Companies evolve and grow and when this happens, their founders need to consider alternative suitable options, which will allow their business to expand properly. This often means changing the business structure of the Hong Kong company and it can also include restructuring the business model, making operational changes or adding partners to the business.
The process of converting an existing legal entity is not complicated and it focuses on the transfer of assets as well as on the formation of the new legal entity. Company conversions typically take place in the case of sole proprietorships or partnerships or when business owners want to change the status of the company from private to public.
We invite you to watch our concise video about the process of changing company types in Hong Kong:
Converting to a private limited company in Hong Kong
Sole proprietorships and partnerships in Hong Kong can be converted into a private limited company. This is usually done when the sole proprietor needs to expand his business or when he needs better asset protection. The same applies in the case of the partnership, the difference being that in this case, more than one individual takes the decision to convert.
The advantages of converting a sole proprietorship or partnership into a private limited company include:
– protection of assets due to having a separate legal entity;
– limited liability for the shareholders: only to the extent of the capital invested;
– better public perception.
Investors who want to transform their partnership or sole proprietorship into a company will first need to set up a limited company in Hong Kong. This is done with the Companies Registry after the name has been approved. Next, the business assets need to be transferred from the old legal form to the new company, before the termination date of the partnership or sole proprietorship. This includes the assets, the bank accounts and the re-signed contracts and agreements.
The new company will have to obtain the relevant special permits and licenses and our company registration agents in Hong Kong can help you apply for them.
Changing the company’s status from private to public in Hong Kong
Private limited liability companies in Hong Kong can change their status to a public company if the shareholders wish to list the company on the Stock Exchange or offer their shares to the public. This is done by adopting a special shareholder’s resolution and submitting the necessary forms to the Companies Registry. The former private company will also need to submit a certified copy of its financial statements.
The status change is recorded with the Companies Registry and will appear in the company’s documents. Alternatively, a public company can be converted into a private one.
The decision to convert an existing business form into one that allows for an expansion of the business needs to be taken according to the performance of the company and future business plans. Our company registration representatives in Hong Kong can give you professional advice based on a review of your company. Contact us for more information.