Opening a bank account in Hong Kong
Opening a bank account in Hong Kong is often a vital first step to establishing business presence. However, many investors believe it is more difficult to open an account in Hong Kong now as compared to before. This is mostly because financial regulations have been tightened in order to combat the designation of the city as a tax heaven.
Common issues faced by investors relate to producing required documents and conditions on maintaining fixed deposits. For many banks, it is common to impose a monthly charge for failing to maintain a balance above a certain minimum amount.
It is therefore important for foreign investors to understand the procedures and documents required. The internal practices of the bank may vary from one to another, but generally the following procedures can be expected:
- Most banks will require an initial appointment, via phone, email, or physical visit;
- Following this, a preliminary review is usually conducted by phone interview, electronic questionnaires, or physical meeting with directors, or by sending supporting documents to bank manager;
- If the preliminary review is passed, both parties will meet to sign the relevant bank application forms and documents, as well as pay the initial deposit and application fee:
- Deposit differs according to the bank and is subject to change from time to time.
- Signatories also differ according to the bank and time. While some banks accept certified and true copy of shareholders’ ID, others require the director/shareholder/ beneficial owner/ nominee to be physically present. In most cases, banks require the same number of people present as that forms quorum in a board meeting according to the AA to satisfy their Know Your Customer procedure.
- At this stage, the bank manager will send the application for the department review, which normally takes approximately one to two months. It is not uncommon for the review department to require further supporting documents before finally opening a new bank account on your behalf.
Generally, the following documents are required during the application:
- Company documents: Business Registration Certificate, Certificate of Incorporation, AA, and NNC1 form.
- Proof of business: Documents required varies from bank to bank, but generally include evidence of the nature of the business, experience in the industry etc. For example, issued/ received invoices, business plan description, agreement with suppliers, bank reference letter, and website.
- Personal documents: Passport and residency proof (for example, utility bill, electricity bill, or bank statement which are issued within three months and include the holder’s address and name).
A shell company is understood to be a corporation that does not conduct business activities itself, but channels funds for group companies. To open a bank account for a shell company, the identity documents of the beneficial owners is required as well.
[tips title="Important Tip"]When a company is marked as a ‘shell company’, it will be subject to a higher level of scrutiny.[/tips]
Once the bank account has been approved, the investor will receive the bank account number, bank cards, and access codes.
Virtual banks and money service operators
In addition to traditional banks, another emerging option is using virtual banks, which have no physical branches and focus on digital services. This concept is still very new to Hong Kong and for now, the HKMA only granted eight licenses for virtual banking.
These banks are a good alternative for tech-savvy people and remote operations. However, it should be noted that some banks are not yet offering corporate bank accounts.
Advantages of virtual banks include better rates and lower fees, integrations with enterprise software, a high set up convenience, and a heavy focus on small- and medium-sized enterprises (SMEs). Disadvantages include less personal relationship development, lack of ATM network, deposit inflexibility, and unavailability of specific services.
Another digital banking solution are money service operators. They usually offer services, such as dedicated payment instructions, the ability to receive money via domestic or international bank transfers, and linking to third party services or currency exchange.
For foreign SMEs operating in Hong Kong, virtual banks could offer a more convenient and cheaper service. This is particularly true for business owners who operate subsidiaries in Hong Kong that primarily function as holding companies. But it should be noted that the virtual banking industry is still very new and growing and as of now, not reliable enough for companies. Nevertheless, the market is expanding, and this might be a valuable option in the future.
Gradual improvements to the banking environment
The HKMA has announced that it has taken steps to improve its internal banking environment – taking the time to engage with various stakeholders to gather details of specific incidents relating to difficulties around bank account opening.
As a result, the HKMA has cautioned financial institution against a one-size-fits-all approach and encouraged them to take a risk-based approach that differentiates the “risk levels of individual customers in accordance with their backgrounds and circumstances”.
The situation is improving, but there is still a long way to go. Hong Kong needs to continue to ease its administrative red-tape in order to stay competitive with other international financial hubs in the region, such as Singapore – which like Hong Kong, serves as a financial gateway to Asia, but benefits from a more relaxed banking environment for foreign businesses.
Hong Kong offers a high level of protection for intellectual property (IP), ranking 16th according to the Intellectual Property Rights Index 2021. It is also a major global IP trading hub. Hong Kong recognizes several different classes of IP, including trademarks, patents, designs, copyright, trade secrets, plant variations, domain names, and lay-out designs of integrated circuits.
Registering a trademark
For the benefits of a registered trademark, an application for registration must be made to the Trade Marks Registry, Intellectual Property Department (IPD). Registration only covers the territory of the Hong Kong SAR. Registration of a trademark in Hong Kong does not affect mainland China, and vice versa.
To register a trademark in Hong Kong, the investor should first investigate whether the trademark is already registered. This can be done online on the Trademark Online Search System (https:// esearch.ipd.gov.hk/nis-pos-view/#/). The investor can also use the Search and Preliminary Advice services provided by the Trade Marks Registry by simply completing Forms T1 and submitting the appropriate fee. 23 AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2022
If the trademark is available, the application to register a trademark can be made online through the IPD Electronic Filing Services, or it can be filed physically with the Trade Marks Registry by filling Form T2, with a graphic representation of the trademark attached.
After filing, the Trade Mark Registry will examine whether the application meets the requirements laid out in the Trade Marks Ordinance (Cap. 559) and the Trade Mark Rules (Cap. 559A), including the following:
- The trademark needs to be distinctive;
- It cannot be a description of the goods or services the investor is providing or seeking to provide;
- It cannot be an industry or business term; and
- The trademark has not been registered or applied for by another trader.
[tips title="Important Tip"]Provided that the application is complete and correct, the trademark registration can be completed within six months, upon which it will be published in the Hong Kong Intellectual Property Journal.[/tips]
If the IPD objects the registration, it will notify the investor in writing. The applicant will have six months to ratify the application. A further period of three months extension may be granted.
Registering a patent
Patents protect inventors by giving them the legal right to prevent others from manufacturing, using, selling, or importing their patented invention.
Hong Kong has two types of patents: standard and short-term. Protection under standard patents is renewable annually after the end of the first third year, for a maximum of 20 years. Protection under short-term patents is renewable after four years from first filing, for a maximum term of eight years.
Applying for a patent elsewhere in the world or in other regions of China does not automatically give you protection in Hong Kong. Investors need to file an application with the Patents Registry of the IPD, which conducts only a formal examination of the patent paperwork. However, in order to be granted an effective patent in Hong Kong, the investor must have first registered the patent in one of three designated patent offices - the State Intellectual Property Office of the PRC, the European Patent Office, or the United Kingdom Patent Office.
The application for a standard patent goes through two phases. The first phase is to file a request to record the existing patent (either from mainland China, the EU, or the United Kingdom). This needs to be done within six months after the designated patent application. Within two months after the request, the IPD will give the applicant notice of any issues with the application. If there are no issues, or if these have been corrected, the request will be published in the Hong Kong Intellectual Property Journal. The second phase is to file a request for registration and grant of the Chinese, European, or UK granted patent in Hong Kong, which should be conducted within six months after publication of the request to record, or the grant of the patent by the designated patent office.
The grant of a short-term patent is based on a search report from an international searching authority or one of three designated patent offices. The application for a short-term patent only needs to be submitted once and there is generally no time limit for filing. But if the applicant wishes to claim priority from a first application in a Paris Convention country or World Trade Organization member territory, the short-term patent application should be filed in the Hong Kong SAR within 12 months of filing the first application. Within two months after the submission of the application, the IPD will examine the application and give the applicant notice to correct any issues. If there is no issue or the issues are corrected, a short-term patent for the invention will be granted and published in the Hong Kong Intellectual Property Journal.
Registering a design
The Registered Design Ordinance (Cap. 522) defines designs as “features of shape, configuration, pattern or ornament applied to an article by any industrial process, being features which in the finished article appeal to and are judged by the eye”.
Registered designs protect only the appearance of products, for example the look of a computer monitor. Registration of the design does not protect the way in which the product relating to the design works.
Designs can be registered and protected if the designer can show that they are new at the filing date of the application, or the priority date (if claimed). A design is new if it has not been previously registered, or has never been published or disclosed before. To file for the registration of a design, the applicant needs to submit the prescribed form, provide a representation and statement of novelty, and pay the registration fee. If the application is in order, the Designs Registry of IPD will publish the registration in the Hong Kong Intellectual Property Journal. The design will be protected for a maximum of 25 years from the filing date, and needs to be renewed every five years.
Unlike the other IP rights in Hong Kong, copyright arises automatically and does not need to be registered. It differs from design in that design protects the shape of an object. A copyright applies to the following:
- Literary, dramatic, musical, or artistic work;
- Sound recordings, films, broadcasts, or cable programs; and
- The typographical arrangement of published editions.
With the copyright, the owner has the exclusive right to:
- Copy the work;
- Issue or make available copies of it to the public;
- Rent out copies of it to the public;
- Perform the work;
- Broadcast the work; and
- Make an adaptation to the work.
Others are restricted from copying the work, which is defined as reproducing the work in any material form.
The protection for copyright differs from that of registered design in that copyright only protects against reproduction of the works, whereas a registered design also protects against the independent creation of a new design that is not substantially different from the registered design. The threshold to prove a copyright infringement is also higher than for a registered design. For copyright infringement, the owner needs to show there is a reproduction in material form, whereas for registered design infringement, the designer needs to establish that the design is the same as or not substantially different from the registered design.
The owner of a copyright may seek a court injunction to prevent the reproduction and distribution of copyrighted materials, as well as claiming financial compensation.
Hong Kong’s National Security Law and its impact on businesses
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