Setting Up a Company in Hong Kong

1.

Due to its pro-investment business environment, Hong Kong financial institutions are geared for supplying corporate finance. After setting up a company in Hong Kong, investors enjoy trade, fiscal and labour freedom, as evidenced by Hong Kong's position as the world's freest economy in the 2011 Index of Economic Freedom.

More than 80 international fund management groups have operations in Hong Kong and a broad array of corporate finance services are available to investors after setting up a company in Hong Kong. To illustrate this, many of the world's top bankers are relocating from the US and Europe to Hong Kong to take advantage of increased demand for corporate finance among Asian companies.

By March 2011, the main board of the Hong Kong Stock Exchange and the Growth Enterprise Market (GEM) together listed more than 1,400 companies, with a total market capitalisation amounting to HK$21 billion (US$2.7 billion).

In 2006, Hong Kong was the world’s 2nd-largest IPO market after London. Mainland Chinese enterprises accounted for 88% of the 59 completed IPO's in 2006. Hong Kong shares are appealing to Chinese investors because Chinese companies listed on the Hong Kong exchange are trading at a discount to those listed on the mainland. Shanghai is emerging as a financial centre to rival Hong Kong. Consequently, the Hong Kong financial authorities are exploring ways to integrate the HKSE with the Shanghai and Shenzhen bourses.

The HKSE comprises two boards. A main board listing is suitable for companies whose i) issued shares are held by at least 1,000 shareholders ii) pre-tax profits exceed HK$20 million and iii) revenue of at least HK$500 million for the most recent audited financial year. After setting up a company in Hong Kong, most international investors prefer to first list their company on the small company board (Growth Enterprise Market), with minimum listing requirements.

Despite the above, the Hong Kong government could be more proactive in attracting inward investment to Hong Kong. Government agency Invest Hong Kong offers limited concrete incentives to foreign investors or those setting up a company in Hong Kong, especially when compared to the Singapore Economic Development Board.

That said, investment in IT sectors is strong and evidence of Hong Kong’s technologically-advanced status is in its ranking as Asia’s fifth-most ‘network-ready’ country in the World Economic Forum’s 2010-2011 Network Readiness Index.