What is a share transfer?
A share transfer is the process of transferring existing shares from existing shareholders to new shareholders or third parties. The process can either be sale or gift and is a common exercise performed by Hong Kong companies with shares. The process mostly involves either adding new shareholders or changing the existing proportion of shareholders.
When do you need to make a Share Transfer?
You may have difference reasons to make a Share Transfer. However, the most common factors are as following:
- When a business owner is contemplating selling the business. Or wants to take advantage of an opportunity to cash out by selling some, or part of their shareholdings.
- To facilitate the restructuring of a company. For example, transferring the shares of a company from a parent company to a new entity.
- Changing the existing proportion of shares between shareholders due to new profit sharing or ownership arrangements.
What is the standard Hong Kong Share Transfer process?
According to the Hong Kong Company Ordinance, all the Hong Kong private limited companies must include in the Article of Association. A provision detailing the restriction of share transfers. The provisions must met the conditions listed before the share transfer occur.
General speaking, the process takes about 3-5 working days. The following shows the process as below:
- Ensure any pre-emptive rights have been satisfied or waived and obtain approval to conduct the Share Transfer from the company’s shareholder.
- Prepare Share Transfer documentation required for the transfer to take place.
- Prepare all related documents (Contract notes, resolutions, sales & purchase agreements, management account, audit reports etc.) for stamping
- After stamping of documents at the Inland Revenue Department , it means the process is completed.
If the share transfers to a third party, it is necessary to establish the terms via a Share Purchase Agreement. These contracts set out in detail the terms of the purchase, including the price and conditions and assurances from the transferor regarding the finances and liabilities of the company in question.
What do your company need for a Share Transfer?
- The original copy of the latest audit report and / or a certified management account, showing the latest 3 months financial status of the business.
- A copy of the residential address, passport or identity card of the new shareholder
- Name of the share transferor
- The number of shares to be transferred
- A company resolution detailing the distribution of dividends
- Land property information (if any)
- Sales & purchase agreement detailing the share transfer
- The company’s subsidiary’s audit report and/or the most recent certified management accounts (if any)
- A copy of the company’s Articles of Association
For further information, please contact us.
You may want to read: Company Limited by Shares Vs Company Limited by Guarantee