause of a company limits its scope of business to the production of garments. The company could not subsequently open a boutique, since it is out of the company’s power to conduct any businesses beyond the production of garments. Is the memorandum of association mandatory? No, after the enactment of the Companies Ordinance (Cap. 622) in Hong Kong in 2014, has abolished the Memorandum as a component of the company’s constitution. Currently, the Articles is the only document that defines a company’s scope of powers. The information contained in the

Yes, a sole shareholder can be the sole director of a private limited company. A private limited company must have at least 1 natural director. The sole shareholder can be the director of the company. However, the sole director cannot be the company secretary of the company. Even if you are the sole shareholder and director, the company is considered as a separate legal entity from you once incorporated. What happens if the sole director and shareholder dies? Another core feature of your company being a separate legal entity is perpetuity. Even if the sole director and shareholder of a company unexpectedly died, the company will not come to an end as a result. The successor(s) will have to obtain a grant of representation from the court, which will enable them to take the shares and appoint a new director. However, this can lead to significant delay in appointment of new director and effective management until then, therefore, the nomination of reserve director by the sole director becomes essential. Nominate Reserve Director If a private company has only one shareholder and that shareholder is also the sole director of the company then a reserve director can be nominated. The reserve director will act in place of the sole director in the event of the sole director’s death. This is not a mandatory requirement. However, if a reserve director is nominated then ​​, such nomination should be reported to the Companies Registry within 15 days from the date of nomination using the Form ND5 (Notice of Change of Reserve Director (Nomination/Cessation) Separate legal entity The doctrine of separate legal personality is the core feature of a limited company. It applies irrespective of the number of shareholders or directors of a company. Therefore, a private limited company is a separate legal person with its own capacity to hold rights and liabilities and the sole shareholder will not be personally liable for business liabilities.

The Board of Directors ( the “Board”) is the governing body of the company and is responsible for taking strategic and policy decisions for the company. Some of the responsibilities of the Board are ensuring compliance of the rules and regulations, reviewing the company’s policies and procedures, approving annual budgets proposed by the management of the company; new business projects. The board of directors are regulated by the Companies Ordinance and the company’s article of association. The Management of the company is responsible for the company’s day to day operations. The head of management is the CEO and is selected by the Board. The role of the Board and the management of the company The Board is responsible for the appointment of the management and determination of the management structure; The Board delegates the responsibilities to the management and determines what matter it should reserve for itself;The management is responsible for implementing the Board’s decisions, policies and strategies and the Board supervises the management to ensure the short and long terms objectives are being met;The Board is responsible for the overall governance and the management of the company. For SMEs, the board and management functions are perhaps centralized. However, a separate Board essentially improves corporate governance and also helps in balancing the interest of the shareholders and the management. Key takeaway The board of directors is responsible for the management of the company.The management is responsible for implementing the decisions of the board of directors

In simple terms, the board of directors operate the company while the shareholders are the owners of the company. Board of directors The Board of Directors (“BoD”) is the governing body of the company. The BoD is responsible for the overall management and makes decisions relating to company issues and policies. It is also responsible for appointing and supervising the management i.e. the managers of the company and reporting the company activities to the shareholders. At board meetings, the decisions of the BoD are recorded in writing in the form of board resolutions. For instance, a board resolution may be passed for appointing a new director, purchasing another business, the opening of company bank accounts etc. It may act as a compliance document to external bodies when the company has to provide proof of the decisions made by the shareholders/directors of the company. Click on the link for a template of a board resolution that you can customise as per your requirements. Directors The directors are responsible for the management of the company and the director’s duties and powers are set out in the company’s articles of association. The directors have a duty to exercise care, skill and diligence codified under the Companies Ordinance. In addition, they have other fiduciary duties such as: exercise of powers for a proper purpose;Avoiding conflict of interests; andRefraining from making profits out of the position as directorsAct in good faith in the best interests of the company In case of a limited company, it must have at least one shareholder and director. Both shareholder and director can be the same person. Shareholders The shareholders own the shares of the company and therefore are the collective owners (also called members). They have the right to vote at the general meetings, receive dividend, right to receive audited accounts with the directors report, pre-empt shares transferred by other shareholders and the right to

Board resolutions are written records of decisions made by the board of directors (“the Board”). The Board is responsible for the overall management of the company and makes decisions relating to company issues and policies. For instance, a board resolution may be passed for appointing a new director, purchasing another business, opening of company bank accounts etc. Also, a board resolution may act as a compliance document to external bodies when the company has to provide proof of the decisions made by the shareholders/directors of the company. Click on the link for a template of board resolution that you can customize as per your requirements. Shareholder resolutions are the written record of the decisions made by the shareholders in general meetings. The shareholders, upon reaching a certain majority, can pass resolutions for different matters. There are two types of shareholders resolution: “ordinary” and “special”. Ordinary resolution vs special resolution See the main distinctions between ordinary and special resolutions in the table below: DistinctionsOrdinary resolution Special resolution Votes required Simple majority: ≥ 50% approvalQualified majority: ≥ 75% approvalMatters to be decided Appointment and retirement of directorsAppointment and retirement of auditors Amendments to proposed resolutions Recommendation to the board of directors to capitalise profitsAlteration of the ArticlesChanging the name of the company Reduction of share capital Voluntary liquidation Key takeaway Board resolution is passed by the board of directorsShareholders resolution is passed by the shareholders of the company and the resolution can be “ordinary resolution” or “special resolution”.

Essentially, general shareholders have the rights to vote, to dividends, and to the company’s yearly performance through the annual general meeting. These shareholders rights are stipulated in the company’s article of association (“the Articles”) and supplementary documents (if any). Generally, the shareholder’s rights are as follow: To vote in shareholders’ general meetings or in passing resolutions; see further in the FAQ on ordinary and special resolutions;To dividends declared by the company;Prerequisites: if there are profits available for distribution and the board of directors had declared to distribute dividends To receive a distribution in case of liquidation i.e. shareholders have the right to receive company’s assets proportional to the size of shareholding at the time of liquidation;Prerequisites: only if there are assets available for shareholders after creditors and other entities with priority have been repaidTo the information of the company’s annual financial statements and audit reports Shareholder agreements also set out the rights and obligations of the shareholders. For instance, it may provide for pre-emptive rights to issue/transfer of shares, right to appoint/remove a director etc.. Can shareholders rights be varied? Yes, the shareholder’s rights can be altered by amending the Articles. The Articles can be amended by passing a special resolution. Key takeaways General shareholders have the rights to vote, to dividends, and to the company’s yearly performance.Shareholder’s rights stated in the Articles can be amended by passing a special resolution.

If you are starting a business in Hong Kong then depending on the nature of the business you may need certain licenses and permits that are issued by the Hong Kong Government department(s). Generally, to secure a business licence, you will have to fill in a form and lodge your application to the appropriate governmental body in Hong Kong. Upon applying for a business licence, it usually takes around 2-8 weeks to secure approval. Common type of Businesses that need a business license in Hong Kong In general, you have to obtain licence(s) according to the nature of your business operation. For example, if your business is operating as: A restaurant and food business then must obtain the “General Restaurant License” from the Food and Environmental Hygiene Department (“FEHD”) before commencing business operations. You might require additional licenses such as a Liquor License from the Liquor Licensing Board;. If you are selling bakery products then you need a Bakery License from the FEHD;An educational institution such as a private school, tuition centre must obtain a School Registration Certificate from the Education Bureau;A travel agency offering travel packages, tour offers and transportation services must obtain a Travel Agent’s License from the Commerce and Economic Development Bureau;An employment agency that offers recruitment/placement services must apply for a license or apply for Certificate of Exemption to the Labor Department; A retail business then the license will vary depending on the type of goods or services being sold. For instance, if you are dealing with medical devices then obtain a Medical Device Trader Listing from the Medical Device Division of the Department of Health; or if you are operating a pet shop then obtain the Animal Boarding Establishment License from the Agriculture, Fisheries and Conservation Department;A financial services company then depending on the type of financial services being offered you need to

Business Registration Certificate is issued by the Business Registration Office and includes important details of the company such as the name of the business, type of business, date of commencement, certificate number, expiry date etc. It is a mandatory process whether the business is sole-proprietorship, partnership, company; or the business is carried out by a foreign company or a branch office. The certificate must be obtained within 30 days of commencing your business operations. In case of a company, you need to register your business: If the company is incorporated in Hong Kong under the Companies Ordinance orIf its a non-Hong Kong company that has established a place of business in Hong Kong, regardless of whether it is actually carrying on any business in Hong Kong; As per the one-stop company and business registration service, only one application is required for both company incorporation and business registration. Registration Process for local companies and non-Hong Kong companies For companies incorporated/registered under the Companies Ordinance, the one-stop company and business registration service simplifies the registration process. It provides, that the registration of a business and the registration of a company can occur at the same time You need to submit the following list of documents required to make an application under the one-stop service: Documents for local companies (a) Incorporation form (NNC1 or NNC1G); (b) copy of the company’s articles of association (b) Notice to Business Registration (IRBR1) Office (c) Prescribed business registration fee and levy Documents for non-Hong Kong companies the application form for registration (NN1) and the supporting documentsCertified copy of the company’s articles of associationCertified copy of the company’s certificate of incorporationCertified copy of the company’s latest published accountsNotice to Business Registration (IRBR1)

To set up a company in Hong Kong, you can follow the step-by-step guide below. Alternatively, if you are not familiar with the incorporation procedure, you can resort to an agency to complete the process for you. Choose the company type The first thing you have to do is decide the type of company based on your business needs and requirements. For example, you can consider the following types of company: A private company limited by sharesPreferred by small and medium enterprises 1-50 shareholdersShareholders’ liability limited to the unpaid amount of share held by each shareholderProfits can be distributed among shareholdersA public company limited by sharesPreferred by large corporationsAt least 1 shareholder with no upper limit Shareholders’ liability limited to the unpaid amount of share held by each shareholderShares can be freely transferredProfits can be distributed among shareholdersA company limited by guaranteePreferred by non-profit organisations and charitiesAt least 1 shareholder with no upper limit Shareholders’ liability limited to the amount each shareholder committed in the articles of association to contribute in the event of liquidation Profits cannot be distributed among shareholders The company name You will have to choose a name for your company. Below are some ground rules: The name must either be in English or Traditional Chinese. You can have an English name and a Chinese name, but there cannot be a combination of English words and Chinese characters within a name; A limited company’s name must Ends with the word “Limited” if it is in English; and Ends with the characters “有限公司” if it is in Chinese.Your proposed company’s name cannot be the same as any names in the Index of Company Names kept by the Companies Registrar. You can do a company name search free of charge through the Cyber Search Centre or the Company Search Mobile Service to see if your intended name has already been taken. The