[ESTABLISHING A BUSINESS ENTITY IN HONG KONG]
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fund (LPF) and has seen their use on the rise. These are investment vehicles which serve specific purposes and are not designed to engage in commercial trade and business as undertaken by conventional entities. The adoption of the type of business vehicle has implications on the legal rights and liabilities between the business owners themselves and between the owners and third parties as will be highlighted below. 3.1 Company Incorporated in Hong Kong Types of Companies Under the Companies Ordinance (Chapter 622 of the Laws of Hong Kong), a company can be: (a) a public or private company limited by shares; (b) a public or private unlimited company with a share capital; or (c) a company limited by guarantee without share capital. A great majority of Hong Kong companies incorporated are private companies limited by shares. A company is limited by shares if the liability of its members is limited by the company’s articles to any amount unpaid on the shares held by the members. A company is a private company if — (a) its articles —
prohibit any invitation to the public to subscribe for any shares or debentures of the company; and
(iii)
(b) It is not a company limited by guarantee. A company is a public company if (a) it is not a private company and (b) it is not a company limited by guarantee. Some public companies are listed on The Stock Exchange of Hong Kong Limited and may be subject to additional rules and regulations, including the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the Codes on Takeovers and Mergers and Share Buy-backs issued by the Securities and Futures Commission (SFC). A company is limited by guarantee if (a) it does not have a share capital and (b) the liability of its members is limited by the company’s articles to the amount that the members undertake, by those articles, to contribute to the assets of the company in the event of its being wound up. It is typically set up by non- profit organizations such as charitable institutions (which may seek the Inland Revenue Department’s recognition as a charity exempt from tax under section 88 of the Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong)), foundations, private clubs or associations. Such a company usually has restrictions in its articles of association limiting the application of its funds towards the attainment of its stated objects and prohibiting distribution of its incomes and properties amongst its members. Incorporation A limited company can be incorporated in Hong Kong by delivering the following documents with the prescribed fees to the Companies Registry: (a) Incorporation Form;
restrict a member’s right to transfer shares (e.g., discretion of the board to decline registration of a transfer of shares or pre-emption clause conferring pre-emption rights on existing members); limit the number of members to 50; and
(i)
(ii)
ILN Corporate Group – Establishing a Business Entity Series
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