In recent years, Hong Kong trust company entities have been striving non-stop due to the increasing demand for financial planning and asset succession. Not only that, as more families and entities pay closer attention to wealth management, various domestic and foreign institutions are also entering the field.
What is a trust company and why pursue this business in Hong Kong? Our article today provides essential details, including eligibility requirements and 4 crucial steps to registration.
What is a Hong Kong trust company?
A trust company is a financial institution that provides trust and fiduciary services for individuals, families, and enterprises. The primary function of this legal entity is to assist clients in efficiently safeguarding and managing their assets.
The trust company, in Hong Kong, acts as the client’s fiduciary agent or trustee. Furthermore, its services can also be used for estate planning, custodial arrangements, stock transfers, beneficial ownership registration, asset transfer, business succession, and other relevant arrangements.
Here’s an example
If a client does not have a financially responsible or reliable family member to oversee their trust, the trust company can be designated as the successor trustee.
After the grantor passes away, the company will manage the assets following the will or terms of the trust. This may encompass distributing these assets to beneficiaries and transferring the grantor’s business to any related parties.
Why set up a trust company in Hong Kong?
Local entrepreneurs may find forming a trust business in this region advantageous for several reasons. Let’s take a look at some of the top benefits the jurisdiction has to offer.
A robust environment for trust companies
According to Statista’s report, the wealth management market of this jurisdiction is expecting positive numbers in the near future. From 2024 to 2028, the market value of investments managed by financial service providers, or Assets under Management, is expected to experience a consistent annual growth rate of 0.92%.
Further, Hong Kong remains the leading international center for trust-related businesses such as legal, tax, accounting, and professional services. As reported by the Securities and Futures Commission of Hong Kong, asset management licensing activity increased by 10% yearly among Type 9 licensed corporations (licensed to carry out asset management activities).
A well-defined regulatory environment, a thriving financial industry, a diverse talent pool and so many other benefits of doing business in Hong Kong are what make this location the perfect place to start a trust company.
The rising need for local trust services
With the growing affluence of Hong Kong’s local businesses and individuals, trust companies are essentially needed for sophisticated wealth management services.
Even in 2024, the lingering impact of the pandemic continues to shape behaviors. Both businesses and families are displaying great intention to seek wealth preservation methods.
This shift is particularly evident among high-net-worth families, making them a highly potential target demographic. By 2024, Statista estimates that Hong Kong Assets under Management will exceed US$220 billion.
Various chances to grow globally
The jurisdiction’s appeal extends beyond its local market. As a prominent financial hub, Hong Kong attracts a wide range of global customers seeking trust services. Thus, entrepreneurs can cater to an international audience without incurring high costs.
Specifically, surveys and interviews from KPMG have highlighted Mainland China as a significant growth driver for the trust industry in Hong Kong. Wealthy clients from Mainland China and other Asian regions nowadays seek comprehensive services, including estate and succession planning activities, and family office services.
Furthermore, a trust company in Hong Kong is structured to provide tax-efficient solutions, adding to the city’s allure for clients keen on optimizing their financial arrangements.
Eligibility requirements for registration
Having reviewed the numbers, let’s take a look at the requirements a business must meet in order to register as a trust company.
To be eligible for providing trust services in Hong Kong, a company must be incorporated under the Companies Ordinance; but strictly not a private company. In addition, the entity is mandated to satisfy the requirements below:
- Objects of the company can only fall within Section 81 of the Trustee Ordinance;
- The issued share capital exceeds HK$3 million;
- At the very least, an amount of HK$3 million of the issued share capital is fully paid up for a cash consideration under the director’s written confirmation;
- The BOD has been duly appointed in accordance with the Articles of Association with at least 2 directors;
- The company is demanded to either:
(1) Deposit at least HK$1.5 million in the name of the Director of Accounting Services (DAS) with an authorized institution (a bank, restricted license bank, or deposit-taking company), and lodge an equivalent receipt issued by that institution with the DAS; or
(2) Deposit at least HK$1.5 million in the name of the DAS with a finance company that is a subsidiary of a bank and lodge an equivalent receipt issued by that institution with the DAS; or
(3) Deposit with the DAS a guarantee, along with a certified true copy of essential documents (e.g. Power of Attorney), from an eligible bank under section 2 of the Banking Ordinance;
- Moreover, the trust company must meet its obligations (besides liability to shareholders) without taking into account the sum deposited;
- No member shall at any time hold shares in the capital of the company to an amount exceeding one-fifth of the issued capital of the company (excluding when the trust company operates as a subsidiary of a bank).
Given the numerous requirements, businesses should consult with the responsible regulatory bodies or seek professional advice. Overall, it is important to ensure accurate information regarding the laws for registering your entity.
How do you open a Hong Kong trust company?
Establishing a trust company in Hong Kong involves the following key steps. Read more to navigate through the process with ease.
Step 1: Incorporate a Hong Kong company
The first step is to set up your business by registering the company with the Companies Registry (CR). Within this phase, you will need to go through the procedures below:
- Choose a business structure (not a private company)
- Decide on a suitable company’s name
- Pick a registered address for business activities
- Draft an Articles of Association including details on company particulars (e.g. share capital, directors, shareholders, company secretary, etc.)
- Send an application to the CR for the Certificate of Incorporation
- Apply for a Business Registration Certificate issued by the Inland Revenue Department
For more comprehensive instructions on how to register your entity with the relevant authority, please refer to our article on setting up a Hong Kong company.
Step 2: Obtain necessary licenses from the SFC
Crucially, trust companies are required to hold a Type 9 Securities and Futures Commission (SFC) license. This category covers both asset and investment management on behalf of the grantor.
In general, you will have to submit an application, along with the related fees and necessary documents to the Securities and Futures Commission (SFC):
- A detailed description of the business plan, including activities, organizational structure, model of operation, etc.
- Financial records and statements
- Comprehensive compliance policies and procedures in adherence to legal regulations.
- Records of your business activities, transactions, and client information, among other required documentation.
Step 3: Register as a trust company
Once the license is granted, the next step is registering as a trust company with the Companies Registry (CR).
To do so, the applicant must download and file the Application for registration as a Trust Company under Part 8 of the Trustee Ordinance (Cap. 29). This form is listed in the Trust Company Related Forms section on the CR’s website. When the application is completed, there are two options for submission to the CR:
(1) By filing an online application through e-Filing Services
The forms can be submitted electronically using your existing account on the e-Services Portal. If you don’t have an account yet, you can create one by following the instructions on the site. Please keep in mind that a number of documents are required for setting up a new account, including personal data, identity verifications, and business registration proofs.
(2) By filing a hard copy application
For a physical application, you can simply print and deliver the documents to the CR’s address at Queensway Government Offices, on the 14th floor.
Applicable fees for both methods
In addition, you will also need to submit the following fees:
- Application fee: HK$11,250
- Fee for issuing the Certificate of Registration as a Trust Company: $840 (refundable if the application is unsuccessful)
Note that if the applicant chooses to apply by post, the fees must be paid via cheque in Hong Kong dollars, payable to the Companies Registry.
Step 4: Receive approval and certificate
Upon successful completion, the Companies Registry will issue a Certificate of Registration as a Trust Company to your business. Depending on the submission method, the certificate will be issued:
For online applications
In this case, you will receive your certificate electronically via the registered email. Please make sure to check your inbox regularly for updates and results, or if any additional information is required.
For physical applications
You shall have your certificate sent to your registered office address in hard copy. Alternatively, you may choose to personally collect the certificate at the Companies Registry during working hours, Monday to Friday (8:30 a.m. – 12:45 p.m.; 1:45 p.m. – 5:45 p.m.).
The legal effect is the same for both electronic and hardcopy certificates. Additionally, it takes about 10 working days for the Certificate to be issued from the receipt of the application; or confirmation of the deposit from the Director of Accounting Services.
Once the Certificate is granted, your company can now commence its operations in Hong Kong.
Key takeaways to remember
Increasing demand for financial planning and asset succession is driving the robust growth of Hong Kong’s trust industry. In the aftermath of the pandemic, this industry is even more striving with a large customer base, not just local, but from all over the region.
If you are already a professional in the field looking to start your own company, this might be a rewarding opportunity. In case you are simply reading to understand the trust company model, this article should provide you with all the information you need.
For any questions or inquiries regarding business operations in Hong Kong, please contact our dedicated support team at service@bbcincorp.com and we will be happy to assist.
Disclaimer: While BBCIncorp strives to make the information on this website as timely and accurate as possible, the information itself is for reference purposes only. You should not substitute the information provided in this article for competent legal advice. Feel free to contact BBCIncorp’s customer services for advice on your specific cases.
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