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The establishment of operations in Hong Kong

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The establishment of operations in Hong Kong

4. SETTING UP A BRANCH

For commercial reasons, a non-Hong Kong company may prefer to establish a branch office (the “Branch”) in Hong Kong or establish a branch office via an overseas subsidiary of the non-Hong Kong company. The following describes the procedures for setting up a branch office of a non-Hong Kong company in Hong Kong (similar rules apply to the establishment of a branch of an overseas subsidiary).

4.1. Formalities

A Branch exists where a place of business of the non-Hong Kong company has been established in Hong Kong.

For the purposes of Part 16 of the CO, a “place of business” includes a share transfer or share registration office but it does not include a local representative office established with the approval of the Hong Kong Monetary Authority by a Hong Kong licensed bank. A place of business will normally exist if premises are occupied in Hong Kong on a relatively permanent basis from which officers or employees carry on business for the non-Hong Kong company. A non-Hong Kong company which appoints an agent in Hong Kong but has no office or other place of business of its own in Hong Kong will not generally be deemed to have an established place of business in Hong Kong.

4.2. Registration Requirements

Any non-Hong Kong company that establishes a place of business in Hong Kong must apply for registration as a “non-Hong Kong company” under Part 16 of the CO.

For registration purposes, the following documents and information must be delivered to the Registrar of Companies within one month of the establishment of the place of business in Hong Kong:17

  1. certified copy of the non-Hong Kong company’s constitutional documents (charter, statutes or memorandum and articles of the company or other instrument constituting or defining the company);
  2. certified copy of the non-Hong Kong company’s certificate of incorporation (where it is not the practice under the law of the place where the non-Hong Kong company purports to be incorporated to issue a certificate of incorporation, the non-Hong Kong company may tender other evidence of incorporation that the Registrar of Companies deems sufficient);
  3. Form NN1 (Application for Registration as Registered Non-Hong Kong Company) disclosing the following information:
    • name of the non-Hong Kong company;
    • place of incorporation of the non-Hong Kong company;
    • date of establishment of the place of business in Hong Kong;
    • address of the principal place of business in Hong Kong and in the place of incorporation, if any
    • address of the registered office in the place of incorporation;
    • particulars of its directors and secretary (if any) including their names or alias, any former names, residential addresses, nationality and identity card/passport numbers (if the director or secretary is a company, the name and registered/principal office of that company) and their date of appointment; and
    • the name and address of at least one person (a natural person resident in Hong Kong or a firm of practising solicitors or professional accountants) who is authorised to accept on behalf of the company service of process and any notices required to be served on the non-Hong Kong company.
  4. certified copy of the non-Hong Kong company’s latest published accounts in the form required by the law of the place of incorporation of the non-Hong Kong company or, if there is no such requirement, in the form in which they are submitted to its members. The non-Hong Kong company would not need to comply with this requirement if:
    1. The company is not required to publish its accounts or to deliver copies of its accounts to any person in whose office they may be inspected as of right by members of the public by:
      • the law of the place of its incorporation;
      • the law of any other jurisdictions where the company is registered as a company; or
      • the rules of any stock exchange or similar regulatory bodies in any of those jurisdictions.
    2. The company has been incorporated for less than 18 months prior to the date of delivery of the Form NN1 and the accounts of the company that are required to be published have not been made up;
  5. Form NM1 (Mortgage or charge details) together with a certified copy of the instrument by which the charge is created or evidenced if the company has created a charge on its property situated in Hong Kong or acquired a property situated in Hong Kong subject to an existing charge. (a registration fee of HK$340 is required); and
  6. Form IRBR2 (Notice to Business Registration Office).

A registration fee is payable to the Companies Registry and a business registration fee is payable to the Inland Revenue Department.

A certificate of registration of a non-Hong Kong company will be issued by the Registrar of Companies and a business registration certificate will be issued by the Inland Revenue Department when the registration requirements have been satisfied. Normally the certificate of registration will be issued within 14 working days18.

4.3. Name

There are restrictions on the registration of the name of a non-Hong Kong company which establishes a Branch in Hong Kong which are similar to those applying to a Subsidiary (see paragraph 3.4 above).

4.4. Business Registration

The provisions of the Business Registration Ordinance apply to the establishment of a Branch as they do to a Subsidiary (see paragraph 3.8 above).

5. CONTINUING OBLIGATIONS

A Subsidiary

5.1. Registers

A number of registers must be maintained by the Subsidiary. These include registers of debenture holders, shareholders, charges, directors and company secretaries.

5.2. Books of Account

The Subsidiary must keep proper accounting records which are sufficient to show and explain its transactions, to disclose with reasonable accuracy, at any time, the Subsidiary’s financial position and financial performance; and to enable the directors to ensure that the financial statements comply with the CO.19

The books of account must be kept at the registered office of the Subsidiary or at such other place as the directors of the Subsidiary think fit. Unlike other records required by the CO, for example, the register of shareholders and the register of charges, the books of account need not be kept in Hong Kong. If they are kept overseas, the accounts and returns which are sufficient to disclose the financial position of the Subsidiary with reasonable accuracy must be sent and kept at a place in Hong Kong at intervals of not more than 6 months. They must also be sufficiently detailed to enable the Subsidiary’s accounts to be prepared.

5.3. Annual General Meeting

The Subsidiary must, in respect of each financial year, hold its annual general meeting (“AGM”) (which is a meeting of its shareholders) 9 months after the end of its accounting reference period. The accounting reference period is the period by reference to which the financial year is to be determined.

If the accounting reference period is the first accounting reference period of the Subsidiary and is longer than 12 months, the Subsidiary must hold its AGM within 9 months after the anniversary of the Subsidiary’s incorporation or 3 months after the end of that accounting reference period, whichever is the later.

The AGM provides an opportunity for shareholders to question the directors on any matter, but in particular, accounts and reports which are usually presented at the meeting. Other business of the AGM may include declaring a dividend (if it is proposed that one be declared), electing directors in place of those directors retiring, and appointing auditors.

5.4. Annual Return

Each year within 42 days of the anniversary of its incorporation, the Subsidiary must file with the Registrar of Companies an annual return – Form NAR1 (giving details of various matters, including its share capital and its directors). The annual return must be manually signed by a director or the company secretary of the company.

If the return is not filed within the prescribed time limit, the Subsidiary and every officer of the Subsidiary are liable to face prosecution and, if convicted, default fines.20 In addition, a substantially higher registration fee shall become payable for the late filing of an annual return. The Companies Registry may strike-off companies from the register of companies which have consistently failed to file their annual returns.21

5.5. Annual Accounts

The directors (in practice the auditor) are required to prepare and put before the AGM of the Subsidiary the financial statements made up to a date not more than 9 months before the meeting.22 The financial statements must show a true and fair view of the financial position and the financial performance of the Subsidiary for that financial year.23

Various other matters which must be specified in the accounts are detailed in Schedule 4 to the CO, including details of directors’ emoluments, compensations for loss of office and loans to directors. In general, the Subsidiary would also need to disclose the name and place of incorporation of its ultimate holding company in its annual accounts.

A director who fails to lay the financial statements before the company in a general annual meeting commits an offence.

5.6. Annual Reports

An auditors’ report and a director’s report must be attached to the Subsidiary’s annual accounts before the same are presented at the Subsidiary’s AGM for consideration by its members. The auditors’ report must state (subject to exceptions) whether the financial statements exhibit a true and fair view of the Subsidiary’s financial position and financial performance. Detailed information about the Subsidiary and its business, in particular the Subsidiary’s profit and loss for the financial year and the state of affairs of the Subsidiary as at the end of the financial year, must be dealt with in the directors’ report.

5.7. Registration Of Charges

Particulars of certain charges or other security created by the Subsidiary must be delivered to the Registrar of Companies together with a certified copy of the instrument (if any) creating or evidencing the charge within one month of their creation. Charge documents delivered beyond the prescribed time period will not be accepted unless an order extending the time for registration is granted by the court.24 For charges created outside of Hong Kong over property situated outside Hong Kong, the registration period is one month after the date on which a certified copy of the instrument creating or evidencing that charge could, if despatched with due diligence, have been received in Hong Kong in due course of post . 25

Similarly, when the Subsidiary acquires a property subject to an existing charge, such a charge must be registered within one month after the date on which the acquisition is completed. Failure to register the charge results in the charge being void against any liquidator and any creditor of the Subsidiary. Although the charge is void, the “chargee” has the right to claim as an unsecured creditor for the repayment of any debts secured by the charge and this amount may become immediately payable by the Subsidiary.26

5.8. Registered Particulars

The Registrar of Companies must be notified when there are any changes in the details and particulars registered. These include but are not limited to:

  1. any change of registered office;27
  2. allotment of shares by the Subsidiary28;
  3. any change of director and company secretary of the Subsidiary and any change of their particulars;29
  4. special resolutions passed by the shareholders of the Subsidiary, for example, amending its articles of association.

5.9. Public Inspection

All documents filed with the Registrar of Companies are open to public inspection and any person, upon payment of fees, can obtain copies of such documents.30

5.10. Disclosure

The Subsidiary must exhibit its full and correct name outside every office or place in which it carries on business in Hong Kong in a conspicuous position in legible characters and must state the same on, among other things, all of its business letters, notices and other official publications.31

The Subsidiary may possess a common seal containing the full name of the Subsidiary and must be made of metal.32

A Branch

5.11. Annual Return

Each year within 42 days of the date of registration of the company in Hong Kong, the non-Hong Kong company must file with the Registrar of Companies an annual return – Form NN3. The annual return must be manually signed by a director, the company secretary, or the Hong Kong authorised representative of the non-Hong company.

If the return is not filed within the prescribed time limit, a substantially higher registration fee shall become payable for the late filing of an annual return.

5.12. Accounts

The non-Hong Kong company need not deliver its accounts to the Registrar of Companies if it is a company of the type described in paragraph 4.2(d) above. Otherwise, the non-Hong Kong company must submit its accounts together with an annual return to the Registrar of Companies within 42 days after each anniversary of the date of registration of the company in Hong Kong.33 The accounts must be duly certified by a director, the company secretary, or the Hong Kong authorised representative of the non-Hong Kong company.

In any event, the Branch should prepare branch accounts for tax return purposes.

5.13. Registration Of Charges

Under Section 336, only charges on Hong Kong property created or acquired by non-Hong Kong companies which are registered under Part 16 will be required to be registered with the Registrar of Companies. Accordingly, charges created by non-Hong Kong companies which are not registered under Part 16 will not need to be registered.

Section 333(2) specifies that ships and aircraft that are registered in Hong Kong will be treated as property in Hong Kong irrespective of their physical location. Likewise, ships and aircraft registered outside Hong Kong will be treated as property outside Hong Kong.

The non-Hong Kong company is required to register with the Companies Registry particulars of any mortgages and charges created by it over property situated in Hong Kong within 1 month of their creation.34 Further, it is also required to register an existing charge on acquired property situated in Hong Kong.

5.14. Registered Particulars

The Registrar of Companies must be notified of any change in certain registered documents or particulars of the non-Hong Kong company. These include:

  1. any change of directors, company secretary or authorised representatives of the non-Hong Kong company and of their particulars (to be filed within 1 month from the date of change)35;
  2. any change of address of the principal place of business in Hong Kong and in the place of incorporation and the address of the registered address in the place of incorporation (to be filed within 1 month of change)36;
  3. any alteration in the constitution, charter, statutes or memorandum of articles (to be filed with supporting documents within 1 month of such alteration)37; and
  4. change in the corporate name of the non-Hong Kong company (to be filed with supporting documents issued by the relevant government authority within 1 month of such change)38.

5.15. Authorised Representative

The non-Hong Kong company must have an “authorised representative” in Hong Kong (see section 4.2(e) above) until at least 1 year after it has ceased to have a place of business in Hong Kong.39

5.16. Issues Of Shares

The non-Hong Kong company must not offer shares or debentures to the public in Hong Kong unless it adheres to a number of disclosure and registration requirements mainly imposed by the CO and the Securities and Futures Ordinance.

5.17. Disclosure

A non-Hong Kong company which carries on business in Hong Kong must state its name, country of incorporation and (if so) the fact that it is incorporated with limited liability in legible characters in all bill-heads and letterheads, notices and other official publications of the corporation, and, if the corporation is in liquidation, in all advertisements of the corporation with the words “in liquidation” added after its name.40


17 section 776 CO and Companies (Non-Hong Kong Companies) Regulation

18 http://www.cr.gov.hk/en/publications/docs/14-e.pdf

19 section 373(2) CO

20 section 662(6) CO

21 The Company Registry has expressed that it may consider taking strike-off action in appropriate cases. Please refer to http://www.cr.gov.hk/en/faq/faq05_a.htm

22 section 431(1) CO

23 section 380(1) CO

24 section 346 CO

25 section 335(5) CO

26 section 337(4) CO

27 section 658 CO

28 section 142 CO

29 sections 645(1) and (4), 652 (1) and (2) CO

30 section 45(1) CO

31 section 659 CO, Companies (Disclosure of Company Name and Liability Status) Regulation

32 section 124 CO

33 section 789 CO, Companies (Disclosure of Company Name and Liability Status) Regulation

34 section 336(6) CO

35 section 791(2)(b) & (c) CO

36 section 791(2)(d) CO

37 section 791(2)(a) CO

38 sections 778 and 779 CO

39 section 786 CO

40 section 337 CO

Skills

Posted on

2014-10-17