The Hong Kong government has announced that it will make a law to enable non-Hong Kong companies to redomicile in Hong Kong. This will help strengthen the city’s position as a global business and financial hub, enhancing its reputation as an open and competitive economy. Upon redomiciliation, the company’s legal entity, contracts, properties, rights and obligations will remain in effect.
The redomiciliation mechanisms for open-ended fund companies and limited partnership funds introduced in 2021 were a welcome move. Leveraging on such momentum, the government consulted the public on an even wider regime in 2023.
Upon receipt of overwhelming support, the Financial Services and the Treasury Bureau announced, in July 2024, that the government will proceed with the legislation to allow the redomiciliation of non-Hong Kong companies.
Through the redomiciliation, foreign companies already with operations in Hong Kong will no longer have to comply with two different sets of regulations indefinitely.
This regime does not allow outward redomiciliation of Hong Kong-incorporated companies to redomicile to another jurisdiction. Like Australia and Singapore, Hong Kong will only consider an inward regime for now.
Company types
Four types of companies may redomicile to Hong Kong, namely: (1) private companies limited by shares; (2) public companies limited by shares; (3) private unlimited companies with a share capital; and (4) public unlimited companies with a share capital. The companies will not be allowed to change their company type through the re-domiciliation.
Eligibility
There will be no economic substance tests. That essentially means that even small companies can redomicile to Hong Kong. However, the applicants must comply with certain legal, financial integrity and other documentary requirements, such as:
- As of the application date, the applicant’s first financial year end since its incorporation has passed;
- The company type to be applied for redomiciliation is the same or substantially the same as the applicant’s type of company in its original domicile;
- The redomiciled company will not be used for unlawful purpose or purposes contrary to public interest;
- If neither the law of the original domicile nor the application’s constitutional documents require members’ consent, an applicant should obtain such consent by a resolution duly passed by at least 75% of eligible members;
- The applicant is able to pay its debts as they fall due during the 12 months after the application date;
- The applicant is to provide its financial statements as of a date no more than 12 months prior to the application date (and such financial statements are to be audited only if the auditing is legally required in its original domicile);
- The application is made in good faith and not intended to defraud existing creditors of the applicant;
- The applicant is not in liquidation. No receiver or manager is in possession of any of its properties. No compromise or arrangement between it and another person is be administered; and
- A legal opinion of a legal practitioner who practices the law of the original domicile is required to confirm that the proposed redomiciliation is allowed under the law of the original domicile. A legal opinion is also to cover the applicant’s due registration in the original domicile, company type, members’ consent and solvency.
Amendments will be proposed to the Insurance Ordinance (chapter 41 of the Laws of Hong Kong), the Banking Ordinance (chapter 155 of the Laws of Hong Kong), and relevant subsidiary legislation to ensure that insurers and authorised institutions which redomicile to Hong Kong will be regulated and supervised as if they were locally incorporated.
Foreign insurers and financial institutions seeking to redomicile will be required to approach their respective regulators in Hong Kong before making the redomiciliation application, such that assessment of their capacity in fulfilling the Hong Kong regulatory requirements can be conducted in advance.
Effects of redomiciliation
A redomiciled company in Hong Kong will be granted the same rights as any locally incorporated company of the same kind under the Companies Ordinance (chapter 622 of the Laws of Hong Kong) and shall comply with READ FULL ARTICLE
Author: Rossana Chu at YYC Legal LLP