Updated: May 25
A shelf company is a legal entity that has been registered and shelved until sold to an entrepreneur. A shelf company is also called a shell company or an aged company. The main reason foreign investors tend to buy Hong Kong shelf companies is the credibility it provides.
The list below describes some of the main characteristics of shell companies, along with some of their most important advantages.
They are already registered: this means they have a business registration certificate issued by the Companies Registry.
Some were not used for trading: meaning they were never engaged in business or commerce activities.
They can be personalized: the name of the Hong Kong Shelf Company can be changed (if available), as can the paid-up capital; the new owner can also appoint more than one director.
They're a convenient option: businesses can be launched much more quickly than if an investor would open a new company.
Investors may find some or all of these characteristics suitable for their business needs. However, due diligence is recommended before deciding to buy an already registered company. Many of the companies selling this type of company are reliable and offer convenient ready-made company packages, however, you can always ask for more information from one of our consultants who specializes in Hong Kong company formation.
Legal entities available for shelf companies
Limited Liability Company (LTD)
Time required to acquire a company
About 2 working days, not including
The type of features it includes (corporate bank account, etc.)
Can open company bank accounts
Advantages of shelf companies
The incorporation has already taken place
Companies available for instant business operations
Foreign investors have full ownership in Hong Kong
Appointment of new directors (Yes/No)
Capital increase allowed (Yes/No)
Modify object of activity (Yes/No)
Participants in the purchase procedure
Buyer (natural or legal entity) and seller (usually a legal entity)
Uses of shelf companies
Can be used in many different business areas
Documents required for purchase
Buyer's personal identification document. Shareholder information will be updated to Hong Kong Companies Registry
Taxes applicable to shelf companies
Corporate income tax, stamp duty, property tax, etc.
Hong Kong does not impose VAT or other taxes on dividend distributions
Change of registered address (Yes/No)
Aged shelf companies available (Yes/No)
Agency where company change is registered
Registering a Shelf Company in Hong Kong
The registration of a shelf company is an easy process as it does not involve the actual registration by the new owner. Once the transfer of shares between the old and new owners has occurred and the sale and purchase agreement has been signed, our company formation experts in Hong Kong can initiate the registration process for the acquired shelf company.
The company is already registered with the Companies Registry, but ownership details must be changed once the transfer is complete. As a general rule, any change in company ownership or structure should be registered. This is easy to do and usually within a business day or two. One of our specialists can assist you throughout this stage.
Clients buying a shelf company in Hong Kong can choose options such as changing the company name, appointing new directors, etc. Foreign investors can register a shelf company as a limited liability company or a joint stock company limited by shares. Once the articles of incorporation of the acquired shelf company are ready, which include details of the new ownership, they must be filed with the Hong Kong Companies Registry along with the application form and the registration fee paid.
A company's identity can be very important to a new owner. This is why the company name can be changed from the originally assigned generic name to a more specific company name. To do this, investors need to first check whether the new name is available. Names that are already in use or that are too similar to the chosen name are included in the Index of Company Names belonging to the Companies Registry. Certain words and abbreviations may be used because they are not necessarily considered to infringe other names.
We have a Hong Kong company name registration guide, and one of our consultants can tell you more about these special considerations.
In many cases, a shelf company is a cost-effective option. However, different shelf company suppliers will have different costs, and the cost may be higher if the company has been established longer, so it's "older". When faced with the option of purchasing a more expensive shelf company, entrepreneurs can compare the costs associated with opening a new company in Hong Kong and make a decision based on these costs and the time required for incorporation. In some cases, investors may find that a Hong Kong shelf company fits their business needs perfectly. If this is the case, then they will be able to use the company's seniority to gain more credibility with banks and creditors and change company specifics such as name and registered address after the beneficial ownership transfer is complete.
Hong Kong Ready-made Company Package
Investors have access to various shelf companies for sale in Hong Kong. Companies that specialize in selling ready-made businesses will sell these, however, caution is advised before entering the final stages of a transaction. It is recommended to seek professional advisors such as those provided by our consultants who specialize in Hong Kong company formation. Our team can help you from start to finish, and our experts will find a ready-made company that suits your needs. Alternatively, we can give appropriate advice on an already interesting purchase option.
Our shelf company packages can include the following:
• Company selection: our team is ready to assist in the selection of shelf companies based on specific investor criteria such as age or type;
• Due Diligence: We help our clients conduct a thorough company verification to identify any indicators that could turn into a risky investment; we look at the company's financial records and any previous activity, if any;
• Banking and Finance: We assist clients with the formalities required to open the company's bank account;
• Final procedure: We also handle post-transfer steps such as changing company name, adding more activity objects and other changes of details that need to be notified and registered with the Companies Registry.
Our team specializing in Hong Kong company registration can help you every step of the way when you decide to buy a ready-made company, or can help you set up a new company. Should you choose to purchase an existing company, our consultants will take the necessary steps to ensure that the due diligence process has been carried out accordingly. This will allow you to ensure that your upcoming investment is a good one and that the company has no hidden debts or liabilities.
The bank account opening process will make it mandatory for new company owners to provide the bank with required signature specimens. By appointing one of our consultants he will be able to handle most of the banking correspondence and submissions, meaning new company owners only need to go through a few steps. In most cases, people buying a shelf company will gain full bank account access in about two weeks, provided all documentation is in place and no additional steps are required by the bank.
Investors should note that Hong Kong shelf companies are not provided with additional licenses and permits. A shell company does not have licenses, certificates or approvals related to specific activities. The Business Registration Ordinance requires companies to apply for relevant licenses before engaging in specific industries or activities.
This means that once the purchase is complete, the new owner will handle the licensing phase depending on the area of the business in which the company will be active.
Some of the major services that require a license include: accommodation and food services, arts, entertainment and leisure, construction, education, financial and insurance services, human health, social work, import and export, wholesale and retail, information and communications, mining, quarrying, professional business services, real estate, transportation and warehousing, courier services, water supply, sewage and waste management.
It is also important to note that specific industries may be subject to additional regulations.
WHY BUY A SHELF COMPANY IN HONG KONG?
It is registered
A shelf company in Hong Kong is a company that has been incorporated under all stages of the Companies Ordinance. Officially registered with the Hong Kong Companies Registry.
Some were not involved in the business
NO PREVIOUS ACTIVITY
Some shelf companies were established but not used for any other business activity. They may have a business scope, but they were not used for trading and did not engage in any economic activity.
Can be changed as needed
NAME CHANGE AND OTHERS
Once the purchase is complete, the buyer is free to adjust the specifics of the shelf company as he sees fit. The name can be changed, as well as the business scope, shareholding allocation and other details.
It has no debt
GOOD CREDIT SCORE
The company has no debts of any kind incurred, no outstanding invoices or pending payments to third parties. This means companies can be good candidates to apply for a business loan.
It is useful in various fields
USEFUL TO MANY INVESTORS
Shelf companies can be used in many different areas of business. The purpose of a company's activities is stated in its incorporation documents, but can be adjusted or changed as required.
Advantages of Hong Kong Shelf Company
As mentioned above, one of the greatest benefits of buying a Hong Kong shelf company is the credibility an already incorporated company provides to its new owner with regard to business partners and customers. Companies can conclude business contracts or business tenders faster than investors choosing to open a new limited liability company in Hong Kong.
In addition, under Hong Kong company law, in order to obtain a bank loan, companies may need to prove that they have not been established recently and provide proof of company history. For example, if a foreign investor wants to get a loan to buy computers for a company, they must provide proof that the company was registered six months or more ago. A ready-made company can be used in a variety of business strategies, as foreign businessmen setting up a company in Hong Kong can incorporate their business background and history into a ready-made company, thereby gaining a better image than building the same image with a new company.
Our Hong Kong company registration experts can provide shelf companies according to investors' needs and requirements. Shelf companies have a range of attractive features, among which we emphasize cost-effectiveness (in most cases) and faster setup process.
Hong Kong Company Formation
Hong Kong is an attractive business destination in Asia, offering companies a favorable business environment and low tax rates.
As mentioned, investors can choose to set up a new company in Hong Kong or buy a ready-made company. The advantages of forming a new company in Hong Kong relate to the initial formation options in which the beneficial owners of the company will be directly involved. These include choosing the type of legal entity and the desired name from the outset. In terms of incorporation time, this can be slightly longer than the purchase and subsequent ownership transfer transaction, especially if the company's constitutive documents must be prepared and signed by the founder (or founders).
Another issue to consider is whether the government funding scheme is applicable to the business sector that the company will activate and the general entry criteria (whether the company needs to be a newly incorporated company/startup to benefit from the programme). If this is the case, our team of Hong Kong company formation consultants can help you understand full details about the technology funding schemes you may be eligible for and their conditions. Some of these include incubation programs or Social Innovation and Entrepreneurship Development Fund.
The preferred form of business in Hong Kong is a private limited liability company. This is why this type of business entity is most often offered as an option for those interested in purchasing a Hong Kong shelf company.
This type of legal entity has many advantages, among which we briefly state that the limited liability of the shareholders is limited to the investment in the capital of the company. This means that the business has a separate legal identity, it will enter into contracts in its own name, sue and be sued independently of the owner, as is not the case with a partnership or sole proprietorship. Additionally, an LLC is an enduring business structure that is not affected by the status of its shareholders or directors, such as death, resignation, or insolvency. As many entrepreneurs buying a shell company in Hong Kong are interested in the company's credibility and public perception, the limited liability company (LLC) is once again the preferred business form. As a business structure, the LLC is a solid structure and, as mentioned earlier, one that inspires permanence because of the potential for transfer of ownership and its permanence regardless of the status of the shareholders or directors. Compared to the few issues (such as taxation, reporting and other relevant laws that need to be considered when doing business in Hong Kong) that entrepreneurs should consider, the advantages of a limited liability company are numerous (such as directors' personal liability for business performance).
Comparison between Shell Companies and New Companies in Hong Kong
The obvious advantage of choosing to buy a Hong Kong shelf company is that the registration process is no longer required. Shelf companies also have a history, thus providing more credibility to their owners. In addition to this, the investor may change its name, appoint new directors and make other important changes. Perhaps the biggest advantage offered by shelf companies is the ability to start trading immediately.
However, registering a new company also has its advantages. The first is cost. Registering a new company in Hong Kong is cheaper than buying a shelf company. Another advantage of the new company is that the owner will choose the name, the type of company to be registered and appoint the directors from the start, compared to an off-the-shelf company where all this has to be changed. The founder will also choose the registered office address according to his own preferences. An important aspect to remember is that a shelf company already has Articles of Association. These will need to be revised to include any changes the buyer needs to make. The registration process for a new company takes only a few days, and our Hong Kong company formation specialists will draft the Articles of Association and other required documents and file the registration papers. If you need help setting up your company in Hong Kong, you can rely on our company incorporation consultants.
Company Taxation in Hong Kong
All companies in Hong Kong benefit from an attractive tax regime. This is one of the main reasons why investors choose to open or buy Hong Kong shelf companies. Ready-made businesses are locally incorporated legal entities, so they benefit from all the usual tax advantages available to Hong Kong companies. We have listed some of the most important taxes for legal entities for information before deciding to buy a Hong Kong shelf company:
Corporate income tax rate: 8.25% for the first HK$2 million of assessable profits, and 16.5% for the rest;
Capital gains tax: 0%;
Withholding tax on dividends, interest and royalties: 0% for resident companies;
VAT: There is no VAT or sales tax in Hong Kong;
Property tax: 15% of the net assessable value of the property;
Stamp duty: Charged under certain circumstances; for transfers of shares in Hong Kong, this is 0.2% of the value of the shares transferred.
Companies in Hong Kong - including shelf companies (as they are registered entities), must file an annual profits tax return, in most cases within one month of the date of issue. Companies pay provisional corporate income tax based on profits recorded in the previous financial year. Those who fail to meet the filing date will be penalized. If you need a ready-made Hong Kong company, we can help you.
The new owner of the acquired shelf company will be responsible for complying with tax and compliance requirements. In some cases, a tax representative may be appointed, in which case the tax return filing date may be extended under a special scheme. Our Hong Kong company formation consultant team can provide you with more details. A Hong Kong CPA on our team is able to answer any questions about accounting principles and the need to prepare annual financial statements for shelf companies, depending on the form of business (public or private). For those companies that are audited, our CPAs can provide adequate solutions for filing audited statements as well as annual profit tax returns.
Hong Kong Companies
A total of 26,099 private companies were incorporated in March this year, according to the Companies Registry. Other figures also show:
Total number of 26,099 local companies registered in March 2023;
Number of private companies increased in 2023, from 6,310 private companies in January to 10,637 in February and 26,099 in March;
Number of public companies still low compared to private companies, with only 2 public companies registered in March 2023;
The total number of companies incorporated in 2022 is 874.
The figures provided here are for local companies registered in the corresponding month. These legal entities are registered under Chapter 622 of the Companies Ordinance. Our team of consultants specializing in Hong Kong company formation can give you more details about the law and can definitely help you buy a ready-made company in Hong Kong.
If you are interested in knowing more information about how to open a company in Hong Kong, please contact us to understand the details and the advantages of each type of company registered in Hong Kong.
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