BACKGROUND
Currently, there are re-domiciliation mechanisms in Hong Kong available for overseas funds, but no straightforward method is available for overseas companies to re-domicile to Hong Kong. Existing company re-domiciliation methods are generally costly and disruptive to business operations: overseas companies must either wind up in their original domicile and incorporate a new entity in Hong Kong, or engage in a court-sanctioned scheme of arrangement to convert into a wholly-owned subsidiary of a Hong Kong incorporated company.
To attract foreign enterprises and investment to Hong Kong, the Financial Services and the Treasury Bureau issued a “Consultation Conclusion and Legislative Proposals” on 3 July 2024 proposing a new inward re-domiciliation regime to facilitate the re-domiciliation of overseas companies to Hong Kong (“Proposed Regime”). While no precise timeframe has been confirmed regarding its enactment, the relevant legislative amendment bill has already been introduced to the Legislative Council of Hong Kong.
We set out below the key features of the Proposed Regime:
1. LEGAL EFFECT OF THE PROPOSED REGIME
Upon re-domiciliation:
the company will retain its legal identity, with no new legal entity created;
its pre-existing property, rights, obligations and liabilities, contractual and legal processes will not be affected, ensuring business continuity; and
it will be treated as having the same rights as any other locally incorporated company of its kind and will be required to comply with relevant requirements under the Companies Ordinance (Cap. 622 of the Laws of Hong Kong) (“CO”).
2. ELIGIBILITY CRITERIA
The proposed requirements for a company applying for re-domiciliation to Hong Kong are summarized as follows:
the law of its original domicile permits outward re-domiciliation, and the applicant has complied with the requirements of such laws;
the company type of the applicant under the law of its original domicile is the same or substantially the same as that of the re-domiciled company under the CO;
as of the date of application, the applicant’s first financial year end since its incorporation has passed;
the applicant should obtain members' consent under the law of its original domicile or its constitutional documents. If the law of its original domicile or its constitutional documents does not require members' consent, a certified copy of a resolution duly passed by at least 75% of the eligible members will be accepted;
the applicant shall prove its solvency by providing its financial statements as of a date no more than 12 months before the application date, together with a legal opinion issued under the law of its original domicile. The financial statements need to be audited only if mandated by the original domicile's laws;
the applicant shall demonstrate compliance with the laws of its original domicile by providing a legal opinion from a legal practitioner who practises the law of the original domicile, stating that the proposed re-domiciliation is permitted under such law; and
if the applicant is an insurer or Authorized Institution (“AI”), it should be capable of fulfilling the regulatory requirements applicable to Hong Kong incorporated insurers and AIs, as assessed by the respective regulators in Hong Kong.
3. PROPOSED APPLICATION PROCESS
The applicant should submit an application to the Registrar of Companies with the required documents and application fee. If the company’s operations in Hong Kong would require licence(s), it should also apply for such licence(s).
The Registrar of Companies would generally take two weeks to process an application. Upon successful application, the company will be registered in the Companies Register in Hong Kong, and receive a certificate of re-domiciliation issued by the Registrar of Companies.
After the certificate has been issued, the applicant would be required to notify the Registrar of Companies and provide evidence of de-registration in its original place of incorporation within 120 days (which may be extended on application, subject to any conditions considered appropriate by the Registrar of Companies). This is a crucial step to completing the process, failing which will result in the revocation of the applicant's company registration in Hong Kong and termination of the re-domiciliation process.
4. PROPOSED TAX IMPLICATIONS
Proposed treatment of the company’s tax obligations under the Proposed Regime is highlighted as follows:
to eliminate double taxation, unilateral tax credits may be provided for re-domiciled companies in respect of the tax payable on actual profits derived in Hong Kong after re-domiciliation where similar profits have been taxed in an unrealized form by the original domicile upon exit;
the re-domiciliation process is not expected to impact the profits tax liabilities of a re-domiciled company, as a company is charged with profits tax on its profits arising in or derived from Hong Kong from a trade, profession or business carried on in Hong Kong regardless of its domicile or residency; and
subject to the point above, no stamp duty liability would arise from the process of re-domiciliation, as no transfer of company assets or change in the beneficial ownership of a company’s assets is involved.
5. LEGISLATIVE TIMELINE
At the current stage, the relevant legislative amendment bill, the Companies (Amendment) (No. 2) Bill 2024 (“Bill”), has been introduced to the Legislative Council for first reading on 8 January 2025, where the exact enactment date has yet to be confirmed. As the Bill is subject to further readings, potential amendments and ultimately the passing of the relevant legislative amendment bills by the Legislative Council of Hong Kong to become law, the final details of the Proposed Regime may differ from those currently proposed and set out above. Stakeholders are advised to monitor developments closely for the legislative status and terms of the Proposed Regime.
Remarks: The information provided in this statement does not, and is not intended to, constitute legal advice.
About the authors
Principal Partner and founder of the firm
B.Sc. (Hon.), LL.B. (Hon.), LL.M.
Adrian was officially qualified as a lawyer in Hong Kong in 1995 and qualified as a lawyer in England and Wales in 1997.
Mr. Lau served as a securities industry regulator at the Securities and Futures Commission of Hong Kong.
Adrian has in-depth knowledge and extensive experience in handling complicated matters in practice areas like Corporate and Commercial, Banking and Finance, Employment, Intellectual Property, Compliance and Regulatory and China-related matters.
Partner
Grace (LL.B. (Hon.)) is a Partner of our Firm. Grace graduated from the University of Hong Kong with a Bachelor Degree in Laws and obtained her Postgraduate Certificate in Laws (Distinction) at the same university. Grace is dually-qualified
as a solicitor in Hong Kong since 2019 and in England and Wales.
Grace specialises in corporate and commercial law, with a focus on M&A transactions, financing, regulatory compliance, and corporate governance. Grace also brings on board expertise in banking, employment, insolvency, and intellectual property matters.