7 key differences between Hong Kong & China registered companies
When doing business in China it is important for foreign companies to know the differences between Hong Kong & China registered companies.
It would be easy to assume that the registration of a Hong Kong company and a Mainland China company would be more or less the same (they are both Chinese companies after all) but this is far from the case.
In fact, Hong Kong & China registered companies operate under very different legal systems and are registered by different authorities. Keep reading to learn more….
1. Legal System
You may have heard of China’s “one country, two systems” principle and nowhere is the meaning of this more apparent than in terms of legal systems. Hong Kong operates under an almost completely different legal system to the Mainland
Hong Kong: Companies registered in Hong Kong are subject to the laws of Hong Kong under the Companies Ordinance (Cap. 622)
China: Companies registered in Mainland China are subject to the “Company Law of the People’s Republic of China”
2. Registration Body
Given that their respective legal systems are different, it thus makes sense that Hong Kong & China registered companies are administrated by different bodies.
Hong Kong: Companies are registered by the Hong Kong Companies Registry
China: Companies are registered by the AIC (Administration for Industry & Commerce)
3. Ease of Doing Business
Hong Kong promotes itself as a world-leading city for international trade and business, so do their free-market policies translate to ease of doing business?
Hong Kong: Relatively speaking, doing business in Hong Kong is super easy! Hong Kong is ranked number 4 in the world for ease of business by The World Bank. You can even register a company in Hong Kong without ever visiting this quasi-city-state.
China: By contrast, doing business in Mainland China is quite complicated. China was ranked number 78 in the world in The World Bank’s 2017 survey.
4. Business Scope
In some countries a company can only operate in the fields they are approved for – this is known as their “business scope”
Hong Kong: there is no requirement for a Hong Kong-registered company to define their business scope
China: companies registered in Mainland China can only conduct activities which they have been approved to include on their business scope by the AIC
5. Registration Number
Chinese companies are each issued unique registration numbers – so how do those numbers differ for Hong Kong & China registered companies?
Hong Kong: Limited liability companies are issued a unique 7 digit registration number by the Hong Kong Companies Registry. (Note that not all businesses are registered as limited liability companies, in such cases they are issued with a unique 8 digit tax registration number).
China: All entities are issued with an 18 digit company registration number by the AIC. (Note that the previous 15 digit registration numbers are being phased out before end of 2017).
6. Different Roles – Company Secretary / Legal Representative
Certain roles are mandated in companies registered in different jurisdictions – for Hong Kong & China registered companies the most obvious difference is with Company Secretary and Legal Representative.
Hong Kong: must nominate a Company Secretary – this role can be held by either an individual or a body corporate, who reports directly to the board of directors and the chairman. There is no official role of “Legal Representative” in a Hong Kong company.
China: no requirement for a Company Secretary, but each company must appoint a Legal Representative – this role is held by an individual is deemed to be a “responsible person” and serves as the “legal embodiment of the company’s interests”.
7. Official Name
There are important differences to be aware of with the naming of Hong Kong & China registered companies.
Hong Kong: the Hong Kong Company Registry operates a completely bilingual service, so companies can be registered with:
- - only a Chinese name
- - only an English name or
- - both a Chinese and English name
Note that Chinese names are registered in Traditional Chinese characters.
China: all companies must be registered with a Chinese name in Simplified Chinese characters. Although an English name can be registered this is not core to a Chinese company’s registration.