Transfer of Shares in a Hong Kong Company
Transfer of Shares in a Hong Kong Company
What are the most common ways to change the company shareholders?<br />
- Transfer existing share of the company.
- To issue new shares
What is the procedure of share transfer?
- The transfer has to be pre-approved by the Board of directors.
- Before transferring shares to new shareholders in the company, the shares have to be offered to the existing shareholders.
The process of transferring the shares for changing shareholders in Hong Kong company:
- Ensure that the share transfer form is signed or noted by both the buyer (transferee), and the seller (transferor).
- Prepare the Share Transfer Form and the Sale Agreement Form for stamping.
- Bring 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.
Transfer Existing Shares of a Company
- The change of company shareholders must be approved by other shareholders.
- Preparing the documents required for the transfer of shares: contract notes (bought and sold note), resolutions, sale & purchase agreement, management account, an instrument of transfer, etc.
- To submit the latest audit report of the company.
- If there was no audit report within the 6 months before the date of transfer, a certified management account (within 3 months) of the company is required.
- When all docs are collected, the instrument of transfer or contract notes have to be stamped by the government and a fee has to be paid – stamp duty.
- The payment of the stamp duty will depend on: Total Net Asset Value of your company or the Consideration depending upon the situation, whichever is higher.
- 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
While transferring the shares of a Hong Kong company, there will be a need to pay a stamp duty imposed by the Inland Revenue Department 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.
More info on the stamp duty rates from the government website.
The total value of your company totals assets minus liabilities of the company at the share transfer date. It means that for a company to transfer 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 Inland Revenue Department will need update audit report and management accounts in order to calculate and charge the stamp duty on the transfer of shares.
The company must provide the Audit Report within 6 months of the share transfer date, or the management accounts within 3 months of this date. As an example, if you provide the Audit Report for the financial year ending 31 December 2019, you would be able to transfer your shares anytime before 30 June 2020 before you have to provide another set of updated financial accounts.
Issue New Shares for the Company
The issue of new company shares in a Hong Kong includes:
- Share allotment by Hong Kong company directors to particular persons.
- Shares issue to the persons after their relevant particulars is entered into the company’s register of shareholders.
- The allotment requires the prior approval of shareholders in the general meeting (GM).
- Shareholders might give their approval concerning a particular allotment or in general. If not revoked earlier, the shareholder approval expires when the next general meeting takes place.
- The return of allotment of shares have to be filed within one month of allotment. This includes disclosing the names of members and their shareholdings. After this specified time limit, the Registrar may not accept the same. The company should submit an application to the court for leave, allowing it to file the return beyond the time limit.
Documents required for the allotment of shares
1. Application of Shares – by new/existing shareholder to the Company stating:
Number of shares to apply.
The consideration (how much) to pay.
His/her particulars to enter into the Register of Members of the Company.
2. Resolution of director – compulsory internal record to be signed by all the directors.
3. Resolution of shareholder – no need if a general/specific mandate have been granted to the Board, or else, this mandatory approval is required.
4. NSC1 – Return of Allotment, compulsory return to be filed to Companies Registry.
5. Register of Members – mandatory internal record to be updated by the Company and keep at registered office address, no signature is required.
6. Share Certificate – issued by the Company to the Shareholder as proof, to be executed by signature of the director and either common seal or authorized chop of the company.
7. Significant Controllers Register – mandatory internal record to be updated (required if there is the change of significant control over the company is registrable) by the Company and keep at registered office address or dedicated location, no signature is required.
The NSC1 should be delivered within One month after an allotment of shares; in case the new investment (new injection of capital) does not involve in allotment of shares, other form(s) and procedure(s) would be adopted instead.