My earlier posts on “how to establish a company in Hong Kong” (Part 1, Part 2) were made while I was attempting to establish a company. Now that I’ve finished establishing a company, and also recovering shares, I can sshare my expeience.
There is more than one type of legal entity in Hong Kong. As an entrepreneur you want to establish a Private Limited Company. Here are the things you’ll need in order of difficulty:
- Company Secretary: This entity must be a legal Hong Kong resident. This means Joe Smith from Montana cannot just create a HK Limited company all by himself, he has to either convince a HKID holder (a Hong Kong permanent resident) to be his secretary or hire a firm to be the secretary. Xingergy uses Kwong’s Accounting Services Co. Ltd.
- Director: This can be you. I am the sole director of Xingergy, my US address is on the official forms and I do not have a HKID or an investment visa. A private limited company can have a sole director, but the director cannot also be the secretary. A director can be a secretary, but there must be another director.
- Money: I admit I am guilty of not keeping good accounting records, so I don’t know exactly how much it cost to establish a company but it’s around US$500. A corporate secretary (Kwong’s) cost about $130 a year. You don’t need any “paid-up” capital, minimum investment amount, etc.
- Company Address: This one is easy to do, difficult to do right. The best option is to use your entrepreneurial superpowers and get a real, unique office address for free. That’s what I did, don’t ask me how. The other option is to get a virtual office. Many companies offer an all in one package, they will do all the company registration paperwork for you, assume corporate secretary duties, and provide a PO box address. Some even offer phone answering/forwarding services and meeting rooms. Prices range from affordable to rich uncle funded my startup. It seems like co-working spaces in Hong Kong should offer these services or at least be able to recommend options, but I don’t really know those guys.
You do not need a bank account to open a private limited company.
Forms you’ll need/get:
- NC1: This is the primary paper proof of your company’s existence, it is generated and maintained by the Company Registry (where you establish the company). It contains your company’s: CR# (company ID number), English name, Chinese name, Company Address, email, Share capital (type of shares, how many, value), Founder members (name, address, type of shares taken, number of shares taken), Corporate -or- Individual Secretary (who, HK address, HKID number or Company number), Director (who, address, HKID -or- passport #), signatures.
- Memorandum of Association and Articles of Association (M&A): This form defines your company. Kwong’s made it, but you can write whatever you want. It has the: Company name, Share value and quantity, Founder members, and then a bunch of lawyer talk.
- Certificate of Incorporation: This is the public “I exist” form. It has the: CR#, Company name, and incorporation date. It is generated and maintained by the Company Registry.
An alternative to all of this is to use a company to take care of all this for you. You’ll get a big fancy folder with company records, an official “chop” (a seal), and more. The company will take care of all the documents and paperwork. Do that, don’t do it the way I did it, manually.
The birth of Renew Investments Limited, my first HK Company. We used an agent in Shenzhen.
A Note on Directors, Shareholders, Secretaries:
There are two levels of “members” in a HK company: directors and shareholders. Directors are the chiefs, shareholders are the indians. Secretaries count the beans.
Selling and Buying shares
I attempted to incentivize one of my potential co-founders with 40% straight up equity. No vesting. This was a horrible idea. After he left the startup I had to recover the shares. My mentor managed to get the former co-founder to meet with him (he was only over an hour late) and sign the forms to “sell the shares to Seth (me).” My mentor had Kwong’s prepare the forms including: Sold Note, Bought Note, Instrument of Transfer. These were all created by Kwong’s. We also had to have him complete forms D2A (Notification of Change of Secretary and Director) and D4 (Notification of Resignation of Secretary and Director), these forms were created by the Company Registry. The D2A and D4 forms were submitted to the Company Registry where they copied them for me and accepted them, resulting in Xingergy’s director and secretary being changed. He still owned shares in the company. So I had to take the bought/sold notes and instrument of transfer to the Inland Revenue Tower, floor 3, to transfer the shares. I had to show either a copy of the company’s NC1 or M&A. Kwong’s made a form stating my company didn’t own any land or assets, so I didn’t have to pay any taxes/fees besides the filing fee of HK$20. After waiting in lines and waiting for my number, DMV style, I successfully submitted all the forms resulting in Xingergy being 100% owned by myself.
Not the most exiting part of running a startup