Hong Kong: Company Re-domiciliation Regime
The Financial Services and the Treasury Bureau (FSTB) recently released the public consultation conclusion and latest legislative proposals for the company re-domiciliation regime (the “Proposed Regime”) in Hong Kong. The Proposed Regime aims to elevate Hong Kong’s standing as a global financial and commercial centre by providing a straightforward and accessible route for overseas-domiciled companies to re-domicile to the city.
1. Overview of Policy Framework
The Proposed Regime is designed to preserve the corporate identity and operational continuity of non-Hong Kong companies re-domiciling to Hong Kong. The re-domiciliation process will not affect the existing legal identity, property, rights, obligations and liabilities, and the relevant contractual and legal processes of the companies. To facilitate seamless transition, companies are prohibited from changing their company type during the re-domiciliation application.
In light of the existing market demand and after considering the practises in other jurisdictions, the FSTB has determined that the appropriate approach at this phase would be to prioritize the introduction of an inward re-domiciliation regime rather than a two-way regime. This strategy aligns with the primary objective of the Proposed Regime which is to increase Hong Kong’s competitiveness and appeal as a destination for enterprises and investment.
2. Eligibility Criteria and Application
Reduced types of eligible companies – The FSTB has refined the scope of the Proposed Regime by streamlining the types of eligible companies from five to four categories: (i) private companies limited by shares; (ii) public companies limited by shares; (iii) private unlimited companies with a share capital; and (iv) public unlimited companies with a share capital.
Simplified requirements on members’ consent– Companies applying for re-domiciliation must obtain the consent of their members in accordance with the laws of their original domicile. If the laws of the company’s original domicile do not mandate members’ consent, a certified copy of a resolution passed by at least 75% of eligible members will be accepted.
Extension of deregistration period – The time required for deregistration in the company’s original domicile upon issuance of the certificate of re-domiciliation will be extended from the original proposed period of 60 days to 120 days. Re-domiciled companies may apply for a further extension, if necessary.
Relaxed requirements on proof of solvency- The original requirement is that companies shall submit their latest audited financial statements as at a date no more than 3 months prior to the application date. Under the Proposed Regime, companies may now submit financial statements no more than 12 months prior to the application date. The financial statements are only required to be audited if it is required under the laws or regulations in the company’s original domicile.
Additional requirement on provision of legal opinion – To ensure the company’s compliance with the laws in its original domicile, the company is required to submit a legal opinion of a legal practitioner who practises the law of the original domicile confirming that the proposed re-domiciliation is allowed under the relevant laws. The company must also submit a legal opinion confirming that the company is duly registered and validly subsisting in the original domicile and that the company is not in liquidation.
3. Tax Implications
Unilateral Tax Credits to eliminate double taxation – The FSTB has introduced unilateral tax credits for re-domiciled companies which allow them to offset the tax paid in their original domicile against the taxes on the same profits derived in Hong Kong.
No Stamp Duty – No stamp duty liabilities will arise from the re-domiciliation process as there are no transfer or change in the beneficial ownership of a company’s assets.
Tax residency – As a company is charged to profits tax in Hong Kong regardless of its domicile or residency, the FSTB considers it unnecessary to clarify the tax residency of a re-domiciled company.
As the legislative process progresses, we will continue to monitor and provide updates on the developments of the draft amendment bill in Hong Kong.
China: Disclosure of Beneficial Owner Information
The People’s Bank of China (PBOC) and the State Administration for Market Regulation (SAMR) jointly issued the Measures for the Administration of Beneficial Owner's Information (the "Measures") earlier this year, which will take effect from November 1, 2024 (the “Effective Date”). The Measures aim to increase market transparency, enhance due diligence measures, strengthen anti-corruption and anti-money laundering efforts and combat illicit financial activities.
1. Scope of Applicability of Measures
The Measures mandate that all companies, partnerships, branches of foreign companies and other entities specified by the PBOC or SAMR (collectively the “Reporting Entities”) in China must disclose information about their beneficial owners (e.g. name, gender, nationality, date of birth, residential address or work address, contact details, type of beneficial ownership relationship, ratio of equity etc.) through the registration system.
However, market entities are exempted from the filing obligation if they (i) have a registered capital of less than RMB 10 million; and (ii) whose shareholders or partners are all natural persons, and (iii) no natural person other than its shareholder or partner exercising actual control or beneficial ownership over it. These entities shall submit an undertaking proving that it meets the aforesaid requirements to avail itself of the exemption.
2. Definition of a “Beneficial Owner”
A natural person shall be considered as a beneficial owner of the Reporting Entities if they meet either one of the following criteria:
1. ultimately owns, directly or indirectly, 25% or more of the equity interest, shares, or partnership interest of the entity;
2. ultimately entitled to 25% or more of the income or voting rights in the entity; or
3. exercise actual control over the daily operations and management of the entity, either individually or jointly with others.
3. Reporting timeline
For Reporting Entities established on or after the Effective Date, they shall report its beneficial ownership information within 30 days after the registration of establishment.
For Reporting Entities established before the Effective Date, they shall report its beneficial ownership information before the end of the one-year grace period, i.e. by November 1, 2025.
4. Consequences of breach of obligation
If Reporting Entities fail to comply with the filing obligations or if there is any inaccurate information reported, the Reporting Entities will be ordered to make corrections by a prescribed time and if the Reporting Entities refuse to do so, they will be imposed a fine of not more than RMB50,000.
The implementation of the Measures in China represents a significant shift in corporate compliance. To better prepare for this new regime, entities shall equip themselves for gathering necessary beneficial ownership information and establishing robust reporting systems to ensure compliance of the filing obligations. We will update in case there are any forthcoming guidelines issued by the PBOC and SAMR to aid entities.
About Us
Vivien Chan & Co. is a full-service law practice with offices in Hong Kong (1985) and Beijing (1993). We are consistently recognized as a premier law firm for and in Greater China. With over 35 years of doing business in Greater China, our Hong Kong and China teams have an in-depth understanding and knowledge of the legal culture and market dynamics.
Our long established licensed law offices in Greater China have allowed us to develop deep local roots and an integrated global perspective necessary to help domestic businesses and multinational companies alike seamlessly manage even the most complex local and cross border transactions.
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