The Hong Kong government, via its Financial Services and the Treasury Bureau, has consulted on a proposed regime for non-Hong Kong incorporated companies to re-domicile in Hong Kong. The objective is to facilitate company re-domiciliation to Hong Kong, thus strengthening Hong Kong’s status as an international finance and business hub. The legislation of the new regime is expected to take place from 2023 to 2024.
Unlike other jurisdictions like Singapore, Canada and New Zealand, Hong Kong currently does not allow re-domiciliation.
If a foreign company wishes to move its identity and business to Hong Kong, a new Hong Kong company must be set up to take over its business. This process is cumbersome and can result in substantial taxes and/or costs as well as disruption to operations and corporate history.
The government’s proposal would now allow non-Hong Kong companies to change their place of incorporation to Hong Kong while preserving their legal status as body corporates, their properties, rights, obligations, liabilities and contracts. This proposal would offer companies maximum business continuity while reducing administrative complexity and costs in the process.
The proposed regime imposes no economic substance test of thresholds of assets, revenue or employee numbers. The Registrar of Companies will be empowered to consider and approve applications based on factors that include:
- Whether the type of Hong Kong company (private company limited by shares, public company limited by shares, company limited by guarantee, private unlimited company with a share capital, or a public unlimited company with a share capital) is the same or substantially the same as the applicant’s type of company in its original place of incorporation.
- Whether the applicant has complied with the legal requirements of its jurisdiction of incorporation for the transfer of incorporation in Hong Kong.
- Whether (at the application date) the applicant’s first financial year end has passed in its place of incorporation.
- Whether the applicant will comply with the naming requirements for the incorporation of a Hong Kong company under the Hong Kong Companies Ordinance.
- That the applicant will not be used for an unlawful purpose, contrary to public interest or endangering national security.
- That the re-domiciliation application is made in good faith and not intended to defraud existing creditors of the applicant.
- Whether a resolution for the transfer of incorporation has been approved by at least 75% of the votes cast by entitled members at a meeting of which members were given at least 21 days’ notice, if the applicant’s original place of incorporation does not include members’ consent to the transfer.
- Whether the applicant can pay its debts as they fall due in the 12 months after the application date.
- That the applicant is not in liquidation or being wound up, and no proceeding for liquidation or winding up against the applicant is ongoing or pending.
- No receiver, or receiver and manager, is in possession of or has control over any property of the applicant, and no relevant proceeding is ongoing or pending.
- No compromise or arrangement made between the applicant and any entity/person is being administered and no relevant proceeding is ongoing or pending.
Once re-domiciled, the company will have the same rights and obligations as other Hong Kong incorporated companies of its type, and will need to comply with the Companies Ordinance. Its corporation information will be available for public inspection. If the company needs a particular licence to conduct its businesses in Hong Kong, it will need to separately apply for the licence.
Applicant companies that were registered with the Companies Registry of Hong Kong as non-Hong Kong companies will cease to be so when they are granted their certificate of re-domiciliation.
It is proposed companies must provide the Registrar of Companies with evidence of their de-registration in their original place of incorporation within 60 days of their re-domiciliation to Hong Kong. Failure to do so will result in the revocation of the application and the termination of the re-domiciliation.
However, market practitioners consider that 60 days will be too short. The de-registration process in the original jurisdictions may involve public notices and/or court procedures (for protection of members and creditors) as well as tax clearance, and may take much longer than 60 days.
It is also hoped that the regime will, instead of terminating the re-domiciliation right after the expiry of the required de-registration period, provide flexibility for the Registrar of Companies to extend this de-registration period if justifiable grounds are given.
The de-registration process in the original jurisdictions may be beyond the applicants’ control. Also, some applicants may need to open bank accounts in Hong Kong before they may start de-registration in their original jurisdictions.
Industries have reflected that non-Hong Kong incorporated companies, especially enterprises with business operations in Hong Kong and those hoping to leverage on Hong Kong’s geographic and economic advantage to expand their business are interested in re-domiciling to Hong Kong. As a response to such market demands, a company re-domiciliation regime with a straightforward application process is a welcome initiative.
Note: This material has been prepared for general information purposes only and is not intended to be relied upon as professional advice for any cases. Should you need further information or legal advice, please contact us.