Transferring shares in a Hong Kong private company is a common practice for various business needs, such as bringing in new investors, restructuring, or adjusting ownership. This guide outlines the steps, requirements, and associated costs to streamline the process and avoid penalties.
Reasons for Transferring Shares
Share transfers occur for multiple reasons, including:
Departure or retirement of a shareholder.
Resignation or removal of a shareholder-director.
Reorganizing group companies.
Adjusting ownership proportions.
Sale of the company or investment changes.
Required Documents
The following documents are essential for completing the share transfer process:
Document | Purpose |
Application Letter | Initiates the transfer process. |
Bought and Sold Notes or Sale Agreement | Records the share sale transaction. |
Certified Management Accounts | Updates the company’s financial standing. |
Articles of Association | Details restrictions on share transfers. |
Identity Proof of the Transferee | Verifies the new shareholder. |
Instrument of Transfer | Legalizes the share transfer. |
Latest Audit Report | Confirms the company’s financial health. |
Name and Number of Shares Transferred | Defines the scope of the transaction. |
Process for Transferring Shares
Review Articles of Association Check for any transfer restrictions, such as:
Board approval requirements.
Pre-emptive rights for existing shareholders.
Secure Necessary Approvals Obtain board or shareholder approval through resolutions as outlined in the company’s governing documents.
Prepare and Submit Documents Ensure the share transfer form is signed by both the transferee and transferor. Submit the required documents to the Stamp Office for stamp duty assessment.
Stamp Duty Assessment The Stamp Office will issue a demand note for stamp duty, which must be paid to complete the process.
Completion Once the stamp duty is paid, the transfer documents will be stamped, marking the completion of the process.
Timeline | Task |
1–2 days | Stamp duty assessment by IRD. |
3–5 days | Entire transfer process. |
Stamp Duty Fees
Transaction Type | Fee |
Stamp Duty | 0.26% of the higher value between consideration or net asset value. |
Instrument of Transfer | HKD 5.00 per instrument. |
Penalties for Late Payment
Delay Duration | Penalty |
Within 1 month | 2 times the stamp duty amount. |
1–2 months | 4 times the stamp duty amount. |
Over 2 months | 10 times the stamp duty amount. |
Refusal to Transfer
Under Section 151 of the Companies Ordinance, the board of directors can refuse a share transfer. If refused, the board must:
Notify the transferee and transferor within two months.
Provide a statement explaining the refusal within 28 days upon request.
Failure to comply may result in a fine of HKD 25,000 and HKD 700 per day if the offense continues.
Key Considerations
Aspect | Details |
Pre-emptive Rights | Offer shares to existing shareholders before transferring to external parties. |
Transfer Restrictions | Board or shareholder approval may be mandatory. |
Company Stamps | Verify that the correct company’s stamp is used on legal documents. |
Transferring shares in a Hong Kong private company requires compliance with regulatory and legal obligations. Following the outlined process ensures efficiency while avoiding penalties. Prompt submission of documents and payment of stamp duty are essential to completing the process successfully.
By understanding these steps and leveraging proper documentation, businesses can streamline share transfers and facilitate seamless ownership transitions.
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