How To Register a Company Limited by Guarantee in Hong Kong

Key Takeaways

• A Company Limited by Guarantee in Hong Kong is ideal for non-profit organisations and charities. It offers a legal structure with member-based ownership and limited liability protection without share capital.
• Key advantages of forming a Company Limited by Guarantee include separate legal entity status, perpetual succession, limited liability for members, and potential tax exemptions under specific conditions of the inland revenue ordinance.
• Incorporating a Company Limited by Guarantee involves distinct pre-registration steps, mandatory structural requirements such as at least one member and two individual directors, and adherence to ongoing compliance obligations, including filing annual returns and maintaining audited financial statements.

What Is a Company Limited by Guarantee?

A Company Limited by Guarantee is the most popular vehicle for setting up a non-profit organisation or charity in Hong Kong. It provides a legal structure and liability protection for such entities. Unlike a traditional company, a Company Limited by Guarantee has no share capital. It is owned by guarantee members who agree to pay a fixed amount to cover liabilities if the company is wound up.

A Company Limited by Guarantee, which is member-owned and liability-limited, directs its profits towards social good. This structure limits members’ liability to their pledged amount so they can have peace of mind while pursuing their non-profit objectives. Profits generated by the company are reinvested to further its mission instead of being distributed as dividends.

While it has no share capital, a company limited by guarantee must state the amount guaranteed by each member, which becomes payable only if the company is wound up. Members’ liability is capped at a fixed amount, so this structure is attractive to those who want to set up a non-profit organisation with minimal financial risk.

Ideal Uses for a Company Limited by Guarantee

Companies limited by guarantee are frequently used for non-profit organisations and clubs in Hong Kong. These entities benefit from the charitable status and structured legal framework that a Company Limited by Guarantee provides, ensuring that their operations are aligned with their non-profit purposes. For instance, sports clubs often adopt this structure to take advantage of its governance and liability protection.

Professional associations also find the Company Limited by Guarantee model advantageous. It allows them to represent their members effectively while ensuring that any profits generated are reinvested into furthering the association’s objectives. Educational institutions like schools and universities may also utilise this structure to balance their operational needs with their educational missions.

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Non-governmental organisations (NGOs) focusing on humanitarian or advocacy goals benefit from the company, which is limited by the guarantee’s focus on non-profit, charitable purposes. Additionally, non-profit organisations, such as social enterprises, can leverage this structure to balance income generation with their non-profit objectives, ensuring that their activities align with their mission to drive social change.

Key Advantages of Forming a Company Limited by Guarantee in Hong Kong

There are several advantages to forming a company limited by guarantee in Hong Kong. One of the biggest is that a company limited by guarantee is a separate legal entity from its members. This means it can:

• sue and be sued
• own property
• borrow money
• enter into contracts in its own name

This ultimately gives you operational independence.

Another big plus is perpetual succession, meaning the company’s existence is not affected by changes in members or individual directors. This ensures continuity and stability, which is crucial for long-term projects and initiatives. Additionally, members of a company limited by guarantee have limited liability; they are only liable to the extent of their guarantee. This limited liability protection is a significant benefit, as it minimises financial risk for the members.

A company limited by guarantee in Hong Kong may also qualify for tax exemptions under the Inland Revenue Ordinance (Cap. 112) if it meets specific criteria related to its non-profit nature. This potential for tax relief from the inland revenue department can provide significant financial advantages, allowing more funds to be directed towards achieving the company’s social objectives.

Legal Framework Governing Companies Limited by Guarantee in Hong Kong

The primary legal frameworks governing companies limited by guarantee in Hong Kong include the Companies Ordinance (Cap. 622), Inland Revenue Ordinance (Cap. 112), and applicable common law principles. The Companies Ordinance provides comprehensive guidance on the formation, registration, and operational requirements of a company limited by guarantee in Hong Kong. Familiarising oneself with the Companies Ordinance regulations is necessary for anyone looking to establish a company limited by guarantee to assure compliance.

The Inland Revenue Ordinance (Cap. 112) is another key legal framework for these companies. It outlines the requirements for obtaining tax exemptions and other financial benefits, which can be crucial for non-profit organisations. A thorough understanding of this ordinance’s provisions is crucial to maximising a company limited by guarantee's financial efficiency.

Common law principles also influence the governance of a company limited by guarantee, particularly in areas not explicitly covered by statutory regulations. These principles provide a foundation for interpreting and applying the laws, ensuring that any company limited by guarantee operates within a robust and fair legal framework.

Structural Requirements of a Company Limited by Guarantee

Establishing a company limited by guarantee involves meeting several structural requirements. At a minimum, a company limited by guarantee must have at least one member who can be either a natural person or a corporation. The structure also includes at least two directors, ensuring adequate oversight and management.

Additionally, the company must have a company secretary and a registered office address located within Hong Kong. These elements are vital to comply with statutory requirements and operate the company within the legal framework established by Hong Kong law.

Members and their role

A Company Limited by Guarantee does not have shareholders. Instead, it is owned by guarantee members, making it distinct from private companies limited. These members are not shareholders but individuals or entities who have agreed to guarantee a predetermined amount if the company is wound up. The liability of members is limited to this amount, providing a level of financial security and predictability.

Members’ liability is limited to the amount they have guaranteed to contribute. This occurs only when the company is wound up, ensuring members are liable only for a predetermined contribution. Therefore, the company limited by guarantee structure becomes appealing to those supporting non-profit initiatives without substantial financial risk.

Appointment and duties of directors

In Hong Kong, a company limited by guarantee must have at least two individual directors. This is a mandatory legal requirement for such companies in the region. They oversee the company’s operations and ensure adherence to its philanthropic aims. There are no restrictions on the nationality or residence of these directors, providing flexibility in the appointment process.

The directors of a company limited by guarantee in Hong Kong must adhere to the standard director’s duties that apply to all registered companies in the country. These general director's duties serve as a legal framework for their responsibilities and actions within the company. They have the same legal duties and responsibilities as directors in other Hong Kong entities, ensuring that they:

• Act in the best interests of the company and its members
• Use their powers for a proper purpose
• Show reasonable care, skill and diligence
• Avoid conflicts of interest
• Not accept benefits from third parties
• Disclose any personal interest in transactions or arrangements with the company.

Following these general directors' duties can discharge their corporate social responsibility responsibilities and help the company.

Role of the company secretary

The company must have a company secretary. This role is essential for maintaining compliance with statutory requirements and ensuring that the company operates within the legal framework established by Hong Kong law. Company secretaries should either be Hong Kong residents or companies registered in Hong Kong.

Choosing a company secretary with extensive experience in Hong Kong company formation and compliance is crucial for success. A professional service provider can act as a company secretary, ensuring compliance with statutory requirements and maintaining records.

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Registered Office Address

In Hong Kong, a Hong Kong company limited by guarantee is legally required to have a registered office address within the territory. This is an important aspect of complying with company regulations within the jurisdiction. This address is crucial as it is where official documents and correspondence from government bodies are sent.

The registered office address must be situated within Hong Kong. Ensuring that the registered office address is correctly maintained is vital for compliance and receiving important notifications from regulatory authorities.

Incorporation Process for a Company Limited by Guarantee

Several steps are involved in incorporating a company limited by guarantee. The application process begins with a name search to ensure the proposed company name is unique and compliant with existing rules. After that, the Articles of Association should be drawn up. These should detail the members’ guaranteed amount, the company’s purpose, and the allocation of assets and income in case of liquidation.

The incorporation process also requires submitting the NNC1G form, Articles of Association, and applicable incorporation fee to the Companies Registry. Engaging a professional service provider can streamline the process, ensuring that all necessary documents are prepared and submitted accurately and efficiently.

Pre-registration steps

Several pre-registration steps must be completed before registering a company limited by guarantee in Hong Kong. Conducting a name search through the Companies Registry is essential to ensure that the proposed company name is unique and does not violate existing rules. This step helps avoid any potential legal issues related to name duplication. Additionally, at least two directors must be nominated to ensure that the company meets the statutory requirements set forth by Hong Kong law.

Identifying guarantors is another critical step in the pre-registration process. Guarantors are responsible for the company’s liabilities up to the amount they have guaranteed. Engaging a professional service provider can streamline the process through digital solutions like the e-Registry.

Required documents

Several key documents must be submitted to incorporate a company limited by guarantee. Drafting the Articles of Association is necessary, as these documents govern the company and state its objects. Additionally, certified true copies of identification documents, such as passports for non-residents or ID cards for Hong Kong residents, are required for each member and director.

The incorporation process requires the following:

1. Complete and sign the incorporation form NNC1G.
2. Provide copies of identification documents for each director.
3. Provide proof of residential address for each director.

Ensuring that all required documents are accurately prepared and submitted will facilitate a smooth registration application process.

Registration procedure

The registration procedure for a company limited by guarantee is as follows:

1. Submit NNC1G form and Articles of Association to the Companies Registry.
2. Pay the fees.
3. Apply for a Business Registration Certificate.

A professional service provider can prepare and submit the necessary incorporation documents for you to comply with all requirements.

Upon approval, the Companies Registry typically takes 4-6 weeks to issue the Certificate of Incorporation. This certificate confirms the legal registration and authorisation to operate in Hong Kong and the Business Registration Certificate is an additional requirement to commence business operations. To speed up the approval process, ensure all documents are correctly filed, and fees are paid. To speed up the approval process, ensure all documents are correctly filed, and the business registration fee is paid.

Ongoing Compliance Obligations

Company Limited by Guarantee as a Charity

Obtaining charitable status for a company limited by guarantee involves several steps. A charity must be established by a written governing instrument that clearly outlines the charitable purposes and administrative provisions. The governing instrument for a charity can vary depending on its legal structure, such as the Articles of Association for a limited company or a trust deed for a trust.

Once recognised as a charity, companies can be eligible for tax exemptions under section 88 of the Inland Revenue Ordinance. Donations to companies recognised as charities can be used to obtain tax relief, providing additional financial incentives.

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The process typically takes three to six months, and the Inland Revenue Department aims to respond to applications within four months, provided all necessary information is included.

Timeline and Costs for Incorporating a Company Limited by Guarantee

Typically, a company limited by guarantee incorporation in Hong Kong period takes four or six weeks. During this period, the company must request a Business Registration Certificate as part of the registration process. Make sure all documents are prepared and submitted correctly to avoid any hiccups.

The incorporation fee for a company limited by guarantee is:

• HKD 170 for up to 25 members
• HKD 340 for companies with 26 to 100 members
• An additional fee of HKD 20 applies for every 50 members or less beyond the first 100 members

Understanding these costs and the timeline is crucial for effective planning and budgeting.

Partnering with Experts

Partnering with experts for the incorporation process and ongoing compliance can greatly streamline the setup and maintenance of a company limited by guarantee in Hong Kong. Expert assistance can provide numerous benefits, including ensuring legal compliance, properly maintaining records and navigating the complex Hong Kong regulations.

Organisations like Acclime can guide you through the incorporation process, offering professional advice and support to ensure that your company meets all regulatory requirements. Leveraging the expertise of professionals can save time and resources, allowing you to focus on achieving your non-profit objectives.

Summary

In summary, forming a company limited by guarantee in Hong Kong offers a structured and legally compliant way to establish a non-profit organisation. The process involves understanding the structural requirements, navigating the incorporation process, and ensuring ongoing compliance with statutory obligations. By meeting these requirements, a company limited by guarantee can effectively pursue its social objectives while enjoying the benefits of limited liability and potential tax exemptions.

Partnering with experts to get your company registered can further streamline the process, providing professional guidance and support, like company secretaries, to ensure that your company operates within the legal framework and achieves its mission. Embracing this structure can empower you and your company to make a meaningful impact while maintaining financial stability and operational efficiency.

Heather CameronBusiness Writer

Heather is here to inform and inspire our readers. Boasting eight years in the world of digital marketing, working in diverse industries like finance and travel, she has experience writing for various audiences. As Osome’s resident copywriter, Heather crafts compelling content, including expert guides, helpful accounting tips, and insights into the latest fintech trends that will help entrepreneurs, founders and small business owners in Hong Kong take their businesses to the next level.

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