I guess many people have heard of ‘Limited by Shares’, that is a Private Limited Company, for which there would be director and shareholder in the structure. But here you may ask: “What is a ‘Limited by Guarantee’? I have never heard of that.” Actually you could be more familiar with the term: Non-Profit Organisation (NPO), which is the more common name of ‘Limited by Guarantee’, having no shareholder in the structure - only director and member instead. Let me give you a better understanding with a clear comparison chart below :

 

 

Let me clarify the last point “Contribution Type”:

For Limited by Guarantee: Every guarantor has to contribute the same and fixed amount of guarantee if the company is going to be dissolved. Just like when you are joining some sort of clubs and you have to hand in certain amount of membership fees.

For Limited by Shares: Every shareholder has to invest a certain amount of share capital. The capital amount depends on how much he/she is willing to invest or how much the amount of shares the board allows him/her to buy . Share capital has to be invested during the initial formation and it can be increased in time if the board decides to do so.

 

Popular FAQs of the TWO Entities:-

>> Can We Transform from Limited by Shares to Limited by Guarantee?

This is definitely one of the top 3 questions that my clients always ask me. Sorry the answer is no, you CANNOT switch from one entity to another since they serve 2 completely different purposes. In that case, you will need to set up a new Limited by Guarantee entity.

 

>> What Should I Do If I Want to Set up a Charity?

You will need to set up a Limited by Guarantee (NPO) first. While setting up the Limited by Guarantee, you will have to provide a proposal on the objective and a 1 year upcoming plan of this Charity, and submit to us for further review. After the Limited by Guarantee has been formed, you can file your tax exemption application, for which we will assist in applying for such tax exemption under Section 88 of the Inland Revenue Ordinance via the IRD. After the Charity status is approved, you may or may not wish to remove your company suffix ‘Limited’ - if you prefer to take this suffix away, our experienced team can handle such application to the IRD for you by taking care of all paperwork.

 

>> Do I Have to Prepare Any Annual Filing for Limited by Guarantee?

Yes, you will have to submit Annual Return to update the Government if there are any changes on director and member information, just like any other Limited by Shares. Profit Tax Return would also be needed to file along with the audited financial statement.

 

>> Please Give Me Some Interesting Examples of Limited by Guarantee & Limited by Shares?

Limited by Guarantee: Sports Association, Recreational Club, Student Union, etc.          
Limited by Shares: Trading Company, IT Consulting Agency, Property Sales Agency, etc.

 

If you have any further questions on these 2 types of incorporation, please feel free to email me, Alex from the Start-up Advisor Team, at info@bridges.hk to know more of our advice. Or, simply drop me a private message, and I will get back to you shortly as an instant help in your organisation setup plan.

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Speaking of setting up a Non-Profit Organisation, the word ‘Charity’ usually pops up in the conversation. I have come across many clients who have confusion between these two terms, and are not sure where to begin. Let me explain further in this blog and answer the questions you might be having!

 

A NPO can serve different purposes, like sharing interests, arranging social gatherings, or even targeting to serve the local community.

 

What Exactly Is NPO?

My clients always come to me and ask, what is NPO, is it necessary to be a Charity?
I will usually shake my head and say Non Profit Organisation a.k.a. NPO, is generally an organisation that is created not to attain monetary achievement, which means their ultimate purpose is NOT to generate additional revenue. NPO can serve many different purposes, some for recreational like sports interest or hobby; some for socializing / networking like premium coffee tasting for a group of tasteful people to share coffee knowledge and gather together; and some for serving the community.
 
In HK, there are 2 mainstreams of NPO, let me explain to you further:-
 
A) Limited by Guarantee: It needs to be registered through HK Companies Registry & Inland Revenue Department (IRD). This type of entity is mainly for recreational purpose or socializing purpose, for example, Football or Rugby League Association. 
 
B) Charitable Organisation: It is also needed to be registered through HK Companies Registry & Inland Revenue Department, with the aim that is exclusively charitable. I can give you a very brief idea about this: we would help the client set up the Limited by Guarantee first, and then apply for the Charity status through the Inland Revenue Department. The purposes must be served under the following 4 categories:-
 
- Relief of poverty
- Advancement of education
- Advancement of religion
- Other purposes of charitable nature that serve and beneficial to the HK Community.
 

Why Would You Want to Set up a NPO?

First of all, let me put this straight, not every person would need a NPO for their business as this is not profit making. But having a NPO is more like a pet project or treating a hobby seriously, something you always wish to do but just have no idea where to start with. For instance, I am a huge football fan, having a football association would actually mean a lot for me as this is my hobby and I could formalize it and recruit members into it, and be able to arrange some friendly matches or gathering time to time.
 
In the meantime I am also a dog-lover, which means I am extremely keen on creating a Charity for helping those homeless pets. People on one side would love to reach or achieve a great result on becoming a billionaire yet at the same time that person would also want to do something that he always want to do when he was a kid. 
 
Think of having a profitable organization is like the need for reputation and achievement, while having a non-profit is to fulfill the needs for affiliation and networking. One way or another, you would want one of them or maybe both.
 
Now you see a NPO includes all sorts of organisation that does not look for monetary outcome but it could be as simple as practicing something that you are really interested in with a group of like-minded people and take it into the next stage, to spread it out; or just doing good for the community without any profits in return (of course you can still collect fees from your members just that all revenues will be used for the organisation’s expenses). 
 

FAQs on Establishing a NPO

>> Can Every Company Secretary Service Provider Help to Set up a NPO?
Yes, a normal company secretary service provider can help in forming a NPO, yet please ensure they have such experience before on dealing with different kinds of NPO setup especially with my introduction up in point 1 (types such as Limited by Guarantee and Charitable Organisation). But why would you need to look for the outsider while we, BRIDGES can assist you with the NPO setup in the most reliable way with our years of experience in handling different cases and accumulating the know-how.   
 
>> Can Every NPO Be Tax Exempted?
Not really, as setting up the Charitable Organisation needs to go through an application process of tax exemption, and after getting the approval from the IRD, the charitable status can then be granted and you can start to receive donations. 
 
>> Can Every NPO Accept Donations?
Not every NPO can accept donations, only Charitable Organisation can accept donations from the public.
 
>> What Happen If I Still Have a Bunch of Questions?
BRIDGES can provide you with a FREE professional consultation session on NPO setup, thus your queries can be addressed and cleared with our preceding case studies and experience sharing. Please feel free to email me, Alex from the Start-up Advisor Team, at info@bridges.hk to arrange the appointment convenient for you. Or if you’d like to ask something instantly, simply drop me a private message, I will be more than happy to walk you through the process and give you my prompt answers. 
 
In the next article we will cover a common question raised among our clients - the difference between a Limited by Guarantee and a Limited by Shares, stay tuned!
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Trademark is crucial not only in today’s world. Did you know the 1st trademark users are Romans who need  a ™ for their swords?

 

Everyone talks about ™, is it really necessary? A REAL need?

Getting a trademark for your business or not is definitely a personal choice but we have to say sometimes your business name or appearance of your product is probably one of the most valuable assets for you. In this blog we will walk you through what trademark can do for your company and the workflow + tips of trademark application in HK. Ready for safeguarding your names / products that could be the swords of your company?

 

 

What Can Trademark Do for You?

Trademark, the mark “™” is usually used for distinguishing products and services of a particular company / an individual owner from those of others in the market.

Yet, bear in mind that the HK Companies Registry and HK Trade Marks Registry are 2 different authorities. Some of my clients would often get confused with these two departments but I have always reminded them having the company registered does not mean it would automatically register for your trademark or you will be entitled to any trademark rights.

In other words, if you would like to enjoy the exclusive right to use your company’s name or logo, it is inevitable to get a trademark, by which you can use it in relation to the products / services / inventions of yours and it will save you a lot of hassles when your products or services provision get more popular in time. Actually some clients might come to me late (they just ignored this part from the start and suddenly remembered after a couple of years of the incorporation), then found out their business / product name has already been taken by others in their preferred category (i.e. a class of trademark, like machine tools; cooking; telecommunications; etc.) and so they couldn’t register in that category now. It is cruel to see how the businesses may have just ignored the importance of trademark and suffered from the plagiarising behaviour at the end, realising they should have taken this step earlier. We hope you are not one of those who paid a huge cost here.

Talking about the exclusive trademark right, many people may mix up “™” and  “®”. Generally, the “™” symbol can be used either or not the trademark is registered.  But the “®” symbol means this trademark is a registered one, and you are entitled to the exclusive trademark right provided by the Trade Marks Registry. In other words, by obtaining this right, your company can then apply the “®” symbol next to your company’s name or logo as an identification. You can take legal actions against any parties that violate the trademark law, such as using your trademark without your consent / agreement. This could set a firewall from anyone who may be tempted to take your trademark’s benefits (could be company name, products, inventions, ideas, etc).

 

Be the First-Mover in Your Market?

Moreover, having a trademark can also be a first-mover advantage for your company, for you can easily dominate the market if you have a newly-invented product or service. Any newcomers would then be hard to get an identical trademark anytime soon. In essence, it gives you a chance to become the market leader if you act quickly with the trademark registration.

To share some latest trends with you, according to our experience, if a HK company owns a registered trademark, it will become a whole lot easier to cooperate with her mainland China partners because those Chinese companies tend to believe you are a reputable company and they are willing to pay extra for your products / services, which makes the whole trademark registration very worthwhile as it just costs you less than HK$100 per month for owning the 10-years trademark right.

 

Easy-to-Prepare Materials for Registration

Before kicking off the registration, simply provide us with 4 basic information below:-

• The trademark you would like to register graphically

• What products / services are to be covered by this trademark? (i.e. the trademark class, like food for babies; hygienic and beauty care; etc.)

• Would you like an official search / non-official search first? (such a search is for ensuring your trademark is available for registration)

• Information of the trademark’s owner

Simple as that!

 

Just 5 Steps for HK Trademark Registration

Trademark registration sounds complicated yet it is not as hard as you thought. Just pass us the above 4 materials, and our experienced advisor will guide you step by step throughout the whole process, whether you are a local or overseas firm. Here we’ll give you some ideas about the steps:-

1. File the Application

Gather all necessary information of your product / creations / services and we will assist you in submitting the application. Generally the whole application procedure can take as little as 6 months.

2. Deficiencies Checking

The Trade Marks Registry will conduct a thorough check on the application and provided documents. The authority will get in touch with us if further information is required.

3. Search and Examination

The Trade Marks Registry will then perform a proper search to see if any identical or similar trademark has already been registered. The authority will also review and see if the submitted trademark is proper and fits the Trademark Ordinance’s requirements.

4. Objections (There might or might not be one)

If anyhow the requirements are not met, the Trade Marks Registry has the authority to object the application. Yet, applicants are granted with 6 months for amendments in order to meet the requirements.

5. Registration

Once your trademark has been accepted for registration, it will be published in the Hong Kong Intellectual Property Journal. If no opposition by a 3rd party is made, the Trade Marks Registry will enter your trademark into the trademarks register and you will be issued with a certificate of registration, meanwhile the notice of the registration will be published in the Journal too. As the owner of a registered trademark, your rights take effect from the filing date of the application, which allow you to use for 10 years.

 

Finally, How to Make Your Trademark Stand Out?

A trademark is not simply a company or business name, it can be a group of elements joined together like logo, image, symbol, etc. Now we are going to give you some hints on creating a distinctive trademark:-

- Be creative, you have to put a little effort into thinking about the uniqueness of your trademark, for instance, in food industry, using “MEAT FOOD” instead of “MEET FOOD” would give the Trade Marks Registry a huge reason to object your application since the chance of getting a similar trademark is massive.

- No description on the products in terms of quantity or quality like “100 Chicken Wings” or “Quality Chicken Wings”.

- No geographical name like “Milano Fashion”.

- Use your invented product name would be the best since as it would most likely be innovative.

 

If you are not sure whether you are having a trademark idea similar with others, come check with us, I am Cherry from the Trademark Team and I will apply my expertise to help you speed up and ease up the application process. It would be my great pleasure to walk you through how to make it done and give you my instant answers to smoothen your journey.

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