By Eunice Ku
Jul. 7 – One of the key advantages that Hong Kong holds over other holding company jurisdictions is its Closer Economic Partnership Agreement (CEPA) with Mainland China.
Set up in 2002 after China’s accession to the WTO, the CEPA is essentially a free trade agreement. The most recent supplement, Supplement VIII (CEPA VIII), signed in December 2011 and implemented from April 2012, deepened liberalization of trade in services. A list of the goods entitled to zero tariff preference and services included under the agreement can be found on the Hong Kong Trade and Industry Department website.
The most commonly used company structure for foreign companies doing business in Hong Kong is a private limited company.
Requirements for Incorporation
According to the Hong Kong Companies Ordinance, a “private company” is a company which, by its articles of association:
- Restricts the right of members to transfer shares;
- Limits the number of its members to 50 (excluding employees and former employees who become members while they are employed by the company); and
- Prohibits any invitation to the public to subscribe for any shares or debentures of the company.
For a company to be a “limited company,” its memorandum should limit the liability of its members to either the amount unpaid on company shares they hold (for a company limited by shares) or the amount they undertake to contribute to the assets of the company in the event of the company being liquidated (for a company limited by guarantee).
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