Nature of Business in Hong Kong: A Guide for Business Owners

Starting a company in Hong Kong? Deciding on your nature of business is one of the first key steps. While it is quite straightforward, there are several factors to consider to ensure compliance with the Inland Revenue Department (IRD) and smooth business operations. In this guide, we’ll cover everything you need to know to accurately report your business nature when incorporating your company in Hong Kong.

What is Nature of Business?

Your nature of business is a brief description of your company’s core activity. It appears on your business registration certificate and is reported to the Inland Revenue Department (IRD) and Companies Registry (CR).

What Does the Law Say?

When you incorporate your company, you must declare its nature of business to the IRD and the CR. This should not be too vague and should reflect your primary activity. For instance, if you run a trading or consulting company, “Trading” or “Consulting” would be too general. However, “Trading Clothes” or “IT Consulting” would be acceptable. It’s important to update it at the IRD and CR if your company’s core activity changes significantly.

The declared business nature will be displayed on your Business Registration Certificate. The maximum length for this description is 30 characters in Chinese or 60 characters in English (split into two 30-character lines), including spaces and punctuation.

Overall, you don’t need to spend excessive time on this, as companies are legally permitted to engage in any lawful business activity, regardless of their stated business nature—unless the business is in a regulated sector, which we’ll discuss further below.

Can My Company Hold Shares in Another Company?

Yes, any Hong Kong company, whether it is an operating company or a holding company, can hold shares in another business. There is no restriction limiting a Hong Kong company to just one role. For example, a company that is primarily involved in day-to-day operations can also act as a holding company by acquiring shares in other businesses. This is a common practice in Hong Kong, where companies often diversify their activities. One entity can simultaneously operate and manage investments or subsidiaries, allowing for greater flexibility in business operations. Whether you’re running a business or managing an investment portfolio, Hong Kong’s regulatory framework allows you to pursue these activities under a single company structure.

That said, you should update your business nature to reflect the changes in your activity if affected. Need assistance with the update? Get in touch.

Choosing Your Nature of Business:

Here’s a simple approach:

What does your company do? (e.g., Trading, Manufacturing, Consulting)
What sector are you in? (e.g., Garment, IT, Food & Beverage)

Combining these answers creates your nature of business.

Examples of Nature of Business:

So, based on the above questions, the nature of business could be:

“Trading of fitness goods”
“Manufacturing smartphone peripherals and software”
“IT consulting”
“Advising and consulting startups”
“Coaching executives”
“Investing in art pieces”
“Garment retail”
“Interior design”
“Food and beverage catering”
“Operating e-commerce”
“Event management”
Etc…

Additional Considerations:

Regulated Businesses: Some industries have specific requirements/wordings. Check with the relevant authority for details.

Bank Applications: Your nature of business can impact your bank account application. Choose a clear and concise description.

Conclusion:

Choosing your nature of business doesn’t have to be complex. By following these guidelines, you can define your company’s activity accurately and efficiently for the IRD and banks.

Ready to incorporate your Hong Kong company?

We hope this guide has been helpful! Feel free to contact us if you need more info.