Investments in Offshore Destinations Looking Less Sunny in Light of Hong Kong Redomiciliation Regime

Author: Stefan Schmierer, Managing Partner

The Hong Kong government is expected to introduce a new redomiciliation regime for foreign companies in Hong Kong in early 2024. Following similar legislation which was implemented in Hong Kong in 2021 for open ended funds companies (OFC), Hong Kong is set to extend its redomiciliation regime for general companies, which certainly increases Hong Kong’s incorporation attraction.

Redomiciliation: Moving Your Company Under the Hong Kong Redomiciliation Regime

The concept of “redomiciliation” entails the move of changing the incorporation place of a legal entity from one jurisdiction to another, comparable to moving houses from one place to another, for a natural person.

In the past, the process entailed winding down the business in one jurisdiction (the original jurisdiction), while setting up a new business in another place (the new jurisdiction). However, this was a quite complex exercise, since it would mean that the existing legal entity would need to be closed down and a new entity would need to be set up from scratch.

From a legal point of view, the old entity would need to terminate all its existing contracts (contracts with business partners, employment contracts, etc.), and would need to transfer all its assets (cash, intellectual property, subsidiary companies and other investments, and any other assets) to the newly set up entity. From a business point of view, it would mean that the continuance of the existing business would need to be broken and an entirely new business would need to be started in the new jurisdiction with the new business.

To avoid these obstacles and to guarantee business continuity, jurisdictions introduced the regime of redomiciliation, by which the place of incorporation of an entity can be changed without winding down the existing entity. All contracts can remain unchanged, and the company can continue to hold assets and operate as usual.

Redomiciliation to Find More Favorable Investment Conditions

The main reason shareholders and investors may want to redomicile is that other jurisdictions may offer more favorable investment conditions.

It has been common to incorporate entities in offshore jurisdictions such as the BVI, Cayman Islands, and Seychelles. Since 2019, however, these jurisdictions introduced economic substance requirements, increasing the cost of maintaining such entities. Under the Hong Kong redomiciliation regime, investors may consider switching their place of incorporation to Hong Kong if it offers a more attractive environment.

Applying to the Registrar of Companies to Redomicile to Hong Kong

The new Hong Kong redomiciliation regime will apply to all types of companies under Hong Kong law, including companies limited by shares and guarantee, and private and public unlimited companies with share capital, provided the company existed in its original jurisdiction for at least one year.

Further requirements include shareholder approval by majority decision, good‑faith application, absence of intent to defraud creditors, and solvency for at least 12 months after application.

The application is submitted to the Registrar of Companies in Hong Kong, who will process it.

The applicant must deregister from its original jurisdiction within 60 days, which may depend on the outbound jurisdiction’s local laws. Not all jurisdictions permit redomiciliation, making outbound feasibility checks essential.

It is noteworthy that redomiciliation does not trigger stamp duty in Hong Kong, as no share sale occurs.

Adjustments Required After Redomiciliation

Once redomiciled, the company becomes a local Hong Kong entity and must comply fully with Hong Kong laws. This may require adjustments to Articles of Association, tax reporting practices, and contractual arrangements.

Increasing Hong Kong’s Attraction Through a Straightforward Process

With the new regime, Hong Kong aims to attract international investors seeking to shift or expand their operations.

Unlike Singapore, which imposes an economic substance test limiting eligibility, Hong Kong’s regime welcomes companies of all sizes, enhancing its competitive position.

How Our Company Secretarial Services Can Help

The redomiciliation process can involve challenges both inbound and outbound. Engaging an experienced firm with company secretarial capabilities can assist with jurisdictional exit, compliance alignment, and ongoing administration.

With prior experience under the OFC regime, our team is well positioned to navigate the new Hong Kong redomiciliation regime, balancing compliance with commercial efficiency.

The business environment in Hong Kong offers substantial benefits. With tightened offshore requirements elsewhere, redomiciling to Hong Kong is increasingly attractive.

How Ravenscroft & Schmierer Can Help?

The Hong Kong redomiciliation regime presents significant opportunities for international investors but also requires careful legal and regulatory planning. Ravenscroft & Schmierer advises companies on redomiciliation strategy, inbound structuring, compliance adjustments, and corporate secretarial matters.

If you are considering relocating your company to Hong Kong, contact us to discuss your circumstances and available options.

FAQ: Hong Kong Redomiciliation Regime

What is redomiciliation?

Redomiciliation allows a company to change its place of incorporation without winding up the existing entity.

Which companies can redomicile to Hong Kong?

Companies existing for at least one year in a jurisdiction permitting redomiciliation may apply.

Does redomiciliation trigger stamp duty in Hong Kong?

No. Redomiciliation does not involve share transfers and does not trigger stamp duty.

Does Hong Kong impose an economic substance test for redomiciliation?

No. The Hong Kong regime applies to companies of all sizes without a substance threshold.

How can Ravenscroft & Schmierer assist with redomiciliation to Hong Kong?

Ravenscroft & Schmierer advises on application requirements, corporate restructuring, and ongoing compliance.

Does Ravenscroft & Schmierer assist with outbound deregistration?

Yes. We assist with coordination and legal requirements in outbound jurisdictions.

Can Ravenscroft & Schmierer provide ongoing company secretarial services?

Yes. We offer full company secretarial and compliance support following redomiciliation.

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Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.

For specific advice about your situation, please contact:

Stefan Schmierer 

Managing Partner

+852 2388 3899

sschmierer@rs-lawyers.com.hk