By Vlad Cuc, specialist in company formation matters
A power of attorney is a special document that allows its possessor to fulfill any acts as described in the document when the person legally entrusted to perform those acts is incapable of doing so.
A power of attorney in Hong Kong can be used for multiple purposes, either for the incorporation of a company when the investor cannot be present in Hong Kong or for personal purposes like fulfilling the wishes of an incapacitated individual or signing on behalf of another person for purchasing a property.
Our Hong Kong company formation agents are accustomed to using a special power of attorney in order to perform various tasks for the incorporation of a company, like opening a bank account.
|Necessary for Company Formation
Yes, when the founder cannot be present in Hong Kong
Necessary for Opening a Bank Account
|Yes, when the account holder cannot be present
Real estate transaction use
|Yes, for real estate purchase/sale, lending, tenant/landowner matters
|Asset management use
|Yes, for matters concerning filing tax returns and other mandatory requirements
|Limitations for the donor of power
Explicitly stipulated in the power of attorney
in Hong Kong
|Unlimited or limited
|Enduring or specific
|Execution in Hong Kong
|Drawn up in front of a notary
|Cessation of power
|With limitations or complete, as chosen by the donor who uses a power of attorney in Hong Kong
|Withdrawal of power
At the donor's request or upon the expiration of
the validity period
Estimated time to draw up
A power of attorney in Hong Kong can be complete within
1 day in most cases
|Attorney-in-fact services offered by our team
|An attorney-in-fact from our team can act on the donor's behalf for personal or business matters
The list below includes some of the most common purposes for concluding a power of attorney in Hong Kong:
- • Banking: this document can be used to open a bank account and/or handle other banking issues;
- • Taxation: the power of attorney can be used to file taxes on behalf of the one granting the power.
- • Company incorporation: this legal document can be used by those foreign investors who wish to open a company in Hong Kong but cannot be present during the incorporation; by appointing an agent, they will have an individual handling the registration process for them.
- • Asset management: making investments, collecting debts and managing a property in Hong Kong are just some examples of how a power of attorney can be used for multiple asset management purposes.
These are just some examples of how a power of attorney can be used. For non-financial or business purposes, an agent can also handle health care issues in the name of the principal.
It is important to note that a power of attorney will not grant truly unlimited powers. For example, although the agent will have broad powers over the assets and matters concerning the principal, he would not be able to change the will or break the fiduciary duty, which is the equivalent of acting in the best interest and as instructed by the donor of power.
We invite you to watch a video about the power of attorney and its uses, useful including for setting up a company in Hong Kong:
Execution of powers of attorney in Hong Kong
A power of attorney in Hong Kong can be issued for general or specific purposes. The general type is invalidated if the donor (the person who gives the power of attorney to another) becomes mentally incapacitated. Alternatively, the donor can revoke the power of attorney or he or she can conclude such a document only for a limited purpose, like renting or selling one particular property.
The power of attorney is concluded in the presence of the donor of the power. When such a document is sealed by a person as directed by the donor of power and in his or her presence, then two other persons should be present as witnesses. Our partner lawyers in Hong Kong can act as attorneys on your behalf, should you need any legal assistance.
Enduring power of attorney in Hong Kong
Unlike a general power of attorney that ceases to have effects if the donor becomes mentally incapacitated, an enduring power of attorney offers the empowered individual the capacity to continue to take care of the donor’s financial affairs despite his or her mental incapacity. The donor must appoint the attorney(s) while he or she is still mentally capable.
When two or more agents or attorneys-in-fact are offered powers under an enduring power of attorney, they are able to act jointly (meaning that they cannot make decisions or act separately) or jointly and severally (when they can act together as well as individually, should this be the case). The grantor will indicate the manned in which he/she wished the attorneys to work upon drafting the document.
When using an enduring power of attorney, one may choose to limit the actions of the attorney, meaning that he may choose the agents to only start to act on his behalf when there is reason to believe that the grantor is becoming mentally incapable or any other types of restrictions one sees fit (in relation to his property, financial affairs, etc.).
Special provisions can be included in the enduring power of attorney regarding the manner in which money will be used by the agent. For example, a restriction ca be in place to prevent certain uses, however, if none are in place, the attorney may decide to use the money to perform the activities under the document as well as for other purposes, in reasonable amounts (such as to cater to out-of-pocket expenses or make gifts). When the appointed individual is a lawyer or a another professional (as opposed to family or a trusted individual) the document can include a clause that covers the manner in which the remuneration of the attorney(s)-in-fact will be handled.
An enduring power of attorney is useful because it can avoid potentially expensive court proceedings that would be needed to determine who should look after the affairs of the incapacitated individual.
Laws governing the power of attorney in Hong Kong
In Hong Kong, the Powers of Attorney Ordinance is relevant for the legal manner in which these documents may be drafted and then enacted for their specific purposes. The Ordinance specifies the manner in which they can be executed and offers a legal definition for those cases in which an individual is considered mentally incapable when signing such a document. The power of attorney is signed and sealed in the presence of the donor of power, and he must do so knowingly. According to law, the agent is also able to act in his/her own name and execute any documents (signed and sealed) as needed for the purpose of effectively handling the matters entrusted to him or her.
The Ordinance stipulates certain situations in which the agent cannot be held liable when/if the power if revoked. For example, if the agent is unaware that the document and the specific powers have been revoked during the time in which he/she was engaged in handling the issues stipulated in the document, then he/she cannot be held liable.
Certain formalities for notarization and legalization are in place for foreign-issued powers of attorney. For example, when the document is issued in mainland China, it needs to be authenticated in the mainland, by the Chinese Foreign Ministry. Other procedures apply for a power of attorney issued in another country, however, in most cases, they will need to be authenticated by the Foreign Ministry in that state. Our team can give you more details if you already have a power of attorney for business, financial or other matters, and you intend to use it in Hong Kong.
The Hong Kong judiciary offers certain types of services related to powers of attorney and the needed apostille or legalizations. Some of the fees are the following:
- – $440 for the registration of an Enduring Power of Attorney at the High Court;
- – $125 per apostille; documents such as the certificate of incorporation can be subject to the apostille which is used to authenticate the seals and signatures on public documents;
- – 2 working days are the usual processing time for apostilles; the registration of a power of attorney can be subject to a longer processing time.
The advantages of using a power of attorney in Hong Kong
As seen above, the power of attorney is a useful legal instrument that has applications both for business purposes, such as for those who wish to open a company in Hong Kong, as well as for those who wish to make sure that their assets and affairs are handled accordingly once they become incapacitated.
Some of the main general advantages of using a power of attorney, including for those who wish to use it when setting up a company in Hong Kong, are the following:
- Security: the power of attorney is a safe instrument, when drafted according to law and when the agent appointed to handle the matters is a trusted individual; it is generally accepted that it is preferable to work with a professional, such as a lawyer or another services provider, rather than an individual (family or friends);
- Flexibility: the document can be used for multiple purposes and when it is a general one, they can be awarded complete freedom in managing the assets or handling other important matters; this high level of flexibility, if chosen, is another reason why individuals should choose to work with a professional agent;
- Convenience: the power of attorney, especially the enduring one, is an instrument that can help individuals rest assured that their assets and affairs are protected and will be used according to tehri instructions, irrespective of certain unforeseeable events, such as unexpected death or an accident;
- Practicality: it is a practical instrument in the sense that it can be used as needed, whether for short or long-term purposes, whenever you need a trusted third party to make decisions on your behalf or handle matters when you cannot be present in Hong Kong.
Hong Kong company formation using a power of attorney
As seen in this article, the power of attorney is a useful instrument that can be tailored to one’s needs and can be used for multiple business purposes. For many investors, the power of attorney for company formation purposes is relevant in the context of the travel restrictions that are still in place in 2021. If you are a foreign national who is unable to travel to Hong Kong to open a company, or are otherwise delayed or retained for a period (under the applicable coronavirus quarantine measures), you can draw up a power of attorney that will suit your business needs and one of our company formation specialists will act as your agents. For more information on this process, the documents required and how you can proceed, we advise you to reach out to us for more details.
Whenever relying on a third parties to start the incorporation proceedings, one will indicate the specific steps that the appointed individual will follow (for example, the exact incorporation steps that will be handled, such as drawing up the Articles of Association and/or making the final submission for registration on behalf of the company’s beneficial owners(s)). While the appointed agent does not need to be a lawyer, it is advisable to only choose to work with someone who is familiar with the requirements, such as our company formation agents in Hong Kong.
The following types of activities useful for setting up a company in Hong Kong and managing a company can be essentially delegated to a third party via a power of attorney:
- – apply for the registration of the company with the Hong Kong Companies Registry; apply for any and all relevant business permits or licenses with the authority that issues them;
- – appear before an authority, a government department, an association, firm or another company on behalf of the company founder(s);
- – enter into negotiations, conclude or modify any and all agreements (either in general, if the power of attorney is a general one or only specific types of contracts, when the power of attorney is issued for a single purpose);
- – make the application for opening a bank account as well as close an existing one; make any other applications to financial institutions;
- – open a branch or a representative office in Hong Kong (an alternative for foreign companies that do not wish to incorporate a company);
- – sign and execute deeds, sign, execute and deliver documents;
- – bring and prosecute legal proceedings, when these are necessary in order to protect the rights of the company or its branches or the rights of the company’s beneficial owners or directors (the party that has granted the powers under the power of attorney);
- – if needed, appoint other parties to handle the purposes, for general or specific issues.
The list above is an example of what can be contained in a power of attorney used for business purposes, including to set up a company in Hong Kong. The document can be issued to act solely in Hong Kong or in other jurisdictions. Our team can give you more details about how a power of attorney can be enforced and used in another country in which the company is doing business (for example, if a Hong Kong-based company opens a branch in a nearby jurisdiction and wishes to use a power of attorney to also handle tasks concerned to that respective branch).
A power of attorney for tax compliance in Hong Kong
The power of attorney can also be used to pay taxes on behalf of the grantor. By doing so, the grantor will effectively designate another party (the appointed agent) to prepare, file the tax returns as well as make the needed payments. The agent may also sign the tax return, if needed and if this is expressly stated in the power of attorney.
However, it is useful to note that the power of attorney issued for an agent who will handle the tax returns is not the same as enlisting the service of an accountant or an accounting firm. An accountant in Hong Kong is the one with the knowledge to do so and while is it possible to appoint the accountant as the agent, in practice the party that will be appointed to make the submissions on behalf of the Hong Kong taxpayer will be an agent who does not have accounting certifications (therefore the need to outsource this step accordingly in order to make sure that the tax returns are filed in the correct manner and following a comprehensive understanding of the company’s tax obligations).
Some of the following acts can be included when drafting a special power of attorney in Hong Kong for tax purposes:
- – file the tax return;
- – receive the tax return and any other documents issued by the Inland Revenue Department;
- – perform any legal act on the taxpayer’s (grantor’s) behalf with respect to taxes;
- – represent the taxpayer in front of the Inland Revenue Department;
- – submit an objection with the Inland Revenue Department on behalf of a Hong Kong taxpayer (dispute an assessment that has been made).
The power of attorney can be used by company owners in Hong Kong when they cannot handle the needed tax matters themselves, when they need to depart from the country for a certain period (that will include the tax return filing date) or in other situations.
If you would like to know more about how a power of attorney in Hong Kong can help you perform business activities in the city, you can contact our Hong Kong company formation representatives.