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Hong Kong

Hong Kong is situated on the southern coast of the People's Republic of China. Its strategic location in the heart of Southeast Asia, combined with its industrious population and free market policies, has produced an impressive rate of economic growth over many years. With the return of Hong Kong to Chinese sovereignty, Hong Kong Special Administrative Region ("SAR") has a vital role to play in China's continuing economic development. Hong Kong's social, legal and economic systems will remain unchanged. Hong Kong has autonomy in negotiating its own economic relations with other countries while China is responsible for Hong Kong's foreign affairs and defence. With an area of less than 1,092 square kilometres, few natural resources and a population of 7 million people, the one-time coastal settlement has become the world's seventh largest trading economy. Hong Kong is an international business and finance centre, a gateway for investments into and from China, and a springboard for companies accessing the Asian- Pacific region.

Professional services in the areas of banking, accounting and law are especially well developed in Hong Kong. The port facilities are the most modern in the world and the airport is served by most international airlines. The official languages are English and Chinese.

Hong Kong Companies

The most common type of entity is the company limited by shares. The company law is based on the United Kingdom Company Ordinance of 1932, which has been amended many times, most recently in 2005.

Hong Kong companies are preferred amongst the Asian/Pacific offshore centres. The major advantage to these companies is that they cannot be easily identified as offshore companies since they are not incorporated by virtue of a special exempt or IBC type legislation. A Hong Kong company would avoid the application of profit tax by arranging to have its income source outside Hong Kong.

The Articles of Association govern the internal affairs of the Hong Kong company whereas the Memorandum should include the following: a name clause, a domicile clause, objects clause, a liability clause, a capital clause, a subscriptions clause. The Hong Kong Private Company is not allowed to invite the general public to buy shares or debentures. The company may not give financial assistance to others to purchase its shares.

Confidentiality

There is no requirement to disclose the beneficial owners of the company under the Companies Ordinance and the absence of tax treaties with other countries provides considerable confidentiality.

Movement of Funds

Hong Kong does not impose any exchange controls and has a very open economy. There are no restrictions on foreign investment or on the transfer of income and capital in foreign currencies. The currency used is the Hong Kong dollar (HK$), which is pegged to the United States dollar (US$) at the approximate rate of HK$7.8 to US$1.

Corporate Requirements

Name

A Hong Kong company must be incorporated with any name other than one which already exists or may indicate a connection with the government. The name may be in English, Chinese or both and must end with the word "limited". The words "Bank", "Trust", "Insurance" or any other specialized financial ending should be avoided unless the appropriate license has been obtained. The incorporation process normally takes approximately four working days.

Shareholders of the Company

The Memorandum of Association must have at least one subscriber.

Share capital of the Company

Capital can be denominated in any currency or in multi-currencies. There is no minimum authorized share capital requirement. Bearer shares and shares of no par value are not permitted. A minimum of one shareholder is required and may be either individual or corporate and need not be a resident of Hong Kong.

Registered Office

All companies must have a Registered Office in Hong Kong and the address must be provided to the Registrar of Companies upon incorporation.

Directors

There must be at least one director, who can be of any nationality and may be individual or corporate. The directors need not be resident in Hong Kong. Details of the directors must be filed with the Companies Registry and made available to the public.

Secretary

A company secretary must be appointed. An individual secretary must be a resident of Hong Kong. A corporate secretary must have its registered office or a place of business in Hong Kong. Details of the company secretary must be filed with the Companies Registry upon incorporations and made available to the public.

Statutory Books

Every company must maintain the following statutory books: register of directors and secretaries, register of members, and register of charges. A minute book must be kept at the Registered Office. A Hong Kong company must also keep accounting records. These records may be kept at the Registered Office or elsewhere at the discretion of the directors. Every company must appoint an auditor who must be a member of the Hong Kong Institute of Certified Public and hold a practicing certificate.

Business Registration

Any company incorporated in Hong Kong is required to obtain a Business Registration Certificate and be registered with the Inland Revenue Department. The Business Registration Certificate is renewable each year.

Taxation

Hong Kong tax is based on the concept of "territorial" or "source" derived income. This means that taxation applies on income that has its source in Hong Kong rather than a tax based on residence. Hong Kong does not therefore impose tax on income generated outside Hong Kong even when remitted to Hong Kong.

The current rate of taxation for these companies with Hong Kong source income is 16.5% on profits. There is no tax on capital gains nor is there any form of dividend or withholding tax.

Annual requirements

A Hong Kong company must hold a shareholders annual meeting in addition to any other meetings in that year, and shall specify the meeting as such in the notices calling it, the first being no later than 18 months from the date of incorporation and within every 15 months thereafter. The meetings of both directors and shareholders may take place anywhere subject to the limitation of the Articles of Association.

The Hong Kong tax year runs from April 1 until March 31 of the following year. The Inland Revenue Department ("IRD") will issue the annual profits tax returns, which must be made within one month of the date of issue. The Company Registry requires the filing of an annual return which gives details of the current directors and of the shareholders. Companies must have their accounts audited annually.

Annual fees payable include the business registration fee, and annual return filing fee.