Incorporating Hong Kong Companies and What to Consider for TCSP Compliance
The anti-money laundering and counter-terrorist financing (“AML/CTF”) regime in Hong Kong has become increasingly comprehensive over the past few years. While the city remains one of the most business-friendly jurisdictions in the Asia-Pacific region, Trust and Company Service Providers (“TCSP”) looking to set up business need to be aware of several key statutory and AML/CTF compliance regulations.
Hong Kong Company Incorporation
Incorporating a private company in Hong Kong is often the first step to consider before deciding whether a TCSP licence is required. The Companies Registry permits both in-person and online applications for company incorporation, and while the online incorporation method is typically preferred over the submission of hand-signed paper forms, due to the lower fees and more streamlined process, both methods share common requirements. To begin with, private Hong Kong companies are required to have at least one individual director, whether resident in or outside of Hong Kong, and one company secretary, which is normally a corporate firm licensed by the Companies Registry. The intended nature of business must also be stated on the incorporation application. Nominee shareholding services are permitted, although this usually means that a Declaration of Trust signed between the nominee shareholder and ultimate beneficial owner (“UBO”) of the company would need to be implemented. Prospective business owners would need to be aware of such requirements when planning their corporate structure.
Hong Kong has more accommodating features to maintain its competitive edge. There is greater flexibility in issuing share capital as the city adopts a mandatory no par regime, similar to other jurisdictions such as Singapore, New Zealand and Australia, which negates concerns on statutory deadlines regarding capital contribution. Additionally, since 2014 under the new Companies Ordinance (Cap. 622), it is optional to have an objectives clause as part of the company’s articles of association and a common seal. This enables greater versatility for Hong Kong companies should the intended business nature vary or change after incorporation, and a modernised approach to company document signing. These features allow greater adaptability in business planning, which can be particularly attractive to small and medium-sized enterprises (“SMEs”).
Considering an Offshore Holding Company
Some businesspersons may assess the option of establishing an offshore holding company for their Hong Kong firms. The British Virgin Islands, Cayman Islands and Seychelles are popular jurisdiction choices for this type of entity. As of 31 January 2025, the base costs start at US$1,250 for incorporation, and US$830 for renewed annual corporate maintenance according to SFM Corporate Services, with the Seychelles as the most competitively priced jurisdiction of the three. These base costs exclude additional services such as the provision of a common seal, bookkeeping and accounting services and the non-compulsory appointment of a local director. In addition to the corporate tax advantages that these jurisdictions are known for, the personal details of the UBO will be kept private from the general public, which can address data privacy concerns that some prospective businesspersons may have when providing their particulars to service providers and government bodies. However, the increasing importance of adhering to international AML/CTF standards also means that the verification of an Hong Kong company’s UBO through corporate documents or public records can be more complex for vendors and other business counterparties. This becomes more apparent in certain situations such as opening a bank account, where the offshore holding company’s documents would be subject to verification procedures. Therefore, Hong Kong businesses need to evaluate the advantages and potential limitations of setting up an offshore holding company.
Notes for TCSP Businesses
With the options outlined above on corporate structure planning, prospective businesspersons need to ensure they select a tailored strategy for their business needs. Although local residency in Hong Kong is not required for the owners and directors of a TCSP business, statutory requirements need to be taken into consideration when establishing a Hong Kong firm. The jurisdiction is known for its modern approach to accommodating the interests of businesses while also ensuring that an international standard of AML/CTF compliance is upheld. Therefore, businesspersons should not be concerned with the number of available choices for potential corporate structures but should rather focus on the appropriate solution for their own long-term business plans.
Perun Consultants is happy to provide more information and personalised assistance related to company formation in Hong Kong or other offshore jurisdictions. Please contact us to speak to a member of our team.