Consultation for a new re-domiciliation regime for non-Hong Kong companies20Jun2023
The Financial Services and the Treasury Bureau (“FSTB”) published a public consultation in March 2023 on proposals relating to the introduction of a new company re-domiciliation regime in Hong Kong (“New Regime”). The New Regime follows the Hong Kong government’s earlier regime to implement user-friendly fund re-domiciliation mechanisms for Open-Ended Fund Companies and Limited Partnership Funds in November 2021. The consultation period for the public to provide responses to the FSTB has ended on 31 May 2023
Current status and the new re-domiciliation regime
Since there is currently no re-domiciliation regime in Hong Kong, a non-Hong Kong company seeking to change its place of domicile to Hong Kong would either need to:
- wind up its original incorporation and incorporate a new entity in Hong Kong, which would result in significant costs and disruptions to its existing business and assets; or
- enter into a court-sanctioned scheme of arrangement to convert into a wholly-owned subsidiary of a Hong Kong company with the consent of the shareholders and other stakeholders pursuant to the statutorily-prescribed threshold, which would involve significant costs and extensive procedures driven by the court. Further, even upon completing the conversion procedures, the company may still be subject to certain regulations of its original jurisdiction.
As comparable common law jurisdictions such as New Zealand and Singapore already have re-domiciliation mechanisms in place, the FSTB proposes implementing the New Regime to install user-friendly mechanisms for non-Hong Kong companies to re-domicile to Hong Kong to help Hong Kong stay competitive internationally.
The New Regime will operate on the basis that the property, rights, obligations and liabilities, as well as the relevant contractual and legal processes of the transferring non-Hong Kong company would not be affected. The re-domiciliation process should also not affect the transferring company’s tax obligations in its original jurisdiction.
FSTB proposes that the New Regime be introduced by amending the Companies Ordinance (Cap. 622) (“CO”). We summarise the proposed amendments as follows.
Eligibility for re-domiciliation
The Registrar of Companies will administer and approve applications for re-domiciliation. The FSTB proposes the following criteria for a non-Hong Kong company (“Applicant”) to apply for re-domiciliation under the new regime:
|General||The Applicant is one of the following types of companies or a type that is substantially the same as one of the following types in its original jurisdiction: Private companies limited by shares; Public companies limited by shares. Companies limited by guarantee without a share capital. Private unlimited companies with a share capital; and Public unlimited companies with a share capital. The Applicant has complied with the requirements (if any) of the law of its original jurisdiction in relation to the transfer of its incorporation; and As at the date of application for re-domiciliation (“Application Date”), the Applicant’s first financial year end at its original jurisdiction has passed.|
|Integrity||The Applicant shall comply with all the requirements under the CO in respect of the incorporation of a local company. The Applicant will not be used for an unlawful purpose, contrary to the public interest or endangering national security.|
|Member and creditor protection||The application for re-domiciliation is made in good faith and not intended to defraud existing creditors of the Applicant. If the requirements of the Applicant’s original jurisdiction do not include consent to the re-domiciliation by the members of the Applicant, the members (i) have consented to the transfer by a resolution that has been passed by at least 75% of the votes cast by members entitled to vote on the resolution; and (ii) were given at least 21 days’ notice of the meeting and the proposed resolution.|
|Solvency||The Applicant is able to pay its debts as they fall due during the period of 12 months after the Application Date. 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 other persons is being administered and no relevant proceeding is ongoing or pending.|
|Others||The Registrar of Companies may also impose other conditions on the Applicant depending on the circumstances of each individual case.|
No economic substance test is intended to be introduced for the New Regime in Hong Kong.
The following documents should be submitted to the Registrar of Companies along with the payment of the application fee:
- The completed application form which shall include, among other things, the original jurisdiction of the Applicant and the proposed name of the Applicant in Hong Kong;
- Certified copy of the certificate of incorporation (or a document of similar effect) of the Applicant;
- Certified copy of the charter, statute, constitution or memorandum or articles of the Applicant in its original jurisdiction;
- A copy of the articles of association that the Applicant proposes to adopt;
- The latest audited financial statements of the Applicant as at a date no more than three months prior to the Application Date;
- Certified copy of the special resolution authorising the re-domiciliation;
- Statements and Consents to Act signed by each of the proposed directors of the Applicant;
- Statement or certificate issued by the directors confirming that all the requirements for registration in respect of the re-domiciliation of the Applicant under the CO will, on the re-domiciliation date, be met in relation to the Applicant;
- Statement or certificate issued by the directors confirming that the Applicant has complied with the requirements of the law in its original jurisdiction in relation to the re-domiciliation;
- Statement or certificate issued by the directors that as soon as practicable after the re-domiciliation date of the Applicant, the Applicant, which has become a re-domiciled company, must take all reasonable steps to procure its deregistration in its original jurisdiction; and
- Notice to Business Registration Office and the prescribed business registration fee and levy.
Upon successful application, the Applicant will be registered in the Companies Register maintained by the Companies Registry. The Registrar of Companies will issue a certificate of re-domiciliation, upon which the Applicant will be required to notify and provide evidence to the Registrar of Companies of its de-registration in its original jurisdiction within 60 days. If such documents required to be submitted to the Companies Registry are not English or Chinese, certified translations are necessary.
The introduction of a streamlined company re-domiciliation regime will be an important step to strengthen Hong Kong’s status as an international business hub and allow Hong Kong to remain competitive with other common law jurisdictions. The FSTB envisions to introduce and develop the amendment bill for submission to the Legislative Council in 2023/2024.
Eddie Look and John Lee
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Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.