A share transfer occurs when a shareholder in a corporation sells or gifts their shares to another new or existing shareholder. The following are the reasons why a company requires the transfer of shares:
- A shareholder is looking to exit the company and make back their money
- A director either resigns from the board or is removed
- Shares are given as gifts to partners or family members
- The business is transferred to another party or sold for an agreed-upon sum
- Reorganizing your business
Hong Kong government imposes a stamp duty when you transfer shares of a company’s stock from one person to another. To deepen your understanding of this topic, this article explores the process of transferring shares in Hong Kong and stamp duty.
What you’ll learn:
1. Transfer of shares in Hong Kong
2. How can you transfer shares?
3. Documents needed to transfer shares
Transfer of shares in Hong Kong
A company in Hong Kong usually transfers shares. A share transfer is a process of selling or gifting current shares from one individual to an existing shareholder or other parties. This is a common occurrence among businesses in Hong Kong. The following are the most typical events that lead to a company share transfer:
- Restructuring a company by transferring its shares from one parent entity to a new entity.
- New profit sharing or common ownership arrangements
- Owner wishes to sell their company or desires to exit by selling parts of their stock
How can you transfer shares?
All private limited companies in Hong Kong are required by law to have a section in their Articles of Association that outlines share transfer restrictions. Before a transfer can take place, these requirements must be met.
Follow these steps:
- Make sure that any terms set forth in the company’s Articles of Association have been met or waived, and get shareholder permission to transfer ownership of the shares
- In order for the transfer of shares to go through, prepare the needed share transfer paperwork
- Get all required documents ready to be stamped by the Hong Kong government. (Contract notes, resolutions, sales and purchase agreements, management accounts)
- The process is finalized when all documents have attained the required stamp
A Share Purchase Agreement is often used when two people agree on the terms of a stock transfer. These contracts go into depth about the specifics of the purchase, including price and terms. The transferor also provides assurances to your Hong Kong company regarding its finances and liabilities. In the majority of circumstances, your company’s procedure can be completed within three to five working days.
Documents needed for the transfer of shares
You now know how to transfer shares in Hong Kong. The following documents and information must be prepared to begin preparing the documentation for changing company shareholders for your Hong Kong company:
- Most recent audit report (or certified management accounts if the business is new) within six months
- New shareholder’s physical address, passport, or ID (Transferee)
- Name of the seller (Transferor)
- Total number of shares that were transferred
- Decisions regarding dividend distribution have been made
- Land ownership-related information
- Purchase and Sale Agreement
- Audit report from a subsidiary company and/or up-to-date certified management accounts
- Copy of the company’s Articles of Association.
Stamp duty on share transfer
If you choose to transfer your business’s shares, the Hong Kong government will charge capital duty on either the total value of the company or the par value of the shares (whichever is greater). Every Hong Kong company must go through this transaction. The rate of stamp duty is now 0.2% on the value of shares, as set by the stamp duty office. More information on stamp duty rates can be found on the government’s website.
The overall value of your company during the share transfer would be its net asset value (net asset value minus any outstanding debts).
If Hong Kong company A were to have a 100% transfer of shares that are valued at HKD $500,000 to shareholder B, the stamp duty would be charged on the entire amount transferred, in this case, HKD 1,000. It is crucial to not forget that stamp duty is a necessary part of paying taxes in Hong Kong.
How can FastLane help?
FastLane could help you makes everything easy in transferring shares and taking care of stamp duty. If you are new to incorporation, we can walk you through the entire process. We also offer additional corporate services like a company secretary, accounting and audit. With our team’s wealth of experience, we promise to make your business journey as smooth and easy as possible.
Although you can read all the details about the process of share transfer here, you may be unaware of some mistakes such as forgetting to file certain paperwork or missing deadlines. With FastLane, we could help your business satisfy all the compliance and make sure that the process is streamlined, on schedule, and with all the right paperwork
To learn more about how we can help you achieve success, contact us today! If you have questions or need clarification, don’t hesitate to reach out to FastLane. We want to help you grow your business by giving you shareable resources and knowledge so that you can make the best decisions for your company.