Innovative redomiciliation framework for foreign companies in Hong Kong

This publication delves into the core attributes of this framework, offering valuable insights for entrepreneurs contemplating the international redomiciliation of their businesses.

Comprehending Company Redomiciliation

This process empowers foreign companies to shift their place of incorporation to Hong Kong without necessitating the dissolution of their original entities. This flexibility holds immense value and can be motivated by various factors. For example, the need to adapt to evolving regional legal prerequisites, expand into new markets and client bases, mitigate economic or legal risks in the current jurisdiction, leverage tax incentives, or simply as a matter of corporate preference.

Hong Kong has long been a preferred destination for foreign enterprises due to its advantageous tax environment, attractive returns on capital, and a regulatory framework conducive to business growth. The introduction of a redomiciliation framework for foreign companies in Hong Kong is poised to further enhance its appeal.

Introduction of the Internal Re-registration Framework in Hong Kong

As previously mentioned, the Hong Kong government is actively contemplating the implementation of a comprehensive regime known as domestic re-registration, which would facilitate the relocation of foreign companies to Hong Kong. Redomiciliation allows companies to seamlessly transition while preserving their assets, contractual commitments, and business relationships across borders. This initiative follows the introduction of the fund redomiciliation regime in Hong Kong in 2021.

For fund managers seeking to expand their reach into Chinese markets or enhance international competitiveness, fund redomiciliation to Hong Kong can be a strategic move.

Redomiciliation or re-registration of a foreign company in Hong Kong is a process that allows overseas entities to alter their legal status and become Hong Kong-based entities. However, redomiciliation may necessitate adherence to specific formalities in accordance with Hong Kong law. Key conditions for redomiciliation in Hong Kong include the foreign company's possession of valid registration and legal documentation in its country of origin and the provision of evidence of financial stability.

The Right to Redomiciliation in Hong Kong under the New Framework

Hong Kong's recently introduced re-registration framework for foreign companies extends to various corporate forms regulated by the national Companies Ordinance. Detailed requirements and criteria for foreign firms to qualify for participation are outlined below.

1. General terms:
   1. The companies of all corporate forms (LLC/Ltd, CLG, JSC/PLC, and unlimited) must hold legal registration in their countries of origin and possess all necessary documents, permits, and licenses. Its activities in the jurisdiction of relocation must also comply with local laws.
   2. Redomiciliation mandates that the company maintains the same or a similar corporate structure as in its original jurisdiction.
   3. The company must have been in operation for a minimum of one year at the time of applying for business re-registration in Hong Kong.
2. Transparency of company activities:
   1. Transitioning a business to Hong Kong requires full compliance with all domestic laws and regulations governing its operations. The company must also conduct itself in a manner consistent with public interest and national security.
3. Participant protection:
   1. If the legal requirements of the original jurisdiction do not include consent to the transfer of the legal entity by the company's participants, then such a transfer may proceed under the following conditions:
      1. Approval by at least 75% of the voting members for the move to Hong Kong.
      2. Participants must receive due notice of the upcoming meeting regarding redomiciliation, provided at least 21 days in advance.
4. Solvency:
   1. To relocate a business to another country, a foreign company must meet the following solvency criteria:
      1. Demonstrated financial capacity to meet its debts when due, typically within 12 months.
      2. Not undergoing liquidation.
      3. No circumstance where one manager lacks ownership or control over the company's assets.
      4. Absence of active agreements with other parties.

For expert guidance and comprehensive support in the redomiciliation of companies to Hong Kong, do not hesitate to contact YB Case specialists. We are dedicated to assisting you in selecting the optimal solution for business immigration and navigating the intricacies of the redomiciliation process to Hong Kong.

Application Procedure under the Redomiciliation Framework for Foreign Corporations in Hong Kong

Under the Redomiciliation Framework for Foreign Corporations in Hong Kong, the application process is carefully overseen by the Registrar of Companies. To commence the redomiciliation process to Hong Kong, the company is required to prepare the following documents and certified copies to complete the application form.

• Certificate of Registration: Include a certified copy of the certificate of registration issued in the original jurisdiction where the company was initially incorporated. This establishes the company's legal existence in its home country.
• Articles of Incorporation: Provide certified copies of both the Articles of Incorporation from the original jurisdiction of incorporation and the new Articles of Incorporation intended for use in Hong Kong. This demonstrates the legal framework under which the company operates.
• Detailed Business Plan: This comprehensive document should encompass in-depth information about the company's operations, strategies, objectives, and financial projections. It serves as a critical tool for local authorities to assess the solvency and potential of the business.
• Latest Audited Financial Statements: Append the most recently audited financial statements of the company to the application. This financial information offers insights into the company's financial health.
• Decision by Participants: Provide a certified copy of the decision ratified by the participants, affirming their consensus on the re-registration of the company in Hong Kong.
• Director's Statement confirming that all prerequisites for the redomiciliation of the company in Hong Kong have been diligently fulfilled in accordance with the relevant Ordinance, as of the date of re-registration.
• Proof of Redomiciliation Fees: Ensure the inclusion of evidence demonstrating the payment of the redomiciliation fees, which encompass the necessary government charges. This step finalizes the administrative requirements.

This thorough documentation is integral to the redomiciliation process, ensuring compliance with Hong Kong's legal requirements and facilitating a seamless transition for the foreign corporation. Upon successful evaluation and approval, the company will acquire a new legal entity status in Hong Kong.

It is essential to note that this framework positions Hong Kong as an attractive destination for multinational corporations seeking to maintain their existing corporate identity and benefit from the advantages that Hong Kong offers. For example, a stable economy, a well-established financial system, tax incentives, and access to the dynamic Chinese market.

Stakeholders were provided with the opportunity to submit written comments to the regulator until May 13, 2023. The anticipated implementation of the new framework is set between 2023 and 2024. For comprehensive guidance on navigating these upcoming legislative changes and the redomiciliation process in Hong Kong, consider seeking advice from YB Case specialists. They are dedicated to assisting you in this endeavor.