Securing an SFC Permit for Accessing the Financial Services Sector in Hong Kong

This city is considered one of the premier locations in Asia for business, thanks to its robust legal system, the autonomy of its regulatory environment, and the significant influx of foreign investors it attracts.

Due to its robust infrastructure, convenient entry to the Chinese market, and a simple tax framework,

Hong Kong stands out as a prime destination for enterprises engaged in services like asset management, broking, and investment advisory. 

Under this system, neither VAT nor capital gains tax is applied; however, a tax on business profits is set at 16.5%.

The SFC is responsible for overseeing the process by which licenses are awarded to enterprises entitled to conduct business in Hong Kong under existing law.

This includes a diverse array of actions that fall under regulatory oversight, such as buying and selling stocks and bonds, as well as managing individual savings. The regulatory authority evaluates different categories of financial services when issuing licenses.

Once you have obtained clearance from the SFC to buy a Hong Kong firm that has a strong track record, you will be able to bypass the first part of the regulatory approval procedure.

This leads to a faster incorporation process for corporations, while also reducing the expenses associated with legal and administrative work.

Selecting a pre-implemented corporate solution enables you to efficiently traverse a regulated market while building confidence with financial institutions and business partners. This will increase your prospects for success.

The SFC must grant authorisation for a business in Hong Kong to be labelled as "ready-made." This requirement arises because the company has effectively navigated the licensing process with the relevant authorities.

Provided that the company complies with the regulations set forth by the local authorities, it is allowed to offer specific types of financial services. Utilizing this framework enables you to bypass the initial licensing phase, provided you already hold an approved authorization.

The judicial framework

According to the Securities and Futures Ordinance (SFO), business entities holding SFC licenses must comply with a specific framework of regulations.

Examples of these offerings encompass stock trading, asset management, financial consulting, and a variety of additional services.

The SFO provides an additional range of services, including guidance on the licensing procedure and ensuring that licensed businesses comply with all applicable legislation while operating.

This article provides an in-depth examination of the various categories of services subject to regulatory oversight.

The purposes of the different SFC licenses

Depending on the type of licence obtained, the licensing framework in Hong Kong classifies regulated activities into several distinct categories.

This classification allows the supervisory authority to better understand the various kinds of commercial activities a company may undertake while remaining compliant with legal standards.

The State Financial Commission (SFC) assigns a unique number to each licence, reflecting the range of services that the company is permitted to offer. 

The type of SFC licence held by a Hong Kong company directly influences the legality of its operations.

Below is a concise overview of the services allowed under each type of license, accompanied by a list of the most frequently encountered licenses:

Upon obtaining a well-established Hong Kong business with an SFC licence, you will receive the authorisation to perform specific operations as outlined in the accompanying document.

You will receive this authority once you have acquired the firm. Moreover, engaging in activities unrelated to these sanctioned duties is not only unlawful but could also lead to serious legal consequences, including the potential suspension of your licence and various penalties.

The advantages of putting your money into a Hong Kong-based enterprise that has received official endorsement

By acquiring a licensed company in Hong Kong, you can bypass initial government interactions and reduce the necessary steps to start operating legally.

After notifying the SFC, you can promptly start utilising this structure. To achieve this, it is essential to choose qualified individuals and implement any necessary changes within your organisation.

This approach not only speeds up processes and streamlines the fulfilment of administrative tasks, but it also facilitates easier connections with partner organisations and governmental entities.

Here are several compelling reasons to consider acquiring a Ready-Made Company located in Hong Kong that holds a Financial Services License:

• Obtaining an SFC licence from scratch can span several months. This may lead to a faster time to market. This process involves verifying officers and business models, as well as ensuring adherence to the laws that govern internal control.
• A company that has successfully finished all prior processes can commence operations without any delay.
• An active SFC authorisation indicates that the structure has undergone scrutiny and received approval to operate within the financial market.
• Decreased chances of encountering setbacks during the initiation of a business. To shift your path or take on additional responsibilities, simply submit an application for a new license. This also provides you with a greater level of flexibility for enhancement. 
• Due to the existing infrastructure being compliant, there is an opportunity for faster expansion without the need to entirely reimagine the concept.
• A reputable firm in Hong Kong, holding a licence from the SFC, has successfully implemented its regulations, complied with KYC/AML procedures, and fulfilled its reporting obligations since obtaining the licence.

Due to this enhancement, internal management, banks, investors, and government authorities will be equipped to conduct future audits and inspections with greater efficiency.

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Factors to Keep in Mind When Acquiring a Hong Kong Company with an SFC License

Additionally, it is essential to consider various factors beyond just the authorisation when contemplating the acquisition of an established company in Hong Kong that holds an SFC license.

An overview of the present condition of the licence

Evaluating the present condition of a company's SFC licence serves as the most reliable indicator for assessing the integrity of a business. 

To confirm that the permission remains valid and has not been revoked due to any administrative or legal matters, it is crucial to conduct a thorough check.

This document outlines suggestions for reaching out to the regulator in advance, designating new directors, updating details in the state registration, and determining the effective dates for changes.

Criteria exist for the selection of new directors

There are criteria for choosing new directors. A solid understanding of the timing of control transfer is essential, as it influences the speed at which the new management can commence operations. This is the reason why having this information is crucial.

A ready-made Hong Kong business, equipped with a licence to provide financial services, comes with a sale and purchase agreement that adheres to the stipulations set forth by the SFC and the relevant corporate regulations in the local area.

This agreement aligns with the regulations that oversee corporations in Hong Kong. After both parties have approved the final draft, they will proceed to sign the agreement, which will initiate the necessary steps to officially document the changes in the relevant paperwork. This will occur after the parties have granted their approval initially.

Keeping the SFC informed about any alterations in management or ownership structures

This is a mandatory requirement set forth by the SFC aimed at maintaining transparency in ownership and ensuring that new participants adhere to the existing regulations. The SFC has stated that this task is required.

The regulator verifies the information regarding new shareholders and individuals involved in managing the firm to determine which actions are permitted during the process. This is carried out to determine which activities are permitted.

Upon acquiring a financial services business licensed in Hong Kong, the buyer must provide a notification that includes the latest details regarding the ultimate beneficial owners, board members, designated responsible officers, and any alterations affecting the control structure.

This announcement is supported by several documents, including board resolutions, a copy of the updated articles of association, and details regarding the professional experience of the candidates. These documents are presented under the standards set by the SFC.

The regulatory body evaluates new entrants to determine their eligibility to function in the financial sector, their level of expertise, and their standing in the business community.

The authorised company in Hong Kong cannot engage in business with unapproved management individuals or new owners until the notice has been submitted and entered into the regulatory framework.

This notice is required before the company can continue its activities. It is essential to follow this restriction when the notification is dispatched.

If you fail to adhere to the stipulations of this regulation, the Commission is empowered to impose disciplinary measures, which could involve the suspension of your licence.

Notifying the Companies Registry about the Occurrences

It is required that you inform the regulator about any alterations in ownership or management when you take over a Hong Kong business that currently holds an SFC licence. This applies when you acquire the company.

The Companies Registry oversees the management of the information contained within it, and it is your duty to ensure that any required updates to that information are made accordingly.

New members will undoubtedly receive formal acknowledgement through the application of this method, while legal modifications to the organization's framework will be carried out by employing this strategy.

Alongside changing the business name or articles of organisation, the applicant also alters the registered address, introduces new directors and shareholders, and, if necessary, revises the registered address. These alterations are implemented in conjunction with the adjustments mentioned previously.

Verified copies of internal business resolutions and the necessary documents must be submitted electronically through the e-Registry system. This task is mandatory and needs to be completed through electronic means.

All necessary revisions must be appropriately announced when the board of directors or members convene under the Companies Ordinance. This announcement should be made during the meeting. The official application forms contain all the essential information required for public consideration during the application submission process.

Once the Companies Registry finalises the necessary modifications to the structure, the Hong Kong government will officially recognise the new management framework established by the licensed business in Hong Kong.

Subsequently, this entry can serve to furnish the tax office, banks, and partners with thoroughly refreshed information through the utilisation of this entry. If you happen to submit your information after the deadline or incomplete, your registration might be denied.

Should a similar situation arise, you will need to initiate the process from the very beginning again.

The legal aspect of the transition in corporate governance will be finalised once the process is concluded, and the entity holding a Hong Kong SFC licence will receive official acknowledgement of the updated documentation.

Instructions for creating a new account or restoring a previous one

Conversations will occur regarding banking services following the passage of the law that allows individuals to obtain a pre-existing company in Hong Kong, provided they receive approval from the SFC.

Based on the specifics of the situation, owners might opt to either re-register a current company account or establish a new one under the name of the new management team. They have access to both of these options.

A revised compliance assessment will be required; however, it is possible that the existing account may remain active if it is functioning and meets the criteria of the new management framework.

Nonetheless, this depends on the account being operational. In this specific situation, the bank requires all documentation that substantiates alterations in beneficial owners, directors, and shareholders. Furthermore, the bank necessitates information regarding the company's profile and upcoming transactions.

If the bank decides against partnering with the currently licensed Hong Kong business due to structural changes, or if the firm is required to switch banks, a new account will have to be established.

To move forward with this process, it is essential to conduct a standard exercise of due diligence. In this endeavour, you will need to engage with the new management team, supply business documentation, and verify the source of funds, along with other pertinent information.

If the necessary procedures are not completed, the licensing process will face the relevant consequences.

When acquiring a pre-established business in Hong Kong that holds an SFC licence, the Commission emphasizes the importance of adhering strictly to the regulations regarding notification of any changes in ownership and management. The purpose of these regulations is to safeguard the company's interests.

The possibility exists that the authorisation could be revoked if you do not submit this information by the specified deadline, assign individuals who do not meet the necessary qualifications, or present insufficient justifications for the overall business purpose of the acquisition. Everything mentioned here is achievable.

The Securities and Futures Commission (SFC) holds the authority to revoke a licence if it believes that the ownership structure is being manipulated to circumvent regulations or fails to sufficiently protect the interests of investors. Nonetheless, this holds true irrespective of the fulfilment of specific formal conditions.

Tighter regulation from the different banking entities

When acquiring a Hong Kong company that holds an SFC licence, a crucial step is to confirm the service terms with the relevant banks. This has great importance in the event of a change in the organisation's leadership.

To prevent unlawful gains and facilitate criminal activities, financial institutions must ensure that the framework for their new clients aligns with the guidelines they have established for themselves.

Access to current accounts might be restricted, or the establishment of new accounts could be denied if there is an inability to provide adequate identification or respond to enquiries regarding the source of funds. Furthermore, there may be restrictions on the opening of new accounts.

This may introduce additional complexities and potentially postpone the commencement of activities, even though the licence remains valid.

Concluding

Joining the regulated market in Hong Kong can be achieved efficiently by acquiring a company that already holds clearance from the SFC. This eliminates the necessity of navigating the lengthy licensing process, which is mandatory for market entry.

This method leverages existing infrastructure that meets regulatory standards, enabling the delivery of financial services in a timely manner. This technique enables this to happen.

This is particularly advantageous for individuals eager to swiftly join the local business scene without the hassle of investing time and resources in obtaining a new licence. This is due to the fact that it removes the necessity for them to undergo the steps involved in obtaining a new licence.

This approach achieves optimal success when implemented following a thorough initial assessment of the operational and legal conditions of the prepared Hong Kong company.

If there are undisclosed debts, non-compliant management practices, or errors in documentation, the appeal of the acquisition could diminish over time.

Given this situation, it is crucial to consult knowledgeable professionals who are familiar with the rules that oversee the community.

In taking this approach, you not only minimise the chances of facing legal issues, but you also ensure that the company transfer proceeds smoothly without any interruptions caused by the financial system.

The SFC has approved a carefully crafted contract aimed at acquiring an established company. This is a fantastic solution to the problem.