What is an instrument of transfer in Hong Kong

What Is the Instrument of Transfer?

The instrument of transfer is the legal document that effects a share transfer in a Hong Kong company limited by shares. The seller executes this document under the Companies Ordinance (Cap. 622) to pass legal title to the buyer. Present the instrument to the Inland Revenue Department for stamping before the company's directors can approve the transfer and update the register of members. A properly completed instrument of transfer Hong Kong deal will also be accompanied by bought and sold notes, which record the transaction price and parties.

Hong Kong Share Transfer Form

The share transfer form itself is not a statutory form issued by the Companies Registry. Practitioners commonly use a stock transfer form in a standard format, often included in the company's own transfer book. The form must contain the names of the buyer and seller, the number and class of shares, and the consideration. The company's articles of association may prescribe a particular form, though most articles simply require an instrument in writing signed by the transferor.

Stamp Duty Instrument of Transfer Hong Kong

The Inland Revenue Department charges stamp duty on the instrument of transfer at a fixed duty of HK$5 plus ad valorem duty of 0.1% from the buyer and 0.1% from the seller. Duty is calculated on the higher of the consideration stated in the bought and sold notes and the market value of the shares. Stamp the instrument within 30 days of execution or a penalty applies. An unstamped instrument cannot be registered in the company's register of members.

Bought and Sold Notes Hong Kong

Bought and sold notes are the counterpart documents that evidence the transaction. The bought note is issued to the buyer and the sold note to the seller, each stating the number of shares, the price per share and the total consideration. These notes are also presented to the Inland Revenue Department for stamping alongside the instrument of transfer. The notes serve as the primary evidence of the contract for stamp duty assessment.

Share Transfer Document Hong Kong

The share transfer document comprises the instrument of transfer together with the bought and sold notes. Once stamped, the buyer delivers these documents to the company's registered office. The directors then meet to approve the transfer, cancel the old share certificate and issue a new one. The company updates the register of members and files any necessary returns with the Companies Registry, though a share transfer itself does not require a statutory filing unless it triggers a change in significant controllers.