Transcript Risk Management by Hong Kong Advantages

Practical Business Solutions
for Your Global Expansion:
Risk Management Hong Kong Advantages
Stephen Hung
Council Member
Law Society of Hong Kong
Facts about Hong Kong
World
Recognition
GDP per
capita
Legal
Taxation
Japanese
connection
A Livable
City
Freest and Most Competitive Economy, Top Financial
Hub, World’s Largest IPO Market…
US$34,300 (HK 2011), US$5,555 (China 2011)
US$42,863 (Japan 2010)
~8,000 lawyers in HK, 72 foreign law firms & ~1,500 foreign
lawyers in HK from 28 jurisdictions.
More than 200,000 lawyers in the PRC.
HK: ~1 lawyer per 1,000p; PRC: ~1 lawyer per 5,000p
Japan: ~1 lawyer per 4,119p
Corporate: 16.5% (max), Salaries: 15% (max),
nil VAT/GST, no tax on offshore income, no estate duty
1,085 Japanese branch offices/subsidiaries, over 21,000
Japanese residing in HK as at 2011 out of approx. 7 million
population, largest Japanese food export to Hong Kong
A truly cosmopolitan city, expatriates from all over
the world
Expanding your business globally:
what are the risks?
1. ADJUSTMENT
8. FINANCIAL
7. FOREIGN
EXCHANGE
2. IMMIGRATION
/ VISA
SME
6. OPPORTUNITY
5. POLITICAL
3. LABOUR &
EMPLOYMENT
4. LEGAL
Expanding your business globally:
what are the Hong Kong advantages?
1. Adjustment
2. Immigration /
visa
3. Labour &
employment
4. Legal
• Multi-lingual; cultural difference
• Familiar with PRC environment
• Close connection with PRC
• Largest foreign investment to PRC
• 4 hours from all of Asia’s key markets
• Visa-free visits for 170 countries/territories
• Easy to get working visa
• International business hub
• Multi-lingual professionals with wide international
connections
• Skilled work force
• HK lawyers familiar with PRC laws
• HK Law Society – close connection with law associations in
PRC; many MoUs signed
• Employment law is not complicated
• Fast and efficient to set up company
• Good at commercial contracts, direct foreign investments etc.
Expanding your business globally:
what are the Hong Kong advantages?
5. Political
6. Opportunity
7. Foreign
exchange
8. Financial
• Open, transparent and anti-corrupted government
• High level of disclosure, good corporate governance
• Little restrictions on business fields
• Easy access and close connections with PRC and
other parts of Asia e.g. Myanmar, Vietnam etc.
• Easy to meet business people, via HKTDC
• HK$ is stable and freely convertible
• Separate from RMB; linked to US$
• HK serves as PRC’s biggest offshore RMB market
• Low risk and cost of doing business
• Free flow of capital
• Simple tax system
• Offshore company can be tax exempt
• Good financial market
• Loans, listing, debt restructuring
Case Study 1
Ms Toshi runs a business selling chocolates in Tokyo for many years. She plans to
expand her business to Zhuhai, Hong Kong, Macao, Guangzhou and Shenzhen.
Initially, she intends to stay in Zhuhai with her 10 year-old daughter to explore her
options, but…
Risks:
Hong Kong Advantages:
Adjustment
• Multi-lingual city with a sizable Japanese
community
• Japanese International Schools in HK
• Got her work permit easily
• Easy to find skilled work force to help out her
business
Transportation
/ infrastructure
& opportunity
• Guangzhou-Shenzhen-HK Express Rail (by 2015)
• HK-Zhuhai-Macao Bridge (by 2016)
• 1 or 2 hours away; close proximity
Case Study 1
Risks:
In person or as
a company?
Governing
law
Setting up
business
complicated?
Hong Kong Advantages:
• Fast, efficient, simple, low-cost formation of HK
company
• Limited liability companies have separate legal
entity, will not be held personally liable
• Easy to trade and invest in PRC
• Sale and Purchase Agreements made in HK
• HK law as governing law and use HK as jurisdiction
• Strong legal protection for contracts
• HK Law Society (~ 8,000 lawyers) and HKTDC
are more than happy to provide services
• CEPA – import products of ‘HK origin’ free of
tariff to Mainland
• Profits could be brought back to HK – offshore
RMB centre
Case Study 2
Mr Suzuki (Japan) and Mr Chan (HK) are each 50% of a HK company. HK company invests
in an equity joint venture (EJV) with a PRC company to set up a factory in Dongguan.
HK company has 60%. PRC company suggests:
1)
Appoint their staff to be legal representative for EJV; and
2)
Risks:
Deadlock?
Legal
representative?
Oral promise?
They will deal with all licensing but demand a fee.
Hong Kong Advantages:
• 50 – 50 shareholdings in HK company
• Prepare Shareholders’ agreement
• Under PRC Company law, legal representative has wide power
• Presumption that they can represent the company using the Seal
• Legal representative out of control?!
• Must choose a trustworthy legal representative
• Cultural difference between Japan and PRC
• Due diligence - must incorporate everything in legal
documents; do not rely on oral representations