Our Hong Kong incorporation often receives inquiries from customers to check whether their buyers are in good standing. This is more common to those who have contracts over millions and billions. We truly understand that both buyers and sellers want an extra protection especially when it is a first time co-operation. However, I must point out that the certificate of good standing has relatively little meaning in Hong Kong.
In Hong Kong, we usually call this document as the certificate of continuing registration. It is a proof that the company is still LIVE and it has not been struck off by the Hong Kong Company Registry. However, presenting the Certificate of good standing does not mean that the company is financially strong and solid. At most, it only means that the company does not owe the Government any penalty or business license fee.
Wordings used on the Certificate of Good Standing
In the certificate of good standing/ certificate of continuing registration, the Registrar will make the following declaration – “(Company Name) was incorporated in Hong Kong under the Companies Ordinance on (Date), and as at the date of this certificate, the company remains on the Register of Companies maintained by the Hong Kong Company Registry.” This declaration only proves that the business is legally registered in Hong Kong and the company is allowed to conduct business in Hong Kong.
How long does it take to arrange the certificate of good standing?
If you still prefer to have the certificate of good standing/ certificate of continuing registration of yourself or your buyers or suppliers, we can order and retrieve one from the Hong Kong Company Registry. The time frame takes around 2 – 5 business days.
What are the alternatives?
If the value of your transaction is about millions or billions, you should consider escrow service instead. Escrow service means that a third party will receive and remit money for the buyer and the seller. The buyer will store the money with the third party in advance and the third party will remit the funds to the seller once the contract conditions is fulfilled or delivered. Escrow services are usually performed by law firms in Hong Kong and law firms are usually covered by professional indemnity insurance. Hence, if you are expecting to have a large lump sum of transaction, you might opt for escrow service so you can enjoy an extra layer of protection. However, escrow service is not cheap and it usually starts at US$9,000.
If value of your transaction is only around US$500,000, you can discuss with your buyer or supplier and see whether they feel comfortable in providing you with their financial statements or audited reports of the previous year. However, this can often be seen as a very rude request in the Hong Kong culture and we do not recommend this practice. If the value of your transaction is only couple thousand dollars, I’d suggest you to simply do a research on google and read customers’ feedbacks online. This is usually sufficient to tell whether a buyer or seller is reliable and trustworthy.