Hong Kong Company Registration
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Hong Kong company registration is one of ATAHK's Hong Kong business services. Hong Kong is increasingly seen as a necessary operations center for the financial industry. It is ranked by the Global Financial Centers Index as the world’s most competitive financial centre after London and New York. It offers a well-regulated financial infrastructure and a transparent legal system and has in place comprehensive double taxation treaties with a number of Asian jurisdictions, including Mainland China.
In the banking sector, more than three-quarters of the world’s top 100 banks have Hong Kong offices. In capital markets, Hong Kong is Asia’s largest equity fund-raising centre as well as the largest source of foreign capital for Mainland China companies. Hong Kong is also Asia’s leading fund management centre with the largest concentration of fund managers in Asia.
Financial industry participants who wish to establish an office in Hong Kong are generally subject to regulatory licensing, registration or authorization requirements. These requirements differ depending on the scope of activities to be undertaken. Different regulators and legislation regulate different sectors of the financial services industry.
Securities and Futures
The Securities and Futures Ordinance (“SFO”) governs the securities and futures markets, establishing regulations for intermediaries, offers of investment products and general conduct in these markets.
Licensing and Registration
The SFO regulates 9 types of regulated activity. Generally, no person may carry on a business (or to hold itself out as carrying on a business) in a regulated activity unless, the person is a corporation licensed or registered by the Securities and Futures Commission (“SFC”) for that regulated activity.
A person can be licensed or registered for more than one regulated activity. The more commonly encountered regulated activities are described below.
Type 1 (Dealing in Securities)
“Dealing in securities” means making or offering to make an agreement with another person, or inducing, or attempting to induce another person to enter into, or to offer to enter into an agreement.There are a number of applicable exemptions from Type 1 regulated activity, including the principal dealing exemption. Under this exemption, a person is not regarded as dealing in securities if he acquires, disposes of, subscribes for or underwrites securities as principal, or deals as principal with a person who is a professional investor.Brokers and dealers in shares and other equities will generally carry out Type 1 regulated activity.
Type 2 (Dealing in Futures Contracts)
“Dealing in futures contracts” means, whether as principal or agent and subject to prescribed exemptions:
1) making or offering to make an agreement with another person to enter into, or to acquire or dispose of, a futures contract;
2) inducing or attempting to induce another person to enter into, or to offer to enter into, a futures contract; or
3) inducing or attempting to induce another person to acquire or dispose of a futures contract, by the person.
Under the SFO, a “futures contract” is defined as “a contract or an option on a contract made under the rules and conventions of a futures market”. Thus, “dealing in futures contracts” generally refers to dealing in an exchange-traded futures contract.Brokers in commodities and futures will generally carry out Type 2 regulated activity.
Type 3 (Leveraged Foreign Exchange Trading)
“Leveraged foreign exchange trading” means the act of entering into, offering to enter into or inducing or attempting to induce a person to enter into a contract the effect of which is that one party agrees or undertakes to:
1) make an adjustment between himself and another person according to whether a currency is worth more or less, as the case may be, in relation to another currency;
2) pay an amount of money or to deliver a quantity of any commodity determined or to be determined by reference to the change in value of a currency in relation to another currency; or
3) deliver to another person at an agreed future time an agreed amount of currency at an agreed price.
The definition of “leveraged foreign exchange trading” is very broad and potentially includes all types of currency transactions. However, there are a number of exemptions, most notably currency exchange wholly referable to the provision of property or services.Currency dealers who facilitate client trading on margin are generally carrying on Type 3 regulated activity.
Types 4 and 5 (Advising on Securities and Futures Contracts)
“Advising on securities” and “advising on futures contracts” mean, subject to prescribed exemptions:
giving advice on whether, which, the time at which, or the terms or conditions on which, securities or futures contracts should be acquired or disposed of; or
issuing analyses or reports, for the purposes of facilitating the recipients of the analyses or reports to make decisions on whether, which, the time at which, or the terms or conditions on which, securities or futures contracts should be acquired or disposed of.
The SFO exempts from Type 4 and 5 regulated activities advice given by a company its wholly owned subsidiaries, its holding company (provided the holding company owns the entire issued share capital of the company) and wholly owned subsidiaries of such a holding company.
Financial planners and investment research firms will generally be carrying out Type 4 or 5 regulated activity. Certain asset management groups, including private equity firms, and corporate finance advisers may also be carrying out Type 4 regulated activity.
Fitness and Properness
The SFC will refuse to grant a license to carry on a regulated activity unless the applicant can demonstrate that it is a fit and proper person to be licensed for the regulated activity based on its financial status and solvency, its educational or other qualifications or experience (or, in the case of a compny, the educational or other qualifications or experience of its management), its ability to carry on the regulated activity competently, honestly and fairly and its reputation, character, reliability and financial integrity.
Investment Offers
Quite apart from licensing and registration requirements, any offer of any securities or regulated investment agreement to the public may, subject to prescribed exemptions, be subject to authorization requirements by the SFC. Thus, for example, asset managers licensed by the SFC who wish to market investment funds to the public in Hong Kong may be required to seek authorization of the SFC both for the fund itself and the marketing materials for the fund.
Banking and Deposit Taking
The Banking Ordinance (“BO”) establishes a tiered system for regulating banks in Hong Kong.
Authorization
Under the BO, subject to prescribed exemptions, no banking business and no business of taking deposits may be carried out except by an institution (“authorized institution”) authorized by the Hong Kong Monetary Authority (“HKMA”). Broadly, there are 3 tiers of authorized institutions, namely:
Banking Business
Banking business means (i) receiving from the general public money on current, deposit, savings or other similar account repayable on demand or within less than 3 months or at a call or notice of less than 3 months, or (ii) paying or collecting cheques drawn by or paid in by customers.
Exemptions
The BO prescribes a number of exemptions from the authorization requirement. One exemption applies to corporations licensed under the SFO for Types 1 (dealing in securities), 2 (dealing in futures) or 3 (leveraged foreign exchange trading) regulated activities. Other exemptions apply to registered trust companies and credit unions and deposits taken from banks.
Licensed Banks
Licensed banks are the only authorized institutions which may carry on banking business.A bank incorporated overseas seeking authorization as a licensed bank must establish a branch in Hong Kong which will apply for authorization. Under the BO, a company incorporated in Hong Kong cannot become a licensed bank unless it has been an RLB or DTC for 3 continuous years or it is a subsidiary of a bank that has been authorized to carry on banking business in Hong Kong for at least 3 years. After 3 years, the bank may then seek to authorize a wholly-owned subsidiary of the bank in Hong Kong to assume the business of the branch.
Licensed banks must have an aggregate paid-up share capital (including share premium account) of not less than HK$300 million (or an equivalent amount in any other approved currency). Furthermore, licensed banks must maintain total customer deposits of not less than HK$3 billion (or an equivalent amount in any other approved currency) excluding deposits of other banks and certain affiliates and total assets of not less than HK$4 billion (or an equivalent amount in any other approved currency).
Restricted License Banks
RLBs may carry on a business of taking deposits but are restricted to taking deposits of a minimum balance of HK$500,000 from any one depositor. An RLB may take a deposit of a sum less than HK$500,000 from a depositor if the amount standing to the credit of the depositor with the RLB, at the time any such deposit is taken, is not less than HK$500,000. RLBs may not carry on banking business and thus, may not operate a chequing or savings account.
RLBs are principally engaged in merchant banking and capital markets activities.Under HKMA practice, a bank incorporated overseas which seeks authorization as an RLB may either establish a subsidiary incorporated in Hong Kong as the RLB or a branch as the RLB.An RLB must have an aggregate paid-up share capital (including its share premium account) of not less than HK$100 million (or an equivalent amount in any other approved currency). There are no minimum requirements as to customer deposits or total assets for an RLB.
Local Representative Offices
A bank incorporated outside Hong Kong may apply to the HKMA for approval to establish a local representative office (“LRO”).An LRO may not carry out banking business or a business of taking deposits. Its business must be limited to representational and liaison activities. Typical functions of an LRO include marketing of the services of the bank’s overseas offices to customers in Hong Kong and acting as a channel of communication between those customers and the bank’s overseas offices.
Under the BO, the HKMA may only approve an application for an LRO if it is satisfied that the bank is adequately supervised by the relevant overseas banking supervisory authority. In practice, the HKMA may wish to confirm that this overseas banking supervisory authority has no objection to the establishment by the bank of an LRO and confirm that the bank operates under a valid license to transact a full range of banking business in its country of incorporation.An LRO is required to operate from a single business location.
Failure to Obtain License
Unlicensed money lenders are generally not entitled to recover in any court any money lent or any interest in respect thereof or to enforce any agreement made or security taken in respect of any loan made. However, a court has a discretion to permit such a recovery or enforce such an agreement or security if it considers that it would be inequitable to deny such recovery or enforcement.
Exemption for Authorized Institutions
Authorized institutions are excluded from the scope of the MLO and are therefore not required to obtain a money lender’s license to carry on money lending business. However, authorized institutions are subject to regulation by the HKMA pursuant to the BO in carrying on such lending activities and may, additionally, be subject to requirements of any banking association to which they belong (e.g. the Hong Kong Association of Banks).
Exemption for Licensed Corporations
Corporations licensed under the SFO to carry on a business of dealing in securities and which engage in securities margin financing are exempt from the requirement to obtain a money lender’s license.
Other Exemptions
The MLO exempts a number of other types of loans, including loans which are secured by charges registrable under company law, loans made by a person whose ordinary business does not primarily or mainly involve lending of money and loans involving the issue of securities for which a prospectus has been registered under company law.
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For further queries, please do not hesitate to contact ATAHK at anytime, anywhere by simply calling China hotline at 86-755-82143422, 86-755-82143512, or emailing to 2355725105@qq.com.