This article is to give a brief outline on how to arrange change of shareholders of a Hong Kong private company.
In company secretary field, we call this as “Transfer of Shares”, which means certain shares hold by existing shareholder is transferring to another person or company. As the shares are personal assets, every shareholder has the right to sell his/her shares to anyone, yet, as the shares are also under the name of the company, any transfer of shares is required to be approved by the board of directors in accordance to the articles of association of the company; besides, any restrictions on share transfers among shareholders agreement should be observed as well.
Step 1 - Company received notice of Intended of Sale
To proceed with, the existing shareholder should serve a notice of the intended sale to the company, attention to either the board of directors or company secretary of the company, which should specify below information:-
The number of shares he/she intends to sell;
The sale price / consideration; and
The name, address and contract information of the potential buyer;
Before proceed further, the company has to ensure that pre-emption rights (if any) have either been fulfilled or waived, which means, the present members have priority purchase the shares under the same offer, and whether they instruct the board of directors to issue a notice of refusal or simply approve the intended sale.
Step 2 - Preparation of mandatory documents of Share Transfer
For preparation of documents, the new shareholder is required to provide the identity documents, also to allow the agent to conduct Know Your Customer (KYC) process; then below is the documents list:-
The notice of the intended sale – optional internal record, and if was not prepared in advance by the seller (existing shareholder) to complete the record;
Director’s resolution – mandatory internal record to be signed by all the directors;
Shareholder’s resolution – mandatory internal record to be signed by all the shareholders;
An instrument of transfer – mandatory proof to submit to Inland Revenue Department (IRD) for stamping;
Bought and sold notes – mandatory proof to submit to IRD together with the instrument of transfer for stamping;
Register of Members – mandatory internal record to be updated by the Company and keep at registered office address, no signature is required;
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, where old certificate should be collected, then cancelled by the company;
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;
Step 3 - Arrange submission to IRD on time to avoid penalty
According to the law, the instrument of transfer and bought and sold notes (IT_BS) should be submitted to the IRD for stamping with necessary the stamp duty at rate of 0.2% of the consideration or the net assets value of the shares (whichever is higher); within 7 days if executed in Hong Kong, within 30 days if it is concluded outside Hong Kong from the date of execution; or else, penalty will be imposed from two (2) times to ten (10) times the amount of stamp duty payable, depending on how late the documents are being submitted.
Any additional information you would like to know, please feel free to drop us an email:- firstname.lastname@example.org. In addition, we dig out below materials in case you need a little more insights.
FAQ – Documents relating to Share Capital / Shares (Share Transfer) No document is required to be filed to Companies Registry, where changes should be marked onto the Annual Return of coming year
Stamp duty on transfer of shares
Stamping of Shares Transfer – Inland Revenue Department
In general, documents required for stamp duty assessment
~ Instrument of Transfer + Bought and Sold Notes
~ Letter of declaration by the Director on below matters
whether or not that the company has commenced business and have prepared audited report issued within 6 months, and together with the certified management accounts by the director and issued within 3 months linked with the latest audited report; also for that of all subsidiaries (if any)
~ Organisation Chart if company has subsidiaries, certified by the director
~ Copy of the latest filed annual return
~ Copy of the latest filed articles of association
~ Copy of the certificate of incorporation
~ Copy of the return of allotments of increase of share capital (if any)
~ Copy of the resolution on declaration of dividends (if any)