Open a Trust Fund in Hong Kong

By Vlad Cuc, specialist in company formation matters

A trust fund in Hong Kong is set up and managed according to the Trust Law Ordinance, the Trustee Ordinance, the Companies Ordinance and elements of common law.

A company incorporated in Hong Kong can act as the trustee provided that it meets certain requirements regarding its share capital, its company objectives and the possibility to fulfill its obligations.

The trust company is often commonly used for asset protection and planning purposes, however, another viable option is to set up a family trust, when the objectives for family wealth are clear. Our company registration agents in Hong Kong can help you register a trust company and can also assist clients who are interested in setting up a company in Hong Kong.

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Registering a trust fund in Hong Kong

There are no special requirements for companies that act as trustees in HongKong to obtain a special license. However, only another registered trust company will be able to be appointed by the court as a trustee or apply for probate or administration.

Trustees in Hong Kong can appoint agents, ensure the trust property against risk, receive remuneration if they act as a trustee in a professional capacity (in certain cases) and appoint nominees or custodians, as necessary. They also have the power to raise money by sale or mortgage but this does not apply for trustees of property owned for charitable purposes.

While trustees can engage in a large number of activities without operating as a registered trust company, only a registered trust company can apply for probate or administration, be appointed as a trustee by Court and be appointed as an approved trustee for a Mandatory Provident Fund Scheme.

Applications for registration as a trust company are made in writing and submitted to the Registrar of Companies. The application must be accompanied by the company director’s statement of compliance, an application fee and a fee for the issuance of the Certificate of Registration as a Trust Company.

A number of conditions apply for registering as a trust company and it starts with the applicant being registered as a private company, as defined in the Companies Ordinance. Our team of Hong Kong company formation agents detail below the other requirements for registering a trust company:

– the objectives of the company: these must be restricted to the ones set forth in the Trustee Ordinance, either partly or fully restricted.
– the capital: for companies engaging in these types of activities, the issued capital cannot be below 3,000,000 HK$.
– the directors: while the requirements for a private limited liability company are generally lighter, for a trust company the board of directors needs to be appointed and the company needs at least two directors (unlike the one director for the ordinary LLC).
– a special deposit: the company needs to deposit no less than 1,500,000 HK$ with a finance company or a bank subsidiary in the name of the Director of Accounting Services and the company needs to be able to meet its obligations without taking into account this deposit (a director’s written confirmation is required).

The application for registration as a trust company is submitted together with the director’s written confirmation mentioned above, plus the proof of payment for the application fee and the fee for issuing the certificate. Upon approval, the company receives a Certificate of Registration as a Trust Company. Afterward, the name of the company is recorded in the Register of Trust Companies. investors should note that when the company is not registered as a trust company in Hong Kong it may not use a company name that contains words like “trust”.

According to the Trustee Ordinance, members of trust companies cannot hold shares in the capital of the company that amounts to more than one-fifth of the issues capital of the company. An exception applies to bank subsidiaries as per the Banking Ordinance.

The Hong Kong Trustee’s Association includes more than 100 corporate members and represents a large number of individuals working in the private banking field as well as those offering trust, pension, and other services.

The family trust in Hong Kong

Trust funds are sometimes used as a method of preserving a family business and solving family inheritance issues. This is just the first step in a long line of good practices small business owners can use to ensure that their company survives throughout generations. Together with a trust fund, families can also use estate and succession planning to secure their assets. Some of the objectives of a family trust fund can include the following:

– preserving the family business.
– succession planning.
– family wealth management, protection, and consolidation.
– providing for underage beneficiaries and the surviving spouse.
– charitable or philanthropic purposes.
– avoiding probate.

Hong Kong as a trust jurisdiction

Hong Kong offers a combination of advantages for those who set up a trust here. The laws in force, the Trustee Ordinance and the Trust Law (Amendment) Bill offer a modern and advantageous regime and make Hong Kong an attractive Asian jurisdiction to base a trust fund.

Some of the most important and advantageous provisions of the Hong Kong trust law are:

– the settlors have reserved power: they can reserve the power or investment and the management of the trust to themselves.

– perpetual trust: the trust can continue indefinitely or settlors can choose a fixed period for the trust.

– protection from forced heirship: any forced heirship rules in a foreign jurisdiction will not affect the settlements made by a settlor during his lifetime.

– trustee’s default powers: the Trustee Ordinance allows trustees to be empowered with enhanced default powers.

– beneficiary protection: the beneficiaries and their interests have a high degree of protection under Hong Kong laws.

Other advantages for choosing Hong Kong as a trust jurisdiction include the fact that English is an official language and it is widely used for business purposes as well as the fact that the legal system is based on the English common law (and the trust legislation is based on the English trust law). Apart from these advantages, Hong Kong is also an important financial center in Asia and in the world and it serves as a business hub and a gateway to China. If you nee assistance for setting up a company in Hong Kong or a trust, you can rely on our team.

Whether it is used for strict business purposes or for helping secure the family assets, a trust fund in Hong Kong is an investment vehicle that can be useful for many investors.

Our Hong Kong company formation representatives can help you open a trust fund and manage your assets.