Buying A Shelf Company Or Incorporating A New One: Which Is Better?

If you are an investor looking forward to entering the Hong Kong market, the Companies Ordinance requires that you register a company. There are two ways of getting a company in Hong Kong; buying a shelf company or incorporating a new one. Which is better between the two? Here is a closer comparison of the two.

Buying a shelf company

A shelf company is an already registered company that is not in use. Therefore, owners put it up for sale. Notably, most shelf companies are indeed registered with the intention of sale because they have never been used but are tagged for sale immediately the registration is completed.

The main advantage of getting a shelf company is that it is already registered and will take a shorter time to complete the buyout.  Besides, the company will look a little older. Many people simply look at the year of registration when selecting the company to do business with.

Despite these benefits, the shelf company comes with its share of problems. One, while the transfer of the company might look easy, changing the bank details almost impossible. Most of the banks will want to meet all the directors of the old company and the new one to establish the cause for sale. However, even after the presentation, the account transfer is still declined.

The chances are that you will be left with a shell of a company that cannot operate. There are numerous court cases of shelf companies buyouts that never completed.

Incorporating a new company

Instead of channeling funds to a shelf company that will only land you into trouble, the better option is incorporating a new business. The process is easy, fast and direct. The Companies Ordinance outlines the needed documents and how to present them.

The main advantage of registering a new limited liability company is that you can do it yourself or even use an agency. This implies that there is no need to book a flight to Hong Kong. Simply contact a good agency, send all the documents for registration, and wait for about 14 days. 

If you are in the tech sector, a new company can easily get support from Hong Kong administration. You only need to look at the available programs and whether your company operations fit there.

With a new company, the process of opening a bank account is direct. You simply need the certificate of incorporation and other supporting documents such as passports of shareholders and details of the directors.

The final take

While buying a shelf company might look more attractive, it is advisable not to rush to it. Many people have lost their funds while others have been embroiled in unending court battles with sellers. Do not fall into the same trap; simply register a new company.