A Hong Kong private company’s ownership is determined by its shareholders who may decide to do shares transfer for the purpose of bringing in a new partner/investor or exit the company and transfer the shares to the current shareholders. This guide will mainly focus on the requirements and the related fee for transferring shares no matter what the circumstances are, whether you are selling your Hong Kong company or transferring the shares of the business.
Content Outline
Reasons For Share Transfer
It happens in the corporate industry that there is a share transfer or sell of shares, as it can occur when there is someone who retires or leave. However, other scenarios when transferring shares is necessary include:
- When a director who is also a shareholder leaves the firm or is replaced, this implies their resignation or removal.
- The transfer of shares between current shareholders in the process of group restructuring.
- The new profit sharing arrangement or ownership agreement may lead to the change in the existing percentage of shares held by the shareholders.
- Transferring ownership or the sell off the company
Documents Required for Share Transfer
It is required to prepare the particular documents in order to own the shares for your Hong Kong company that should be submitted to the Revenue Department (IRD).
The required documents are:
- Application form or cover letter
- Sale and Purchase Agreement
- Verified financial statements dated within the past three years for the company and its subsidiaries
- Corporate resolution outlining dividend distribution (if applicable)
- Articles of Association
- New shareholder’s residential address, passport, or ID card copy
- Transfer document
- Real estate details (if applicable)
- Most recent audit report
- Transferor’s name
- Quantity of shares to be transferred
- Equity transfer agreement
Things to consider before Share Transfer in Hong Kong
It’s important to point out some specific conditions which affect transferring a company’s shares.
These conditions are:
- Verify the existence of any constraints and/or limitations on the transfer of shares in the memorandum and articles of association.
- Consider the company’s Shareholders’ Agreement for any limiting or restricting clauses.
- Make sure the board resolution or general meeting resolution that authorizes the transfer has been enacted.
- Ensure that other shareholders have been approached for the option to buy the shares as well.
Share Transfer Procedure
Pursuant to the Hong Kong Companies Ordinance, all the Hong Kong private companies shall make in their articles of association the provision with restriction on the transfer of shares and other related provisions of the transfer of the shares.
The most prevalent restriction pertaining to share transfer are:
- The board of directors become the only body who can approve all share transfers.
- Transfers of shares are by directors’ discretion.
- Shares must be initially made available to existing shareholders based on the preemptive rights which are granted to them.
The share transfer process can be completed within three to five business days.
Furthermore, make sure that the shares are allocated to the existing shareholders in accordance with the company’s articles of association. Both of the transferee (buyer) and the transferor (seller) mutually should sign the share transfer form. Next you will need to prepare necessary documents, fill the transfer form for the certified stamp and send it to the Stamp Office.
It is then that the documentation is stamped, and the share transfer process has been completed.
Refusal to Share Transfer
Section 151 of the Companies Ordinance explicitly states that, in the scenario when the board of directors refuses the transfer of the shares, the board will send a notice of disapproval to the transferee and the transferor within two months of the time when the share transfer is lodged.
The transferor and transferee may now request an explanation for non-compliance or inability to meet the requirements. Within 28 days, this company is supposed to send the reference to the relevant person individually, and if needed, to register the transfer.
If the company is unable to send within 60 days either of the notices of refusal together with statements for the reasons for that refusal or the transfer registration, the company and all its responsible officers shall each a subject to a non-cumulative fine of level 4 (HKD 25,000) and a HKD 700 fine for each day that the offense continues.
Share Transfer Stamp Duty
Share transfer stamp duty is subject 0.26% of the consideration or the shares’ net asset value to be transferred, whichever is higher.
The amount of share transfer stamp duty charged for each instrument of transfer is HKD 5.00.
When is Share Transfer Stamp Duty Paid?
You are required to pay stamp duty within two days of the sale or the purchase of shares taking place in Hong Kong. If the sale or purchase you made outside Hong Kong, you should pay stamp duty within a month after.
Penalties for Late Payment of Share Transfer Stamp Duty
Failure to pay stamp duty within 30 days may result in the following penalties:
| Stamping duty | Penalty |
|---|---|
| Not exceeding one month overdue | 2x the amount of stamp duty |
| Between 1 month to 2 month overdue | 4x the amount of stamp duty |
| Others | 10x the amount of stamp duty |
How Can FastLane Help You?
Transferring ownership among companies in Hong Kong entails complicated steps and certain penalties if handled incorrectly. Through Fastlane Group which is regarded as a reputable company secretary, the share transfer process can be simplified, making certain that regulations are adhered to and that stamp duty is paid on time. Due to its experience in corporate governance, Fastlane Group enable the smooth transition of ownership hence, protecting your interests. Do not hesitate to Contact us for professional company secretary service.