Guide to Societies in HK: NPO, Charity, Social Enterprise

Guide to Societies in HK: NPO, Charity, Social Enterprise | Bestar

Guide to Societies in HK: NPO, Charity, Social Enterprise

Guide to Societies in Hong Kong: NPO, Charity, Social Enterprise

Understanding the Differences

Before diving into the specifics, let's clarify the distinctions between NPOs, charities, and social enterprises:

• Non-Profit Organization (NPO): A broad term encompassing organizations that do not distribute profits to shareholders or members.  Their primary purpose is to fulfill a social mission.   
  

• Charity: A type of NPO that aims to provide relief for the poor, advance education, or promote religion. They often enjoy tax exemptions.   
  

• Social Enterprise: An organization that combines social mission with commercial activities. It generates revenue to sustain its operations and achieve social impact.   
  

Non-Profit Organizations (NPOs) in Hong Kong

• Legal Forms: NPOs in Hong Kong can take various legal forms, including:

  • Societies (most common)

  • Trusts   

  • Companies limited by guarantee   

• Registration: To register a society, you'll need to submit an application to the Registry of Companies and Societies.

• Responsibilities: NPOs must be accountable to their beneficiaries and donors, maintain transparency, and comply with relevant laws and regulations.   
  

Charities in Hong Kong

• Tax Exemptions: Charities meeting specific criteria can apply for tax exemption from the Inland Revenue Department.   

• Charitable Purposes: To qualify as a charity, an organization must primarily pursue charitable purposes as defined by law.

• Regulations: Charities are subject to additional regulations, including financial reporting and fundraising requirements.   
  

Social Enterprises in Hong Kong

• Definition: There's no formal definition of a social enterprise in Hong Kong, but it generally refers to businesses with a social mission.   

• Legal Forms: Social enterprises can adopt various legal structures, such as companies limited by shares, limited liability companies, or cooperatives.

• Balancing Act: Social enterprises strive to balance social impact and financial sustainability.   
  

Key Considerations

• Mission and Purpose: Clearly define your organization's mission and objectives to determine the most suitable legal structure.

• Funding: Explore different funding sources, including donations, grants, and revenue-generating activities.

• Governance: Establish a strong governance structure with clear roles and responsibilities for board members and management.

• Compliance: Adhere to relevant laws, regulations, and reporting requirements.

• Impact Measurement: Develop metrics to assess your organization's social impact.

Legal Requirements and Procedures

Hong Kong offers several legal structures for non-profit organizations (NPOs), charities, and social enterprises. The most common are:

• Society: A non-profit association registered under the Societies Ordinance.

• Trust: A legal arrangement where assets are held by one party (trustee) for the benefit of another (beneficiary).

• Company Limited by Guarantee: A company where members guarantee a certain amount in the event of the company's winding up.

• Social Enterprise: While there's no specific legal definition, it often takes the form of a company limited by guarantee or a company limited by shares.

Key legal requirements and procedures include:

• Drafting a constitution or memorandum and articles of association.

• Registering with the relevant government department (e.g., Companies Registry, Inland Revenue Department).   

• Complying with ongoing reporting and filing obligations.   

• Adhering to specific regulations for fundraising and financial management.   

  
  

Tax Implications

• Charities: Can apply for tax exemption under Section 88 of the Inland Revenue Ordinance if they meet specific criteria (e.g., exclusively established for charitable purposes, serving the public interest).   

• NPOs and Social Enterprises: Generally not eligible for tax exemption unless they qualify as charities. However, they may enjoy certain tax benefits on specific activities or income.

Funding Opportunities

• Grants: Government grants, foundation grants, and corporate donations are common sources of funding.

• Fundraising: Organizing events, public appeals, and merchandise sales can generate income.

• Social Investment: Attracting investors willing to support social impact alongside financial returns.

• Revenue Generation: Some social enterprises generate income through the sale of goods or services.

Best Practices for Governance and Management

• Clear Mission and Vision: Define the organization's purpose and goals.

• Strong Governance: Establish a competent board of directors with clear roles and responsibilities.

• Financial Management: Implement robust financial systems, including budgeting, accounting, and reporting.

• Transparency and Accountability: Maintain open communication with stakeholders and adhere to ethical standards.

• Impact Measurement: Track and evaluate the organization's social impact.

• Capacity Building: Invest in staff development and training.

• Collaboration: Partner with other organizations to achieve common goals.

Additional Considerations

• Legal and Regulatory Compliance: Stay updated on relevant laws and regulations.

• Risk Management: Identify and mitigate potential risks.

• Sustainability: Develop long-term strategies for financial and operational sustainability.

• Public Relations: Build and maintain a positive public image.

Additional Resources

• Bestar: Provides a guide to establishing a non-profit organization in Hong Kong: https://www.bestar-hk.com/post/guide-to-establishing-an-non-profit-organisation-in-hong-kong-1

• Social Enterprise Business Centre: Offers information and support for social enterprises in Hong Kong: https://socialenterprise.org.hk/

How Bestar Can Guide Societies in Hong Kong

Guide to Societies in HK: NPO, Charity, Social Enterprise

Bestar plays a crucial role in the establishment and operation of NPOs, charities, and social enterprises in Hong Kong. Our expertise can help navigate the complex legal and financial landscape, ensuring compliance and maximizing impact. Here's how we can assist:

• Entity Selection: Assist in determining the most appropriate legal structure (society, trust, company limited by guarantee, etc.) based on the organization's goals, size, and liability concerns.

• Constitution and Bylaws: Draft comprehensive governing documents outlining the organization's purpose, structure, membership, and decision-making processes.

• Registration and Licensing: Guide through the registration process with relevant government authorities, ensuring compliance with all legal requirements.

• Compliance: Advise on ongoing legal obligations, such as reporting, filing, and maintaining statutory records.

• Governance: Provide guidance on board structure, responsibilities, and fiduciary duties.

• Fundraising and Donations: Advise on legal frameworks for fundraising activities, including compliance with fundraising regulations and donor protection laws.

• Employment and Labor Law: Assist in developing employment contracts, policies, and procedures to comply with labor laws.

• Intellectual Property: Protect the organization's intellectual property rights through trademarks, copyrights, and patents.

• Tax-Exempt Status: Determine eligibility for tax exemption under Section 88 of the Inland Revenue Ordinance and assist with the application process.

• Tax Planning: Develop tax-efficient strategies to maximize the organization's resources.

• Financial Reporting: Advise on financial reporting requirements and compliance with tax regulations.

• Donations and Deductibility: Explain tax implications for donors and the organization regarding donations and receipts.

• Other Taxes: Advise on other applicable taxes.

• Audits and Tax Compliance: Assist with tax audits and ensure compliance with tax laws.

Additional Services

• Financial Management: Provide guidance on financial planning, budgeting, and reporting.

• Grant Writing: Assist in preparing grant applications and managing grant funds.

By engaging Bestar, NPOs, charities, and social enterprises can benefit from our expertise to focus on their mission while ensuring legal and financial sustainability.

RFP

• Charitable Donations and Tax-Exempt Charities - Inland Revenue Department

• Establishing a charity in Hong Kong

• Hong Kong Company Limited by Guarantee

• Steps to Setting Up Non-profit Organisations in Hong Kong

• Process of registering a society in Hong Kong

• Tax implications of different legal structures