Hong Kong imposing company Individual Director

The Hong Kong new company ordinance will take effect on the 3rd day of March, there are few changes but only one change will have a great impact on new companies and existing Hong Kong companies.

Starting March 3rd a new Hong Kong company will have an individual director, the corporate director will no longer be accepted, and this will have enormous impact on privacy and secrecy of businesses.

As a matter of fact it’s very easy to get information on the internet regarding the public registry of Hong Kong companies to understand who the shareholders and directors are, for a small fee all information is accessible and this could cause important concerns with competitors, clients and suppliers not to mention the foreign tax authorities!

Although the corporate shareholders will continue to be the norm and will still be fully accepted; the disclosure of the directors’ names and addresses are the new facts that need to be addressed by the company formation agents and tax specialists in Hong Kong.

An individual company director in Hong Kong could be of any nationality and country of residence. However, the new company ordinance will also affect the directors responsibilities with that, most of the company formation agents are reluctant to offer individual nominee directors services.

The risk level to offer individual nominee director services is difficult to estimate as for the time being because corporate director’s services represented a vast majority of the cases, few possible cases of disturbances are foreseeable.

In case of Hong Kong Company bankruptcy, the risk is high that local Hong Kong suppliers and mainland China partners will use collector services. These collection companies are well-known for their rudeness and for their visits to business and private homes of the company directors.

The legal risks to see the director attacked for his personal responsibility are limited. Director’s liability in Hong Kong, say everywhere, is very difficult to engage as the demonstration of a lack of surveillance or poor management is nearly impossible.

Legal protection expenses are de-facto, the pressure point to individual nominee services for a Hong Kong company director.
In Hong Kong a highly competitive environment of each company formation agent is waiting on his colleague’s published prices, waiting for pragmatic solutions and full understanding of the risks to decide or not to provide such services. As a result very few actors are offering individual nominee services in Hong Kong.

The temptation to hire foreign (to Hong Kong) services of individual nominee directors today is high. Hence we are also at the peak of the problematic implementation of this new company ordinance. However, the main point to consider in order to get the solution for this problem is the attitude and response of the bank to this new law.

Hong Kong banks and financial institutions KYC requirements are increasing, for the time being we believe that banks will require the physical presence of the director for the business bank account opening; this is the case right now and should not change with a nominee perspective.

We suggest opening an account before March 3rd for Hong Kong companies with offshore as corporate director and shareholder. The grace period for this setup will be accepted till the beginning of October 2014, which will give everybody the experience and time to structure an adapted nominee services proposal and solution.

We foresee that Hong Kong individual nominee services prices will be driven by a multitude of factors such as: customer reputation, dealings with Hong Kong and China, turnover of the company, access to bank information, paper trail follow up of the customer instructions, and insurance costs to protect the nominee.

Legally, a director should also present a profile justifying his position, barring the way to juniors or inexperienced persons for the position. This will influence the decision of company formation agents to be part of this specific business.

If we have to guess the estimate prices of individual director nominee services, a difficult guess would be 200 Euros per month for low level services with an average of 400 euros per month after an auto regulation of the market in around September.

With one million companies and 100,000 new creations every year the Hong Kong market shouldn’t suffer that much due to this new ordinance. After all such a dynamic location with offshore advantages is difficult to find.

European tax pressure is sending new customers to Hong Kong everyday and this will not stop.

Should you want to find a solution for specific cases please contact the undersigned who will put you in direct and confidential contact with our company managing partner: a Swiss entrepreneur living in Hong Kong for 10 years and a permanent resident therein.

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