Merger and Acquisition of Hong Kong Companies

Some mainland Chinese companies have completed the establishment of overseas structures, with Hong Kong companies as parent holding company, while their mainland businesses actually operated by the subsidiaries in mainland China.  If a client plans to transfer its Mainland company and business, he/ she may transfer the shares of its Hong Kong parent holding company to other parties.

Common benefits for acquiring the shares of the HK parent company for acquiring the business of its subsidiary:

 

  1. The transfer is convenient;

  2. If there is no change in the shareholders of the subsidiary, the number of administrative procedures of the mainland can be substantially reduced; and

  3. Transfer of shares in Hong Kong companies only needs to pay stamp duty in Hong Kong.

Issues to be considered for M & A of a Hong Kong company include:

 

  1. Whether there are restrictions on the transfer of shares, such as the right of first refusal, in the articles of association of the target company.

  2. Whether there is a shareholder agreement between the target company and the original company for which the shares of the company cannot be transferred during the agreed period.

  3. Scope of the M&A: If any of the buyer or the seller does not want to include some of the business of the target company, the seller may need to consider restructuring the target company before the share transfer, and separate the business that is not to be acquired from the target company.

In general, the M & A process of Hong Kong companies is as follows:

 

  1. The buyer, the seller and the target company sign a non-disclosure agreement (NDA);

  2. Drafting a share transfer agreement, which shall be executed by the buyer and the seller;

  3. Conduct a comprehensive due diligence and valuation of the target company; and

  4. Settlement of the shares.

 

  • Generally, the settlement includes: 

          (a)  Satisfaction of the settlement condition;

          (b)  Execution of related documents (such as tax-paid contribution agreement, Instrument of Transfer);

          (c)  Hong Kong stamp duty related procedures;

          (d)  The board of directors has resolved to transfer the shares, register new shareholders to the register of                   shareholders, and appoint new shareholders to designate board members; and

          (e)  Buyer has paid the consideration.

Our specialties: 

With our comprehensive approach, we provide legal advice at all levels:

  • M&A between domestic small private companies;

  • M&A between large corporation;

  • M&A involved listed companies;

  • Cross-broader M&A

With a view to achieving win-win results from successful M&As, we also advise our clients on various angles, by assisting them in: 

  • Pre-M&A planning; 

  • Company/Corporate restructuring;

  • Legal due diligence;

  • Drafting non-disclosure agreement, shareholders' agreement, sales and purchase agreement, etc;

  • Satisfying the relevant compliance requirements under the Companies Ordinance, the Listing Rules and the Hong Kong Takeovers Code

Our experienced legal team will guide our clients to complete legal due diligence for M&A and to satisfy the relevant compliance requirements under the Companies Ordinance, the listing rules and the Hong Kong Takeovers Code and we strive to bring favourable results with engaging manner and pleasant personality. 

Disclaimer: The contents above are for reference only, and we do not take any responsibility for its accuracy. The latest laws and regulations of respective governments, regulatory and professional bodies shall prevail.

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