Transfer of Shares in a Hong Kong Company – Complete Guide
Do you want to change the shareholders of your company in Hong Kong? Or perhaps do you intend to add more shareholders to your Hong Kong business? Whatever the reason may be, you must have many questions about the transfer or addition of shares in Hong Kong.
While operating a business in Hong Kong, you can transfer the company’s shares to another, but the process of passing it to a new shareholder is not a simple task.
To do this task properly, you need to keep a lot of things in mind to the transfer of shares in Hong Kong; or more importantly, when you want to change the company shareholders in Hong Kong.
Let’s dive deeper into the article to get the full information about how the transfer of shares in Hong Kong works.
What is the Process of Transferring of Shares in Hong Kong?
In order to understand the process of transferring shares, you should be aware that according to the regulations of the Hong Kong Companies Ordinance, all private limited companies of Hong Kong have some provisions in their articles concerning the task of transferring its shares.
Despite the provisions, there are no particular constraints on the share transfers in the Companies Ordinance. Therefore, the most common ways to change the company shareholders are mentioned below-
- In order to transfer shares of the company, it has to be pre-approved by the Board of directors.
- Before transferring shares to new shareholders in the company, as per the provision of rights, the shares have to be offered to the existing shareholders first.
Now, let’s discuss the process of transferring the shares for changing shareholders in Hong Kong-
- To start this process, you need to make sure that the pre-conditions for your rights are waived or satisfied.
- Ensure that you are preparing the share transfer form by getting it signed or noted by both the buyer (transferee), and the seller (transferor).
- Prepare the Share Transfer Form and the Sale Agreement Form for stamping.
- Deliver the Shares Transfer Form and the underlying share(s) to the company, and wait for the approval of the Board of Directors on the share transfer.
- In the process of transferring, the shares that have been stamped and the buyer’s particulars have to be confirmed for registration into the Company Registers. This is the official proof for the transfer of the company’s shares.
How to Transfer Existing Shares of a Company?
Do you want to transfer the existing shares of a company? Well, this process will occur in the case that the shares are already in your company, and you wish to transfer it to a person who is already a shareholder or associated with the business.
Keep on reading to know more about this process-
- The transferring of shares in Hong Kong should follow the Articles of Association. In short, the change of company shareholders must be approved by other shareholders.
- Once you receive approval from other shareholders, you can begin preparing the documents required for the transfer to take place.
- The documents included- contract notes (bought and sold note), resolutions, sale & purchase agreement, management account, an instrument of transfer, etc.
- Apart from these documents, the company would have to submit the latest audit report of the company, only when they have operated their business in the past.
- If you haven’t prepared any audit report within the 6 months before the date of transfer, a certified management account (within 3 months) of the company is required.
- As soon as you have collected all the documents, the instrument of transfer or contract notes have to be stamped by the government and a fee has to be paid.This process is considered as the stamp duty.
- The payment of the stamp duty would be imposed based on: Total Net Asset Value of your company OR the Consideration depending upon the situation, whichever is higher.
- Once you are done with the collection of all the documents, it needs to be sent to the Stamp Office.
- Once the documents have been stamped, the process of the transition of Company Shareholders in Hong Kong is completed.
Stamp Duty on transfer of shares in Hong Kong
When you transfer the shares of your company, there will be a stamp duty imposed by the Hong Kong Government, more specifically the IRD, on the total value of the company or the par value of the shares, whichever is higher. The current rate for the stamp duty is set as 0.2% on the value of the shares.
You can find out more information on the stamp duty rates from the government website.
The total value of your company would be the net assets (assets minus liabilities) of the company at the share transfer date. This means for a company transferring 100% of the shares to another shareholder, and at the date of the transfer of shares is worth HKD $500,000, then the stamp duty on the transfer of shares would be HKD $1,000.
Updated Audit Report and Management Accounts
The importance of having an update audit report and management accounts is crucial for completing the transfer of shares, as the IRD will need this in order to charge the stamp duty on the transfer of shares in Hong Kong.
As stated above, the requirement from the company would be to provide the Audit Report within 6 months of the share transfer date, or the management accounts within 3 months of this date. This means for example, if you provide the Audit Report for the financial year ending 31 December 2018, you would be able to transfer your shares anytime before 30 June 2019 before you have to provide another set of updated financial accounts.
In case you do not have an updated Audit Report or management accounts prepared, you may need to seek an accountant or prepare these. This would be the longest part of the transfer of shares. Contact us at Startupr for more information on your updated accounts or how to help with this process.
The next section of this article will help you understand the process of issuing new shares for the company.
How to Issue New Shares for the Company?
In Hong Kong, issuing new shares includes the allotment by the directors for the shares. The issuance of these new shares to the new shareholders commences once it has been listed in the register of the company’s shareholders with the relevant details.
The distributions of the shares, beside the allotments offered to the existing shareholders of the company, may be done after getting the approval of the shareholders before this in a general meeting. This approval might be delivered either in the relation of a particular allotment or allotments in general.
To complete this process, within one month before the date of assignment, the return of allotment of shares, disclosing the members and shareholders, must be filed with the Companies Registry.
If you can’t meet the time limit, there is a chance that the Registrar would refuse to approve the return of the allotments for the filing of the Change of the Company Shareholders in Hong Kong. Additionally, you are also required to submit to the court for leave to file the return after the time has passed.
Here comes the role of Eqvista
By now, you should have a better idea about the process and requirements of issuing new shares to the shareholders. Therefore, you need to prepare yourself for the process involved with this.
The process for this can be time consuming and complicated, especially if you are not familiar with the process in Hong Kong. These tasks can lead to costly mistakes for your company either indirectly (by making bad decisions that dilute your ownership of the company), or directly (by selling your company at a low rate).
To curb these kinds of issues and make the process simpler, Eqvista was created. It is a well-advanced tool that handles everything that you, as a founder, need. All of it being in one place.
Eqvista is an application which can help you issue shares electronically while creating electronic certificates as well. In other words, you can eliminate the original wasted time and effort by issuing shares to an investor or new founder with Eqvista.
Which Documents are Required for Transfer of Shares in Hong Kong?
By now that you should have a solid understanding about the process of transfer of shares in Hong Kong. The next step is understanding the correct documentation requirements.
In order to prepare the documents to change Company Shareholders in Hong Kong for your business, the following documents and information are required to be submitted.
- The original copy of the latest audit report within 6 months (and/or certified most recent management accounts within three months, if the business has started)
- A copy of the residential address, passport or identity card of the new shareholder (transferee)
- Name of the seller (Transferor)
- The number of shares to be transferred
- Resolution of distribution of dividend (if any)
- Land property information (if any)
- Sale & Purchase Agreement (if any)
- Subsidiary’s audit report and/or certified latest management accounts (if any).
- A copy of the Articles of Association of the company
What is the Time Frame for Processing a Share Transfer?
You may be wondering about the time frame for processing the transfer of shares in the Hong Kong company.
It will take approximately 3 to 5 working days to complete the process of transfer of shares to the shareholders or to change the Company Shareholders in Hong Kong, depending on your schedule and if you have all the documents in place.
The process works like this:
- First, you will be given the document and the information related to the transfer as per your schedule.
- It takes about one day for the Company Secretary to prepare the Bought and Sold Note and the Instrument of Transfer along with other documents.
- After that, the transferee and the Transferor are called to sign the transfer documents according to the schedule.
- Once you receive all the original transfer documents complied with the supporting documents, you need to submit it to the Stamp Office for assessment. In addition to these documents, you should also provide the stamp duty payable as well, which is also given to the Stamp Office.
- Given that the certificates of the new shares are prepared well, you need to update it with the Register of Members, while the rest of the document set is delivered it to you.
How Startupr can help you?
As mentioned before, for an effective completion of this process, you will need to hire a professional who can help you. Startupr is one-stop-service who can do wonders for your business with professionals qualified for the tasks.
We will always work with you, whether it is incorporating your business or transferring the shares for your Hong Kong company.
Although we have outlined the transfer of shares process, there are chances that you can miss the deadline or forget to prepare some documents in this extensive process.
We are here to help you at every step of the way so that this process is completed on time, without the hassle, and with the correct documentation.
Let us help you!