Category Corporate Services

Will we all end up being considered has-beens…? – and how to avoid hiring a has-been…

Hong Kong island in blue/white

The younger generation is bright, without fear, full of optimism, with not much to lose and everything to gain, with plenty of energy and creativity, with a future not a history.

Should our age, our comfort, our experiences and skills be the shrouds of our careers? Or is this fake notion of work life balance which kills combativity and render the best us of slowly has-beens.

By choosing to live in Hong Kong I escaped de-facto to the notion of work life balance, the recent events (and the corresponding stress increase) plus the nature of the Hong Kong businesses are de-facto destroying what is considered in the West as a good work life balance.

So, I live in a city where we are not accustomed to comfort and where not taking into consideration change of business models and change of laws and regulations could simply erase years of efforts.

This is not the situation of many of my 50+ years old friends which I see with despair slowly becoming has-beens, they are enjoying their life but their clients are not anymore enjoying their combativity and creativity.

They are replacing “let’s try” by “it’s too dangerous”, they protect their business and cease to develop it, they have more excuses than solutions.

On the opposite some 50+ are incredibly temerarious, as if at 50+ they will not have to face the consequences of their actions, they are the most dangerous has-been as they are completely disconnected from reality and living a life as 30 years ago when circumstances were totally different.

Is there a secret to avoid being a has-been?

  • FEAR is a good tool, the fear to look alike the has-been persons we despair.

  • MIXITY is a good solution, when one of your business partners is a 24 years old African immigrant in Europe, he doesn’t know your cultural references and you must learn about his experiences.

  • CURIOSITY is a must so is continuous learning.

But my own preference is DIGITAL, most of the people involved in the digital economy are de facto obligated to continuously change, adapt or pivot their business models, governments are enacting news laws and regulations and the business owners and decisions makers should be agile.

If you want to hire the services of a lawyer, and advisor or consultant if this person is active in the digital economy, you are certain that the person will not refer immediately to a past situation, he/she managed as the evolution of practices and regulations could make it irrelevant.

Instead, the players in the digital economy are imagining what tomorrow’s new reality will be and possess this unique ability for A/B testing their thoughts and advice.

The Hong Kong Company Registry to soon better protect privacy?

The Hong Kong Company registry is allowing the public, after payment, to access the particulars of directors and shareholders of a Hong Kong Company.

This situation was reflecting a new era of full transparency, incepted by the Paris based OECD team and, less to say, endangering rights to privacy and business confidentiality.

Law enforcement agencies have anyway a full access on the register of significant controllers and the new proposal to restrict access to information is of course challenged by journalists’ associations.

There is no real public interest to access the particulars of directors and shareholders on the company registry Hong Kong but there is without doubt additional risks for the directors and shareholders to, being publicly exposed, be subjected to multiple pressures, criminal or not.

The possible new access restrictions, remaining to be fully recorded, are very good news and could be interpreted as a show of force against FATF rules and OECD recommendations.

Transparency is not inevitable, the evolution of Anti-Money Laundering laws and regulation and more specifically their drastic implementation by Financial Institutions is sufficient. The professionals and law enforcement agencies are better equipped and trained in the pursuit of fighting criminals, there is no need for the journalists to access a passport number and a private address.

Easy tools to protect privacy and business confidentiality for a Hong Kong company:

  1. Local “nominee” director with unique bank signatory power
  2. Seychelles company as corporate shareholder
  3. Declaration of Trust from an individual or a corporate entity
  4. Option agreement etc.

The above are a perfect illustration that a public access on the particulars of directors and shareholders is totally useless for a journalist’s investigation, with the understanding that Financial Institutions and law enforcement agencies have a full access on the Ultimate beneficial Owners particulars.

The timing is well chosen, wealthy individuals are facing extremely dangerous times, because of travel restrictions and forced immobility. Being captive at home with your private address publicly displayed is a source of stress.

Individuals in favor of an era of transparency are not taking into accounts the risks, and the absence of state protection, in most of the countries where exposed individuals are located.

The topic of privacy and business confidentiality is also dividing the world, between a European side avid of social and tax justice and the East which adopt a more pragmatic and realistic approach. The US considering new rules that they will not apply to themselves, as usual, and counting the points.

Picking the right company type in Hong Kong

company type in Hong Kong

Being one of the largest financial centers in the world, Hong Kong is chosen by entrepreneurs and global companies worldwide due to its flexible type of companies to choose from when you opt to incorporate a company there. There are several company type to choose from, ranging from:

  • private or public companies,
  • limited by shares or guarantees,
  • sole proprietorship,
  • partnership,
  • branch, or a representative office/liaison office.

All of which has pros and cons depending on the purpose and usage of the company itself. Although there are many kinds of company types in Hong Kong, this article will focus directly on the most attractable, popular and pragmatic companies to choose from.

Hong Kong limited liability companies (LLC)

An LLC in Hong Kong can either be a private or a public company that is limited by shares. To give you an exact account on their unique potentials, these are their respective characteristics:

Private company limited by shares

  • Mostly aligned with SME’s who are engaged in the business of trade and commerce.
  • Corporate substance dictates that it requires at least one (1) shareholder (maximum of 50 shareholders), a Hong Kong based Company Secretary and Director, with a registered office in Hong Kong as well.
  • No minimum share capital is required.
  • No bearer of share / shares has no par value.
  • Shares are deemed transferable.
  • Profits in the company can be proportionately distributed to the shareholders.

Public company limited by shares

  • Applicable at best with large multinational companies.
  • In terms of corporate substance, at least two (2) directors, one (1) member and a Hong Kong based Company Secretary is required, along with a registered office in Hong Kong.
  • No corporate directorship is permitted.
  • Shareholders can be over 50 in number.
  • No minimum share capital is required.
  • No bearer of share / shares has no par value.
  • Shares are traded with no restrictions with regards to transfers.
  • Options are available to list the shares of the company in the Hong Kong Stock Exchange or not.
  • Profits in the company can be proportionately distributed to the shareholders.

Pros

  • Hong Kong companies has an innately lawful nature of being a separate juridical entity. Thus, having the right to acquire tangible assets, enter into legal contracts/agreements, as well as having the capacity to sue or be sued under its own pretenses, and otherwise having a separate legal capacity apart from its shareholders, which makes their shareholders not personally and legally liable on debts incurred by the company.
  • Shareholders has a proportionate limited that is based on their shares on the company.
  • Shares has a free flow of transfers without any restrictions. Shareholders can also completely or partially sell their shares.
  • To increase its cash flow and overall wealth, private companies can issue additional shares to other members in order to bring in more investments to them.
  • Private companies benefit from a two-tier tax scheme in Hong Kong, which means that profits tax is at 8.25% for the first HKD 2,000,000, meanwhile revenues generated outside of Hong Kong are exempted from profits tax.

Cons

  • Private companies are required to maintain a good compliance practice in terms of its tax and company obligations with the Hong Kong Companies Registry as well as the Hong Kong Inland Revenue Department (IRD).
  • Not too much privacy protections, oftentimes in just a few hundred HKD, the identity of the shareholders and directors of a private company can be purchased from the Companies registry itself, since under the law, these kinds of data pertaining to this type of companies must be publish.
  • Cost can sometimes be an issue since it’s not the same with the actual cost to put up a sole proprietorship or partnership in Hong Kong.
  • Company closure can be costly and oftentimes a very long process.

Private companies are generally encouraged if you

  1. want to run a company which has a separate legal capacity when entering into contracts,
  2. increase your financing capabilities by utilizing the assets of the company to enter into loans with banks or other financial institutions, and
  3. allow other shareholders to partake in your capacity as a shareholder or director of the company in representing you in entering into contracts or agreements.

    Sole proprietorship in Hong Kong

    This type of business model is registered under the Business Registration Office. Every so often, the process of registration is quick, fast and not too costly. In nature, it is ran and operated by a single person who acts and assumes the sole role of being the owner of the business. Thus, tax coverage on this kind of business is lulled at 7.5% to 15%, heaving depending upon the income bracket of the sole proprietor.

    Pros

    • Registration process and maintenance thereafter is a lax process.
    • Audit task is not required on its annual tax filing.
    • You can register as a sole proprietor only after one month from when you started operating your business.
    • Profits on this kind of business is enjoyed solely the owner alone.
    • The sole business owner can exercise an independent decision making process without the need to consult other stakeholders.

    Cons

    • Sole proprietorship are not capable in raising large amounts of financing or capital related injections from banking institutions.
    • Capital injection in the business solely relies on the personal assets and wealth of the business owner.
    • Does not have a separate juridical entity. In other words, if sued or goes into a bad debt, the personal assets and wealth of the sole proprietor is covered under those liabilities. In fact, the chances of going bankrupt is so high that even the court can hold the business owner personally liable on debts.
    • Sole proprietors are independently reliant unto themselves to solve business problems and keep the business afloat without the help of other investors.

    Sole proprietorship is beneficial if you are looking for a quick fix in establishing a legit business that can be registered easily with low cost, simple compliance and maintenance.


      Partnerships in Hong Kong

      Requiring at least two members, a partnership business in Hong Kong is regulated by the Partnership Ordinance. Said firm needs to secure its Business Registration Certificate within one month from starting the business. In view of tax obligations, partnerships are required to pay 7.5% rate. There are two kinds of partnership that you can register in Hong Kong, it can either be a Limited or a General Partnership.

      Pros

      • Partnerships are a collaboration between two or more people that intends to build and develop their business. Each and every partner in the business can contribute on their professional backgrounds and personal aptitudes since they would differ in some way in order to build a stable business portfolio.
      • Registration processes can be smooth, and maintenance can be inexpensive at times.
      • Partnerships can expand exponentially if they want to increase their pool of partners to develop the business and grow capital.

      Cons

      • All members of the partnership assume a group type hold on liability and that no one is left out, and everyone are personally responsible at their own capacities.
      • Partnerships are prone to disagreements with the other partners since they differ from standpoints due to personal capacities. These kinds of disagreements can result to legal problems if unresolved.

      A partnership type is advisable for people who wants to establish a partnership with similar mindsets and goals. It can even be suited if you want to diversify the risk associated in a business.


        Representative or liaison office

        A Representative or Liaison Office is a legal entity that is an extension of a parent company with a jurisdiction separate from Hong Kong. It is required also to utilized the same company name as that of its parent company counterpart. However, annual tax return with NIL is mandatory to be submitted.

        Pros

        • This type of business benefits from an already registered parent company, without the need to operate under a separate entity.
        • The government agency tasked to regulate this kinds of businesses are confined within the powers of the Inland Revenue Department (IRD) of Hong Kong.
        • It is very easy to establish and register.

        Cons

        • Are not allowed to conduct businesses in Hong Kong.
        • Its operational and business conducts or pursuits are very limited and well regulated.
        • Funding are only allowed through the parent company that owns the Representative/Liaison Office.
        • During the registration process, Hong Kong requires that a local representative, that can either be a Hong Kong resident or a solicitor who will be representing the business entity in the process.

        Our thoughts

        All companies or businesses, regardless of jurisdictions are regulated in some way, with their own inherent risks, similarities, disadvantages or advantages. One thing is certain, ensuring that what you choose to register must meet your requirements and setup as an entrepreneur.

        If you are planning to choose the best business type in Hong Kong, you can talk to us, so you can make an informed decision


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