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A company limited by guarantee in Hong Kong is the entity of choice if you want to set up a non-profit organization or a charity.
What is a Company Limited by Guarantee ?
A company limited by guarantee in Hong Kong is a company without a share capital or shareholders.
Instead, it has members whose liability is restricted to the amount they agree to contribute if the company is being wound up.
What is a company limited by guarantee suitable for?
A company limited by guarantee is the right vehicle to engage in for non-profit or charitable activities.
This covers companies that have the objective of promoting art, science, sports, culture, religion, education, research, or other similar objects.
All of the income and properties of a company limited by guarantee are to be applied solely towards the promotion of its object.
A company limited by guarantee can also be used as a subsidiary company set up to carry out the Corporate Social Responsibility obligations of a parent company.
The principal difference between a company limited by guarantee and one limited by shares is that the former does not have a share capital while the latter does.
Another difference between both entities is that profits made cannot be distributed to the members in a company limited by guarantee. On the contrary, profits in the form of dividends are issued regularly to members of a company limited by shares.
Also, upon the winding of a company limited by shares, its assets are normally distributed to its shareholders. It is not the case for a company limited by guarantee.
What are the advantages of setting up a company limited by guarantee in Hong Kong?
A company limited by guarantee has a separate legal identity from its members. As such, it can sue or be sued, own property, obtain loans, enter into contracts, and more in its own name.
It also enjoys perpetual succession meaning that changes in its members or directors will not affect its existence.
Finally, the liability of members of a company limited by guarantee is limited only to the amount they have undertaken to pay. This liability will only arise when the company is being wound up.
What laws govern a company limited by guarantee in Hong Kong?
The principal laws which have an effect on the creation, existence, control, management, and dissolution of a company limited by guarantee are the Companies Ordinance (Cap. 622), the Inland Revenue Ordinance (Cap. 112), and common law.
What is the structure of a company limited by guarantee?
A company limited by guarantee must have at least one member.
Its member(s) can be natural persons or companies.
There are no restrictions on the nationality or residence of the members.
At any point when the company’s membership is increased, the company is required to notify the Companies Registry of this change. Members of the company may appoint proxies.
A company limited by guarantee must have at least two Directors at any given time.
A company cannot be appointed a director of a company limited by guarantee. There are no restrictions on the nationality or residence of the directors.
The directors of a company limited by guarantee in Hong Kong are bound by the general director’s duties applicable to any company registered in Hong Kong.
- Company Secretary
A company limited by guarantee must have a company secretary.
Such company secretary can be a natural person resident in Hong Kong or a company having a registered office or a place of business in Hong Kong.
- Registered Address
A limited liability company in Hong Kong is required to maintain a registered office address within Hong Kong.
- Constitution Documents
A company limited by guarantee must have and is governed by its Articles of Association.
The Articles should notably specify the amount guaranteed by members, the object of the company, how the company assets and income are to be applied in the event of winding up, etc.
How to set up a company limited by guarantee?
In setting up a company limited by guarantee in Hong Kong, you may require the services of professionals such as us Air Corporate to initiate and conduct the registration process. Certain documents must be prepared and certain steps are to be followed.
- Documents Required
To commence the setting up of a company limited by guarantee in Hong Kong, you need:
- Copies of the passport or ID card for each non-resident or resident member respectively plus proof of residential address. In the case of a body corporate, the certificate of incorporation and proof of the registered office address
- Copies of the passport or ID card for each non-resident or resident director respectively plus proof of residential address
- Articles of Association
- Standard incorporation Form NNC1G available from the Hong Kong Companies Registry.
- Incorporation Steps
The setting up process for a Hong Kong company limited by guarantee is the same as the one applicable to any company. It is generally fast and straightforward.
Please refer to our step-by-step guide to setting up a company in Hong Kong for detailed information on incorporation process.
What are the obligations of a company limited by guarantee in Hong Kong?
Once a company limited by guarantee is incorporated in Hong Kong, it has to consistently meet up with certain obligations including:
- Maintaining records of members, directors, debenture holders, and company secretaries
- Keeping account books and records to be audited on an annual basis
- Having annual general meetings, the first of which is to be held within nine months after the first anniversary of the company’s incorporation
- Filing annual returns and paying relevant fees
- Reporting changes to members, directors, company secretaries, and registered office address to the Companies Registry
Is a company limited by guarantee automatically a charity?
A company limited by guarantee in Hong Kong is not automatically treated as a charity.
For a company limited by guarantee in Hong Kong to qualify as a charity, it must follow a charitable purpose, such as:
- The relief of poverty
- The advancement of education
- The advancement of religion
- Purposes beneficial to the community
Whether a Hong Kong company limited by guarantee qualifies as a charity is to be determined by the Inland Revenue Department.
What is the benefit of a company limited by guarantee being recognized as a charity?
By the provisions of the Inland Revenue Ordinance, a company that is a charity is exempt from taxation and will be deemed to have always been exempted from tax.
Also, donations to such companies can be used to obtain tax reliefs.
How to be recognized as a charity?
In addition to the requirements stated above for setting up a company limited by guarantee, a charity is required to have a constitution or governing instrument that:
- Specifies its purpose
- Restricts the sharing of the income and assets of the company to its members
- Expresses how the company’s assets and income should be applied after dissolution
- Forbids directors and other persons with powers of control over the company from receiving remuneration
- Makes the keeping of operating records compulsory
How long does it take to apply for qualification as a charity?
After a company limited by guarantee is set up in Hong Kong, the application process to qualify as a charity normally takes 3 to 6 months.
Contact our team of experts if you have questions or need assistance to set up a company limited by guarantee in Hong Kong.
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