Usually, acquiring businesses in HK SAR requires concluding a contract for the sale of a company or assets. Non-public companies can also be purchased through signing an agreement, provided it is done according to the provisions of Hong Kong’s Company Act.
Next, we will analyze the basic rules for purchasing businesses in HK SAR.
How M&A Deals are Regulated in Hong Kong
Despite the fact that most M&A deals in HK SAR are governed by the laws of this jurisdiction, there’s no strict requirement for that. What this means is that signing an M&A deal in Hong Kong may be regulated by rules & regulations of foreign states, too. M&A deals concluded in HK SAR may sometimes be subject to Chinese law as well. Such contracts are usually associated with assets located in the PRC, although they can belong to Hong Kong-based individuals, companies or parties to the transaction located in the PRC.
Acquiring a Company in HK SAR: Submitting an Application to Regulatory Authorities
The transferring of the shares of Hong Kong-registered companies requires submitting no specific application to the local Company Register. However, if the transfer of shares of a company registered in Hong Kong occurs prior to submitting an annual income statement to the local Company Register, the declaration must be submitted after an M&A deal is concluded. Once the declaration is submitted, any changes occuring during subsequent transactions should be reflected in the subsequent annual declarations.
Selling land & property in HK SAR requires having an act or other documents registered in the local land registry. The laws of the jurisdiction set no specific deadlines for the registration process; however, untimely notification of relevant authorities may lead to priority being lost during registration. If one month has passed after the registration of a document, its priority is kept back to the registration date; if not, it will only be taken into account starting from the registration date. A registration fee may vary depending on a transaction.
Concluding M&A Deals Involving Several Shareholders in HK SAR
Normally, the buyer prefers that all parties involved sign an M&A contract; however, the local Company Law may require shareholders with a minority stake to sell it. Provisions like these are usually contained in a company's shareholder agreement or charter.
Under the Company Act, buyers offering to acquire ninety percent of a company’s shares can forcefully acquire the remainder of the shares.
If a company to be acquired is a PLC, the M&A Code shall also be applicable to the mandatory acquisition process, irrespective of whether the company is registered in Hong Kong or other jurisdiction. When determining if a company can be regarded as a PLC is the main factor to be taken into account is the number of its shareholders in HK SAR.
Whether an M&A deal will be a success is pivotal on many factors, including the number of participants & the complexity of a company’s structure. And that wraps up our analysis of the key legal aspects involved in regulation of M&A transactions in HK SAR.
Need more information on Hong Kong’s M&A regulation? Our legal professionals will be happy to provide you with a consultation on the sale of a company in Hong Kong.