According to the Hong Kong Companies Ordinance (Chapter 32), s.29 provides that, all Hong Kong private limited companies must include in their articles, a provision regarding the restriction on transfer of its shares. But in the Companies Ordinance, there is no specific way of share transfer restrictions, the most common ways of restriction limits are as follows: -
(1) All transfers of shares must be pre-approved by the Board.
(2) With pre-emptive rights provisions, shares must first be offered to existing shareholders.
If the articles of association are in form of Table A, the restriction is that: Directors may, in its absolute discretion and without assigning any reasons therefore, refuse to register any transfer of shares irrespective of whether the share is fully paid up or not.
Share transfer process
1. Make sure that any pre-emptive rights that have been satisfied or waived.
2. Arrange the "Share Transfer Form" to be signed by both the transferor (seller) and the
transferee (buyer).
3. Present the Shares Transfer Form and the underlying share(s) to the company, and
wait for the Board of Directors’ approval on the share transfer.
4. Arrange the "Share Transfer Form" and "Sale Agreement" for stamping.
5. Upon the transfer shares stamped and the buyers’ particulars to be confirmed for
registration into the Company’s Registers. It can prove to be the company's
shareholders.
Stamp duty
Each "Share Transfer Form" requires for a stamp duty fee of HK $ 5, while for the "Sale Agreement", you need to pay a consideration or the sale of shares at a rate of 0.2% on its net asset value, whichever is higher.
In order to calculate the net asset value of the transfer shares, the IRD assessor may require you to submit the following documents: -
(1) the company's audited report - its own audited report and its subsidiaries.
(2) The company itself and its subsidiaries, a certified copy of the management
accounts.
(3) The company / subsidiary owns property, the information to be furnished in
the form IRSD102.
(4) Shares Sale Agreement (If there is no such agreement, a written confirmation
to be provided by the seller / buyer).
(5) The Company’s Memorandum of Association and Articles of Association.
(6) Any dividend payment resolutions.
In our experience, for the purpose of providing these documents to the IRD, a number of ineligible agents may request the director to sign a declaration to the IRD stating that the company has never conducted any business and does not hold any assets or subsidiaries. However, if the IRD eventually find that the director intentionally made a false statement by declaring, the company shall be criminally liable for it. So please be careful when choosing your agent.
Prohibit companies from acquisition though its own shares funding
According to s. 47A of the Hong Kong Companies Ordinance, it prohibits that all Hong Kong companies provide any financial arrangements and funding for the purpose of acquiring the company's shares. The Ordinance provides follows:-
(1) When any person being carried out acquisitions or is proposing to acquire
shares in a company, during the acquisition, before or at the time, the
company or any of its subsidiaries should not directly or indirectly provide
any financial assistance on this matter.
(2) Where a person has acquired shares in a company and for the purpose
of acquisition (the person or any other person), incurs any debt, the public
company or any of its subsidiaries are not available to reduce or relieve
the debt so incurred directly or indirectly to give financial assistance.
(3) Any company which contravenes this section is liable for fine and each
default shall be liable for imprisonment or a fine.