What is an incorporated or registered company when your business operates in Hong Kong locally? An incorporated company in HK is a legally recognized entity that exists separately from the owners (or founders) and shareholders. When we mention “incorporation”, it is usually referred to limited entity, which is different from all partnership companies. There are at least six advantages to open a limited company in Hong Kong.
Advantage 1: When incorporated as a company, you as an individual would have limited liability. In the Companies Ordinance of Hong Kong, it states that that when a limited company happens to go out of business and get shut down, the owners and shareholders of the company are not individually liable to contribute to the assets and liabilities of the company. They are not legally bound to contribute to anything more than the nominal value of shares. The advantage of having limited liability for the shareholders is one of the main reasons for a Hong Kong company registry.
Advantage 2: Perpetual Succession is another reason. A Hong Kong limited company possesses the capability of perpetual succession. Regardless of any changes in shareholders of the company, the limited company will be the same entity with the same privileges, immunities, estate, and possessions. Also, the death or insolvency of individual shareholders should not negatively affect the limited company. The company will be able to continue its existence for an indefinite period of time till the company is shut down, most probably with an agreement among all the shareholders. The exception to this is that the shareholder may apply for a de-registration request to shut down the business.
Advantage 3: The company has transferable shares. The shares of any shareholder in a limited company should be movable property that are transferable which is according to the articles of association of the company. This setup allows the investment of funds in shares. It is done this way to enable the cash-out of shares at any given time depending on the will of the shareholders (in which they have agreed upon). This setup allows liquidity for the investors in which they can sell shares at any time depending on the stock exchange market’s availability.
Advantage 4: The HK company is virtually a separate property. The limited entity is allowed to own its own funds and assets. Think of it this way: The property of the company is actually not the property of shareholders, but the property of the limited company. For example, being a separate property, when a majority shareholder uses the company’s resources for his own personal reason, he is liable to be held for criminal misconduct of the company assets or funds.
Advantage 5. The company should have the capacity to sue. Being a separate legal entity, an incorporated limited company has the rights to sue another person or company. But be aware that the managing directors are not liable to be sued under the name of the company.
Advantage 6: The HK company has autonomy and independence to form its own internal policies and have them implemented under the appropriate circumstances.