21 December 2020
A Message: Starting Up In A Locked-Down World
A Message from our Managing Director:
Hunker Down or Buck Up?
At the time of writing, we seem caught in a rabbit hole of uncertainty about COVID-19, and governmental indecision (at least, outside Asia), with knock-on effects on business travel and sentiment. But whilst uncertainty is great business for futurists, what about real entrepreneurs in a be-plagued world?
While things are standing still, is standing still enough? Your competitors are betting your bottom dollar that you think so. Would it be crazy to start a new company, virtually, in Hong Kong, without actually going there?
The Too Hard Basket
There are plenty of perceived justifications for not doing it: you can’t open a bank account without travelling (or can you?); you don’t want to employ someone you haven’t met; you can’t rent space you haven’t seen in a place you don’t know. That’s a critical mass of reasons to let your competitors take the risk instead.
Reasons to be Cheerful
Two hills may seem like a mountain but, if you think about workarounds and risk mitigation one by one, maybe they are just mounds, not mountains.
No bank account – you can’t travel, so you can’t get a traditional bank account in Hong Kong? No bank account: no point having a company? Isn’t it even a legal requirement?
No: this is a fallacy based on traditional thinking, even repurposing that you want to use a traditional bank rather than an online payments solution. (Actually, there are situations where even a traditional account can be opened.)
(Primasia’s partner, Currenxie, can help you set up an online payments solution without travelling to Hong Kong.)
Primasia has clients who have operated their companies in Hong Kong for years without Hong Kong bank accounts. And by ‘operate’, this means with staff and office space, meeting monthly payroll, paying expenses, etc. These clients have done this by simply paying from their holding company bank account or credit card. Costs being picked up by one group company and cross-billed to another group to another group company is hardly a new thing.
Extra bank charges – yes, since there are more international payments, but this can be managed by, for example, paying the smaller bills in advance, to be in credit, so you make a transfer only once every quarter instead of monthly. (Saves time, too. I do it with my own utility bills.)
For payroll, if you use a service provider, you need make only one international transfer per month, covering all salaries and social security (MPF). Again, our clients do this.
And would you really let bank charges (some of which you will have anyway) get in the way of a strategic decision?
Can’t do the accounting? How do you do the accounting for the Hong Kong company if the payments are made out of (say for example) a UK bank account? Answer: you can handle this through intercompany entries in the holding company’s book: the same current account the holding company already has with the Hong Kong subsidiary is effectively the general ledger of the subsidiary, and the supporting documentation is the same. The Hong Kong accounts can be prepared by Primasia, either online (Using Xero) or in traditional software, and audited, and the tax return completed and filed in the usual way.
New Staff Risk
Although we have got (somewhat) used to teams working from home, this is only recent, and therefore so far involves existing and known team members. Recruiting new staff, with WFH from the outset, let alone in another jurisdiction, is a different matter. What if you hire the wrong person in an unfamiliar place, or someone who need’s closer management, who plays the time zone game? Wouldn’t that be an expensive disaster?
Keeping It Simple
Firstly, Hong Kong’s employment rules are very employer friendly. Many of the complications someone expects if coming from a European or Australian environment (such a on termination of employment) simply do not exist in Hong Kong. A clear summary of the rules is contained in a brief booklet published by the Labour Department, which Primasia can provide for you.
Getting It (More) Right The First Time
Local knowledge can assist in vetting applicants: there are certain flags to look out for on local CV’s, and some checks are more easily carried out by a local partner than remotely.
Conversely, being interviewed from home in a tiny Hong Kong apartment is not ideal. Therefore, we can offer a meeting room for the Zoom meeting to take place in. (Not everyone has a suitable room or device to use Zoom from.) Whether or not someone physically shows up for an interview, even a Zoom one, is also a key filter of who is suitable and who isn’t.
Reducing the Downside
Setting aside the risk of a mistake or mismatch whenever you employ someone, and the risk of untested staff WFH-ing from the outset, with advice it is easier to manage the legal – hence, cost – risk in Hong Kong than in, say, the United Kingdom or Europe.
Hong Kong offers a lot of flexibility in employment agreements including, for example, regarding probation periods. In Hong Kong, either party can give immediate notice during a probation period, so a mistake need not be costly or time consuming.
There is no formal limit on the length of a probation period (within reason) and probation can be extended (again, within reason). With COVID-19 and travel restrictions, what is deemed reasonable would likely be more flexible still. Confirmation could be subject to final physical interview, for example, assuming that travel restrictions will be lifted in due course eventually.
Local advice on employment offers, on probation terms and on other aspects, can limit financial exposure on staff who don’t work out. Ask us!
The same considerations apply to renting space. You don’t want to make an expensive mistake from afar (or anywhere!). Nor do you want to rent the wrong space, in the wrong area, at the wrong price and on the wrong terms, even if it is co-working space.
WFH? Not all Hong Kong staff want to work from a cramped and crowded Hong Kong apartment. An office to work in may actually be a staff inducement, as well as improving productivity. With cheap and reliable public transport, commuting is less of a problem than elsewhere.
Local knowledge can help select the right space (and to review the agreements). One of our partners is also developing a portal to search and compare around 100 co-working spaces in Hong Kong. And one major business centre is offering free space provided a 6-month agreement is signed. Watch this space (no pun intended)!
Not everything just does itself even when COVID’s not around. But it’s usually small stuff, like receiving couriers, forwarding mail, and hosting the occasional meeting, and we can help.
Onwards and Upwards
If you want to sell to Hong Kong’s affluent and internationally-minded market of 7.5 million early-adopters, or to use Hong Kong as your springboard to China and the rest of Asia, contact Primasia for the “how to” and the “why to”. Become a part of that recovery.
Primasia Corporate Services is a Hong Kong based corporate services provider that has been supporting its clients in Asia for over three decades. Among several of our services, Primasia Hong Kong (Primasia) offers our clients Online Accounting services, China Company Incorporation services, Virtual CFO services, MPF Filing services, Profit tax filing services, Employment return filing services, Wholly Foreign Owned Enterprise (WFOE) incorporation and registration services etc. One of our services which we are proud to be offering our clientele is our investment visa and working visa Hong Kong services.
Connect with Primasia Corporate Services Limited
Hong Kong Headquarters: Suite 1106-08, 11/F., Tai Yau Building, No. 181 Johnston Road, Wan Chai, Hong Kong
A Message from our Managing Director: Hunker Down or Buck Up? At the time of writing, we seem caught in a rabbit hole of uncertainty about COVID-19, and governmental indecision (at least, outside Asia), with knock-on effects on business travel and sentiment. But whilst uncertainty is great business for futurists, what about real entrepreneurs in a be-plagued […]