Our post How Can You Structure Your Business in HK? Covered the most common types of business organization in Hong Kong for commercial undertakings. But what if you need a company for non-profit making purposes? For a non-profit entity, the most common choice is a Hong Kong company limited by guarantee.
Common Purposes for a Company Limited by Guarantee
A company limited by guarantee is more commonly used for trade associations, clubs, professional, learned societies, and some religious bodies rather than for commercial purposes. Although, note that while this type of company is used for non-profit purposes, it is not a charity and is not exempt from tax. To set up a charitable organization, you should consult a legal firm who can assist to tailor make the company’s Articles of Association and get exemption before incorporation.
Requirements for Set Up
When setting up a company limited by guarantee take note that upon set up you must have at least 2 directors, 1 founder member, a company secretary and a registered office address.
All directors of the company must be natural persons i.e. they cannot be corporate. Members meanwhile can be either corporate or individual. While there is no restriction on the nationality and resident status of either directors nor shareholders.
For more information about the role/purpose of directors, company secretary and registered office address you may refer to our posts as follows:
- Responsibilities and Obligations of Directors and Shareholders in HK
- Company Secretary: What is it? What is it for?
- Registered Address
As for members, however, note that they are NOT the same as shareholders. Members are not required to make any capital payment, so they don’t own the company but can be considered as the decision makers. Accordingly, members don’t receive any dividends and have no claim upon the assets of the company. Rather, they undertake to contribute a fixed amount (minimum HKD1) to the assets of the company in the event of its being wound up while they are members, or within one year after they cease to be members. Note that each member must contribute the same amount.
Remember that after set up you will need to maintain your company. You will need to file an Annual Return to the Companies Registry (“CR”) and pay to the Inland Revenue Department (“IRD”) an annual registration fee to renew the Business Registration of the Company. Changes to the directorship, company secretary, and registered office must be reported to the CR. Annual audit and tax filing are also required, for more details on how this should be done, please read our article Accounting, Audit, and Tax Filing: HK Requirements and Best Practices.
Shall you decide to set up a company limited by guarantee for non-charitable purposes you can go ahead and approach a service provider to assist.