In March, Hong Kong’s Financial Services & the Treasury Bureau FSTB) opened a public consultation on proposed amendments to the Hong Kong Companies Ordinance to introduce an inward company re-domiciliation regime in Hong Kong. The consultation period closed on 31 May and the FSTB plans to submit amending legislation to the Legislative Council in 2023 to 2024.
Hong Kong established re-domiciliation regimes for Open-Ended Fund Companies (OFCs) and Limited Partnership Funds (LPFs) in 2021, but no re-domiciliation regime exists for other types of companies. This means that a company can only change its place of incorporation to Hong Kong either by winding up its original incorporation and establishing a new entity in Hong Kong or by entering into a court-sanctioned scheme of arrangement to become a wholly owned subsidiary of a Hong Kong-incorporated company. Both methods are costly and cause disruption to a company’s operations.
The proposed regime would allow non-Hong Kong companies to change their place of incorporation to Hong Kong while preserving their legal status as body corporates, their property, rights, obligations, liabilities and contracts.
The Registrar of Companies will administer the proposed regime and approve applications for company re-domiciliation based on the following factors:
- Whether the type of Hong Kong company that the applicant company is seeking to re-domicile – i.e., private company limited by shares, public company limited by shares, company limited by guarantee with a share capital, 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 company type in its place of incorporation.
- Whether the applicant company has complied with the legal requirements of its jurisdiction of incorporation for the transfer of its incorporation.
- Whether, at the date of the re-domiciliation application, the applicant company’s first financial year end in its place of incorporation has passed.
- Whether the applicant company will comply with the naming requirements for the incorporation of a local company under the Hong Kong Companies Ordinance.
- 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, which included notice of the resolution to approve the transfer of incorporation.
- Whether the applicant company can pay its debts as they fall due in the 12 months after the application date.
The FSTB said it did not intend to impose an economic substance test on applicant companies. The Inland Revenue Department will be empowered to address transitional tax matters such as fair deduction for trading stock, bad debts, impairment losses on financial assets and depreciation.
Once an application is approved, the applicant company must provide the Registrar of Companies with evidence of its de-registration in its place of incorporation within 60 days of its registration in Hong Kong. Failure to do so will result in the revocation of the application and the termination of the re-domiciliation process.
Once re-domiciled, the company will have the same rights and obligations as other locally incorporated companies of its type and will need to comply with the relevant Companies Ordinance provisions. If the company needs to be licensed to conduct certain businesses in Hong Kong, it will need to apply for the relevant licences separately.
Applicant companies who are already registered with the Companies Registry as registered non–Hong Kong companies will cease to be registered as such once they have been granted their certificate of re-domiciliation.