Share transfers are the redistribution of company ownership to new or existing members for a range of reasons from commercial to personal. These can include:
- Bringing in new investors to raise capital for business expansion or development projects
- Removing departing shareholders when partners retire, resign, or wish to exit the business
- Restructuring ownership to reflect changes in profit-sharing arrangements
- Selling the entire business by transferring all shares to new owners or acquiring companies
- Estate planning purposes when shareholders transfer shares to family members or trusts
In this guide, we’ll go over the documents you’ll need to prepare for a share transfer, the stamp duty to be paid, the steps to the transfer process, and the entities you’ll have to notify when the deed is done.
Required Documentation
Details about the participants, the shares involved and conditions for their transfer, as well as the consent from the company board must be recorded on paper to formalise the details of the transfer.
| Type | Document | Purpose |
| Core | Instrument of Transfer | Official legal transfer document |
| Bought and Sold Notes | Records the agreed transaction price | |
| Share Purchase Agreement | Signed contract that outlines the terms of agreement | |
| Financial | Latest Audit Report* | Records company’s financial position |
| Board Resolution | Formal board approval | |
| Management Accounts | Alternative financial records | |
| Support | Copy of Articles of Association | |
| New shareholder’s ID | To verify the identify of the new shareholder | |
| Transaction Details | Name of share transferor | The person or entity making the transfer |
| Quantity of shares to transfer |
*Dormant companies can notify the IRD of their dormancy in writing to forgo submitting an audit report.
Stamp Duty Calculation and Payment
The Inland Revenue Department charges 0.26% stamp duty on the higher of two values:
- The actual purchase price agreed between parties, or
- The net asset value of the shares being transferred
An additional HKD5 administrative fee is applied per Instrument of Transfer submitted. Late payments are penalised as a multiple of the stamp duty amount, so be sure to pay on time.
Payment Deadlines
| Document Execution Location | Payment Deadline |
| Hong Kong | 2 days after sale |
| Outside Hong Kong | 30 days after sale |
Penalty Structure for Late Payment
| Delay Period | Penalty Amount |
| Up to 1 month | 2x original stamp duty |
| 1-2 months | 4x original stamp duty |
| Over 2 months | 10x original stamp duty |
Pre-Transfer Considerations
Share transfers are a delicate process that can be easily derailed by miscommunication and ill-preparation, so be sure all the documents are consistent and terms are clear with all parties before proceeding with the transfer. Considerations include:
- Lock-up Periods: Check the Shareholder’s Agreement for any restrictions on transferring during specific timeframes
- Board Approval: Ensure board authorisation to proceed with the transfer.
- Pre-emptive Rights: Existing shareholders with pre-emptive rights get first purchase options, unless they’ve waived those rights in writing.
- Conditional Transfers: Check the Articles of Association for limitations or conditions related to the transfer of shares.
The Transfer Process
If the conditions are met, the transfer can proceed with the following steps:
Step 1: Shares are offered to existing shareholders according to their pre-emptive rights.
Step 2: Shareholders with pre-emptive rights must confirm if they wish to purchase shares.
Step 3: Transfer documents are completed with signatures from both parties
Step 4: The completed documentation is submitted to the IRD for official stamping.
Step 5: The stamp duty is paid within the set deadline.
Step 6: Company registers and records are updated to reflect the ownership change.
The transfer of shares comes into effect on the date on the share purchase agreement once it has been signed.
Post-Transfer Tasks
Once the transfer process is complete, there remain several updates that need to be made to reflect the changes, usually handled by the company secretary:
- New share certificates must be issued within 2 months of the transfer to the transferees
- The Register of Members needs to reflect the new ownership structure
- If the transferee joins the board, the Register of Directors also needs to reflect that
- The Significant Controller Register will also need to be updated if company ownership exceeds 25%
- The Companies Registry must be notified in the Annual Returns filing.
- New beneficial owners must notify their bank of their new shares and provide supporting KYC documents such as identification and address proof
Managing Transfer Refusals
Section 151 of the 關聯的文章 gives directors the right to refuse to register transfers. Should a director refuse to transfer, they must provide a notice of refusal within two months of the transfer being lodged, and provide a written statement on request by the other party explaining the reasons for refusal within 28 days.
Non-compliance with this procedure will be met with penalties of:
- HKD 25,000 fine for the company
- HKD 700 daily penalty until compliance is met
Conclusion
Share transfers can get complicated very quickly with more variables involved. Some situations may include:
- Multiple shareholders with varying rights and restrictions
- International ownership structures requiring cross-border compliance
- Regulatory considerations in specialised industries
Participating parties will often be looking out for their own interests, which will naturally lead to friction and disagreements. Having an experienced professional guide you through the transfer process can be the difference between a smooth transfer and an extended headache. If you’ve got more questions about share transfers, drop us a message let’s talk!
