Transfer of Shares for Hong Kong Company
The transfer of shares occurs when a shareholder in a company sells or gifts his/her shares to another new or existing shareholder. For Hong Kong companies, the procedures for a transfer of shares need to follow certain conditions.
Reasons for Transfer of Shares
A transfer of shares may occur for a variety of reasons such as:
- A shareholder leaves the company and recoups his/her investment
- A director (who is also a shareholder) resigns or is removed from the company
- Shares are gifted to a spouse or family member
- The business is being handed over or sold to someone else
- Restructuring between inter-group companies
Hong Kong: Procedure for Transfer of Shares
There are several important criteria to note when performing a transfer of shares in Hong Kong:
The Transfer Must Be According to the Articles of Association
Section 11 of the Hong Kong Companies Ordinance stipulates that all private limited companies in Hong Kong must include in their Articles of Association, a provision regarding the restriction on transfer of its shares.
Every company should thus have provisions in relation to the transfer of shares in their Articles of Association. The transfer of shares must be performed according to such provisions. Although there is no mandatory or specific way to restrict share transfers, the most common restrictions found in companies are:
- All transfer of shares must be approved by the Board of Directors
- Share transfers are subject to directors’ refusal
- Under pre-emptive rights provided, shares must first be offered to existing shareholders
Relevant Documents Have to Be Prepared and Submitted to the Government Authority
Relevant documents relating to the transfer of shares are required to be submitted to the Inland Revenue Department for stamp duty assessment.
In order to enable the Stamp Duty Office to assess the proper amount of stamp duty payable, the following documents and information should be submitted to the Inland Revenue Department (the “IRD”):
- Bought and Sold Notes / Sales & Purchase Agreement
- Articles of Association
- Latest audited financial statements of the company and its subsidiaries or Latest management accounts of the company and its subsidiaries;
- any other information and documents, where necessary, in specific cases*
*The types of documents required to be submitted to the IRD varies from case to case. Please approach us for further advice if professional services on the transfer of shares are required.
Stamp Duty Must Be Paid for Contract Notes
3E Accounting will assist to present the transfer of shares documents to the IRD for adjudication of the stamp duty payable.
Time for Stamping
Transfer documents are required to be submitted to the IRD for adjudication within the following specified time:
- On the date of execution, if effected in Hong Kong
- Within 30 days, if effected outside Hong Kong
Current rates of stamp duty
With effect from 1 September 2001, stamp duty on sale or purchase of any Hong Kong stock is charged according to the amount of the consideration or its value on every sold note and every bought note as follows:
- $5 + 0.1% of the amount of the consideration or of its value on every sold note and every bought note#
(Where the stamp duty calculated includes a fraction of $1, round-up the duty to the nearest $1)
#The amount of stamp duty payable to IRD varies from case to case. Please approach us for further advice if professional services on the transfer of shares are required.
Late stamping is subjected to the payment of the penalty as follows:
|Not exceeding 1 month||2 times the amount of stamp duty|
|Exceeding 1 month but not exceeding 2 months||4 times the amount of stamp duty|
|In any other case||10 times the amount of stamp duty|