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The Three Instruments of Peace Simplified

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Similar to other major advanced metropolitan areas, Hong Kong is facing an aging population. As of 2021, the median age of Hong Kong’s population was 46.31. According to the Census and Statistics Department’s population projection, the percentage of elderly persons aged 65 and above in the population will gradually increase from 20.8% in mid-2022 to 25.3% in 2028, and then to 35.1% in 20692. The continued rise in the number of seniors therefore increases the demand for various elderly and healthcare services.

In light of this, the Government has been proposing more extensive life and end-of-life education to members of public, hoping to break the taboo surrounding discussions about death, helping people to view death in a positive light and raising awareness about the “three instruments of peace”, i.e., wills, Enduring Power of Attorneys (EPOAs), and Advance Directives (ADs).

Three instruments of peace are viz.:-

  • Will (also known as “平安紙”): the execution of a will is governed by the Wills Ordinance (Cap. 30). A will provides instructions on the distribution of the estate of the testator after he/she passes away.
  • Enduring Power of Attorney (EPOA): the execution, registration, powers and scope of EPOAs is governed by the Enduring Powers of Attorney Ordinance (Cap. 501). An EPOA seeks to appoint one or more attorney(s) to manage the financial affairs of a person when he/she becomes mentally incapacitated.
  • Advance Directive (AD): there is no specific statute addressing the execution and the power of scope of ADs. However, the Hospital Authority has published a recommended form of AD, and has also published guidelines for Hospital Authority clinicians. An AD seeks to address a patient’s desires about whether to receive life-sustaining treatments.

To promote the use of the “three instruments of peace”, the Government has already been subsidising and organising talks on life and end-of-life education every year. The Hong Kong Public Libraries collaborate with organisations to organise talks on life and end-of-life education every year, including talks on the “three instruments of peace”3. The Social Innovation and Entrepreneurship Development Fund (SIE Fund) also subsidises ventures related to life and death, education and the “three instruments of peace”4. It is hoped that if planning in different areas can be done in advance, better preparations can be made for the elderly and their families.

Although the concept of the three “instruments of peace” has been widely circulated among the community, it must be noted that in practical and precise terms, the execution, registration requirement, and the scope of the affairs to be covered vary for each of the three instruments of peace. Pitfalls could arise if they are not understood correctly. It is therefore hoped that the table below has summarised the requirements in order to assist members of the public:

 Will (also known as “平安紙”)  Enduring Power of Attorney (EPOA)  Advance Directive (AD)
FormNo prescribed form, but wills drafted by lawyers will take into account important details, e.g., more contingency plans in place for alternate executor(s) and/or beneficiaries  Must be made using the prescribed form  Not applicable
When does it take effect?  When the testator passes awayOn the date stipulated in the EPOA (usually when the attorney has reasons to believe the donor is becoming mentally incapable)When 2 doctors (the patient’s attending doctor and another doctor) confirm or certify that the patient is: terminally ill; in a persistent vegetative state or a state of irreversible coma; or in other end-stage irreversible life limiting condition  
Property and financial affairsExecutor can distribute the testator’s  estate according to the willAttorney may apply assets of the donor to: maintain the donor; prevent loss to the estate; maintain the attorney or other persons (e.g., where the donor is expected to provide for the needs of such persons); and make limited seasonal gifts to persons related or connected to the donor  Not applicable
Scope and restrictionsTestator may also express his/her wishes towards funeral arrangementsDonor may include any restrictions he/she likes on the attorney’s authority unrelated to health and welfare of the donor  Patient may decide whether to receive life-sustaining treatments.  
NOTE: Medical practitioners cannot perform euthanasia or carry out illegal instructions.  
Mental state at signing1. Of sound mind
2. Having mental capacity
3. Making the instructions voluntarily
4. Knowing the nature of the instrument and its consequences
Execution requirements  Execution before 2 independent witnesses, who do not have to be lawyers.  Execution before a registered medical practitioner and a solicitor (At the same time, or first before a registered medical practitioner and within 28 days before a solicitor).
Registered medical practitioner must certify that he/she was satisfied that the donor at the time of signing was mentally capable.
Solicitor must certify that the donor appeared to be mentally capable. 		Execution before 2 independent witnesses: First witness must be a registered medical practitioner, who could be a doctor treating or has treated the patient. Second witness must be 18 years of age. Confirm that the first witness has explained to the patient the nature and implications of the directive.
Independence of witnesses  A witness should not be a beneficiary under the will, otherwise the gift to that beneficiary will be voidWitnessing registered medical practitioner and solicitor must not be: the attorney; the spouse of the attorney; a relative (whether by blood or marriage) of the donor; ora relative (whether by blood or marriage) of the attorney  The 2 witnesses must not be beneficiaries under – the will of the patient; orany insurance policy held by the patient; orany other instrument made by or on behalf of the patient.
Requirement regarding execution by executor/attorney  An executor need not sign to confirm his/her appointment. Therefore, it is recommended that the testator discusses and informs the proposed executor of his/her appointment in advance.  Attorney must sign the EPOA before a witnessInapplicable
Requirement of registration  After the testator passes away, the executor shall arrange for applying for the grant of probate, and shall file the original will with the Court.  An attorney must bring the EPOA to the High Court for registration once he/she has reason to believe the donor is or is becoming mentally incapable. As a safeguard against abuse, the donor may decide whether he/she wants to receive or have other person(s) receive notifications of registration. One of the factors to consider before registration is that once an EPOA is registered, the record that an EPOA is created by a donor and the name of the attorney becomes public information.  No requirement of registration. The patient is recommended to provide family or close friends with a copy of the AD and inform them where the original is stored.
RevocationA will is generally not revoked unless: the testator enters into a marriage subsequent to the execution of the will; the testator executes another will to revoke the previous will; by written revocation executed in the same manner as the testator could validly execute a will; or the testator intends to revoke the will and he/she personally destroys or causes others to destroy the will in his/her presence and by his/her direction  When the donor is mentally capable, or after his/her recovery from mental incapacity, he/she may revoke the EPOA.   Otherwise, an EPOA is revoked in limited situations, for example- bankruptcy of the attorney; death of the attorney or donor; by an order or direction of the Court.By written revocation    

If you have any questions on the above, please contact the Co-head of our Elder Law practice Ms Helena Hu or our Associate Mr Dexter Yuen.

1 Census and Statistics Department. “Demographic Trends in Hong Kong 1991-2021” published [29 Dec 2022]. The Government of the Hong Kong Special Administrative Region. 29 Dec. 2022, https://www.censtatd.gov.hk/en/press_release_detail.html?id=5338. Accessed 24 Jun 2024.

2 Press Releases. LCQ6: Measures to cope with an ageing population. The Government of the Hong Kong Special Administrative Region. 22 Mar 2023, https://www.info.gov.hk/gia/general/202303/22/P2023032200177.htm. Accessed 24 Jun 2024.

3 Press Releases. LCQ6: Making the “Three Instruments of Peace”. The Government of the Hong Kong Special Administrative Region. 28 Jun 2023, https://www.info.gov.hk/gia/general/202306/28/P2023062800356.htm. Accessed 24 Jun 2024.

4 Press Releases. LCQ6: Making the “Three Instruments of Peace”. The Government of the Hong Kong Special Administrative Region. 28 Jun 2023, https://www.info.gov.hk/gia/general/202306/28/P2023062800356.htm. Accessed 24 Jun 2024.

Disclaimer: This article is for reference only. Nothing herein shall be construed as Hong Kong legal advice or any legal advice for that matter to any person. Oldham, Li & Nie shall not be held liable for any loss and/or damage incurred by any person acting as a result of the materials contained in this article.

Ten Common Handwritten Will Mistakes

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Handwritten wills i.e., holographic wills are valid in Hong Kong and in most jurisdictions around the world. Perhaps the most famous holographic will was that of Napoleon Bonaparte, who seemingly had plenty of time on his hands while exiled on the island of St Helena in 1821. He wrote a whopping five long pages and numerous codicils by hand, which was the requirement under French law for a valid will, in the absence of a notary. After praising his loved ones and lashing out at each of his political enemies, he bequeathed to over 7,500 beneficiaries the contents of his entire estate, down to a pair of slippers. The beneficiaries were not only his immediate family members but everyone from his General Montholon (2 million francs) to regular soldiers (100 francs each) in his army. It took the executors of his will 40 years to complete their tasks. 

Handwriting your own will is likely to be easier than the task that Napoleon undertook, but here are some of the more common (but not all of the) pitfalls to avoid:

1. Not appointing a willing executor

There will be no one to execute your wishes in this instance and this will lead to administrative delays. The beneficiary entitled to your residuary estate has first priority to apply to be your executor by virtue of rule 19 of the Non Contentious Probate Rules in Hong Kong where there is no named executor willing to take on this role. Your residuary estate is the whole sum of your estate after deduction of your debts, taxes, funeral, legal and administrative expenses and distribution of your cash and specific gifts to your beneficiaries.

2. Being too specific or not being specific enough

You may bequeath your Rolex Explorer II watch to your son but you own two Rolex watches at the time of your death, none of which is the Explorer II. You may state clearly “I bequeath my grand piano to my cousin.” but it transpires that you have three cousins (who coincidentally all play the piano up to grade 8 level) at the time of your death. These are examples of gifts that are too specific or not specific enough.

3. Not updating your will 

If you marry, divorce, enter into a committed relationship or any combination thereof, there may be significant impacts on the validity of parts of your will. Some committed relationships that may be recognised under overseas laws are not recognised in Hong Kong. It is important to review your will at regular intervals in order to take stock of significant changes in your relationships and assets.

4. Writing only one will when you have substantial assets in another jurisdiction

The legal concept of domicile may be different from your birthplace, nationality and/or jurisdiction where you have permanent residency. Your domicile at the time of death affects your will. You may write a will in Hong Kong that can be overridden due to laws in another jurisdiction that do not allow you to leave out certain beneficiaries, for instance. It is important to consider the laws of the countries where your substantial assets are located.

5. Writing wills in every jurisdiction you have assets in but inadvertently revoking some of the wills

You may have carefully considered all your worldly assets and handwritten your wills in accordance with where your assets are located. One common pitfall is not making reference to your other international wills, such that your last will and testament referring to your assets in Canada may inadvertently revoke your prior last will and testament referring to the distribution of your assets in Hong Kong.

6. Improper execution of the will

In Hong Kong, two witnesses are required when you sign your will. They and their spouses may not be your beneficiaries. Your executor may be a witness to your will but again, this executor should not be a beneficiary if such executor is to be a witness to your will. In the absence of proper execution, the court must be satisfied that there is no reasonable doubt your purported will satisfies your testamentary wishes.    

7. Forgetting to appoint guardians including temporary guardians for your minor children

If both parents pass away, minor children without appointed guardians will become wards of the Social Welfare Department. It is important to consider appointing temporary guardians who reside in Hong Kong in the event that permanent guardians are overseas, again to avoid having children becoming wards of the Social Welfare Department during the time it takes permanent guardians to arrive in Hong Kong.

8. Forgetting to include back up beneficiaries, executors and guardians

No one knows with certainty when their time will come. It is entirely possible to outlive one’s beneficiaries, executors and/or appointed guardians, especially the longer that one lives. Some care needs to be taken to think through some possible alternatives in the event that these persons predecease you or refuse to act as your executor or as guardians of your children.

9. Keeping the will in your own safety deposit box at the bank

This is a very safe place to keep your will but is it too safe? In Hong Kong, singly and jointly held safety deposit boxes require a “Certificate for Necessity of Inspection of Bank Deposit Box”  issued by the Home Affairs Department before a deceased’s safety deposit box may be inspected. A bank official and two public officers authorised by the Secretary for Home Affairs must be present during the inspection. Keeping one’s will in one’s own bank safety deposit box (even jointly held) leads to administrative delay and this should be weighed against the security afforded by a bank safekeeping your will.

10. Not signing your will

Many people take the time to carefully put together a will and then trip up on the final step – they omit to sign the will properly or put off signing the will. This may be due to any number of reasons – not prioritising this important final step (life often gets in the way) or even due to an inability to find witnesses for the will. Unfortunately, an unsigned will is an invalid will.

The legal requirements for a validly written will are both easy and difficult to fulfill – easy in the sense that a handwritten will showing intention and capacity signed by an adult which is properly witnessed is a legal document in Hong Kong, yet difficult because there are some common pitfalls that many a do-it-yourselfer has failed to avoid.

Beat Napoleon Bonaparte and have your will professionally drafted. To celebrate the inauguration of our groundbreaking Elder Law Practice (the first of its kind in Hong Kong), we are proud to relaunch our hugely popular FreeWill initiative, an opportunity for Hong Kongers to have their wills prepared for a nominal donation to a registered charity. To find out more, visit our FreeWill campaign page.

Disclaimer: This article is for reference only. Nothing herein shall be construed as legal advice, whether generally or for any specific person. Oldham, Li & Nie shall not be held liable for any loss and/or damage incurred by any person acting as a result of the materials contained in this article.

Handling Second-layer Recipients in Fraud Cases – Defence Concerning Underground Banking (地下錢莊/地下钱庄)

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Introduction

In typical fraud cases, victims would find it difficult to trace the defrauded money because often case, the first-layer fraudsters would have dissipated fund elsewhere in a nano second, leaving their own bank balance with close to nothing. Victims therefore have to also sue the second-layer recipients to recover the lost fund. The fund transfers from the victims to the second-layer recipients, however, are not a direct one. Problem arises if the second-lawyer recipients come forth and defend the claim by arguing that they are equally innocent and their receipt of money was deriving from legitimate underlying transactions with the first-layer fraudsters.  

One of the most often cited defence by PRC second-layer recipients is that they engage service of Underground Banking (地下錢莊/地下钱庄) whereby they send money to a stranger in the PRC and in return obtain money from another stranger in Hong Kong. This explains why they would receive money from certain person not even their acquaintance as this is essentially the modus operandi of Underground Banking. It could be entirely credible that these second-layer recipients do not know the first-layer fraudsters personally (notwithstanding that they do transact with them) and that these second-layer recipients are truly irrelevant to the fraud scheme. In light of the prevalence of email and identity scam these years, such fact pattern and defence has become a common occurrence. Does that then mean that the victims’ claims against these second-layer recipients would be defeated?

As the Mainland practices foreign currency control, it is not uncommon for individuals in the Mainland to use underground banking for their outward remittance needs. While commonly used, such practice is inherently illegal under the relevant PRC administrative regulations and administrative measures on foreign exchange. Victims facing such defence raised by the second-layer recipients may therefore counter-argue in response that the use of underground banking itself constitutes an “illegality” and thus should not be given effect.

The Case Laws

OLN acted for the victim in the fraud claim Taihei Dengyo Kaisha Ltd v. Zhao Yizhe and another [2024] HKDC 222. The Plaintiff was a victim of an elaborate email scam, whereby after its funds were induced to be deposited into a fraudster’s account (first layer bank account), part of the funds were then dissipated from the first layer bank account to the second-layer recipient (i.e. 1st Defendant in the present case)). To recover the funds, the Plaintiff started a civil claim against the 1st Defendant based on the different causes of action including unjust enrichment and tracing.

In response to the Plaintiff’s unjust enrichment claim and tracing claim, the 1st Defendant raised the aforesaid defence concerning the use of Underground Banking, arguing that she received the funds due to her purchase of HKD with RMB through an exchange agent in the Mainland, and such constituted (1) defence of bona fide purchaser and (2) defence of change of position.

In the Plaintiff’s application for summary judgment against the 1st Defendant, the District Court has confirmed that in analyzing the issue of illegality, a distinction has to be made between domestic illegality and foreign illegality, and that the Court has different approach in handling the two types of illegality.

In view of the frequency of litigation in Hong Kong involving cross-border elements, especially regarding PRC law, this is a much welcome decision in confirming the Court’s readiness to grant judgment at summary stage where the defence concerns a transaction illegal under PRC law, and should discourage unmeritorious defences going to trial.

Summary Judgment

The District Court confirms that in respect of foreign illegality, the Court of Final Appeal decision in Ryder Industries Ltd v Chan Shui Woo [2015] 18 HKCFAR 544 (“Ryder”) is the highest authority in Hong Kong on how it affects the enforceability of contracts.

In respect of foreign illegality, the Court’s task is to identify which type of illegality the case falls within as follows:

  • Type 1: the contract is unenforceable under its proper law (whether chosen by the parties or otherwise)
  • Type 2: the performance of the contract requires or necessarily involves conduct which is illegal under the laws of the place where it is required to be performed
  • Type 3: the contract could have been performed in a legal manner but the real objective and intention of the parties at the time of concluding the contract necessitates them to perform by some act which is illegal by foreign law
  • Type 4: the actual performance of a contract may violate foreign laws, even though not required or initially intended, but nonetheless lead to the unenforceability of the contract before a Hong Kong court, regardless of its proper law

Following Ryder, if the transaction is identified as a Type 1, Type 2 or Type 3 case, the contract will not be given effect. If, on the other hand, it is a Type 4 case, the Court should make a judgment as to whether comity should require it to give effect to the contract or deny its enforcement by evaluating the seriousness of the illegality and the important policies which may underlie the impugned foreign law.

The Court found that as the 1st Defendant’s purchase of Hong Kong Dollars through the agent “necessarily” contravened PRC law as the very essence of the transactions was to circumvent PRC currency exchange controls, the transactions fall squarely within the Type 2 case. The Court was required to refuse enforcement of the contract, and the defence of change of position and bona fide purchaser would not therefore be available.

The Court also acknowledged that despite the issue of foreign illegality being a complicated and developing area of law, as Hong Kong case authorities have fairly established that it is illegal under PRC law to engage underground banking and there is no material dispute on the PRC law in the present case, the Court failed to see what utility can be gained for the restitution claim to go to trial.

The Court therefore granted summary judgment in favour of the Plaintiff against the 1st Defendant for the unjust enrichment claim for the amount of the sums received and a declaration that the 1st Defendant held the sums received on trust and/or constructive trust.

Key Takeaways

  • Regarding the issue of illegality, a distinction has to be made between domestic illegality and foreign illegality, as the Court would adopt different approaches regarding the enforceability of the underlying transaction.
  • Although foreign illegality remains a complicated and developing area of law, where Hong Kong case authorities have fairly established the relevant foreign illegality in issue and there is no material dispute regarding the foreign illegality in question, the Court may still be prepared to grant judgment at the summary stage.
  • Aside from a litigation standpoint, for individuals residing in Mainland who have outward remittance needs, whilst using underground banking or money exchange (地下錢莊/地下钱庄) may seem convenient, it is nonetheless an illegal practice in Mainland. More importantly, it carries the risk that there is no safeguard regarding the source of funds, and the funds received may well stem from innocent parties and be clawed back through legal proceedings.

Anna Chan, Kacy Lam and Dexter Yuen acted for the Plaintiff.

The full Judgment can be viewed here.

Oldham, Li & Nie Partner Wins the Private Client Lawyer of the Year at the 2024 Asia Legal Awards

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We are delighted to announce that our partner and head of Private Client practice, Anna Chan, won the Private Client Lawyer of the Year at the 2024 Asia Legal Awards ceremony.

Anna received this prestigious title in recognition of her deep knowledge and expertise to guide clients through even the most complex contentious and non-contentious matters.

Anna Chan, OLN Partner, wins Private Client Lawyer of the Year at the 2024 Asia Legal Awards

The results were announced on 14 March 2024 at a ceremony in Singapore attended by Anna Chan and Martin Tse, Senior Associate.

In addition, Anna Chan was shortlisted in Litigator of the Year and Oldham, Li & Nie in Boutique Law Firm of the Year categories.

The Asia Legal Awards, hosted by Law.com International, a leading global media platform, honours the most outstanding legal practitioners, firms and transactions in Asia.

To learn more about Asia Legal Awards, see the complete lists of this year’s winners.

Budget 2024/25: Updates on Stamp Duty on Property Transactions in Hong Kong

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In the 2024/25 Budget (the “Budget”) delivered by the Financial Secretary of the HKSAR on 28 February 2024, a number of tax measures were proposed. Most notably, all demand-side management measures for residential properties have been cancelled with immediate effect, meaning that no (i) Special Stamp Duty (“SSD”), (ii) Buyer’s Stamp Duty (“BSD”) or (iii) Ad Valorem Stamp Duty (“AVD”) at 7.5% under Part 1 of Scale 1 of Head 1(1A), First Schedule of the Stamp Duty Ordinance (Cap. 117) (“SDO”) needs to be paid for any residential property transactions starting from 28 February 2024.

Property market in 2023

As illustrated in the Budget, insofar as a residential property is concerned, the market sentiment has become very cautious since the middle of 2023 in view of the rising interest rates and uncertainties in the external environment. In 2023, residential flat prices fell by 7% and the number of residential property transactions declined by 5% to a low level of around 43,000.

Cancellation of all “spicy measures”

It is under the backdrop of the property market’s weak performance that all “spicy measures”, including the SSD, BSD and AVD at 7.5% under Part 1 of Scale 1 were cancelled with immediate effect on 28 February 2024.
However, residential property purchasers would still have to pay AVD at the rate under Part I Scale 1 but such rate has been amended to be same as those of AVD under Scale 2 of Head 1(1A), First Schedule of the SDO (i.e., the rate for the sale and purchase of non-residential property on or after 26 November 2020) with effect from 28 February 2024, by way of the Public Revenue Protection (Stamp Duty) Order 2024 as discussed below.
In other words, for residential property transactions, AVD ranging from HK$100 to 4.25% of the stated consideration or the value of the property (whichever is higher) will be levied. The AVD rates immediately before and after 28 February 2024 are set out below:

Rate at Part 1 of Scale 1 from 25 October 2023 to 27 February 2024: Flat rate of 7.5%

Rate at Part 1 of Scale 1 on or after 28 February 2024:

Amount or value of the consideration or value of the property (whichever is higher)Rate at Part 1 of Scale 1
ExceedsDoes not exceed
 HK$3,000,000HK$100  
HK$3,000,000HK$3,528,240HK$100 + 10% of excess over HK$3,000,000
HK$3,528,240HK$4,500,0001.5%  
HK$4,500,000HK$4,935,480HK$67,500 + 10% of excess over HK$4,500,000
HK$4,935,480HK$6,000,0002.25%  
HK$6,000,000HK$6,642,860HK$135,000 + 10% of excess over HK$6,000,000
HK$6,642,860HK$9,000,0003.00%  
HK$9,000,000HK$10,080,000HK$270,000 + 10% of excess over HK$9,000,000
HK$10,080,000HK$20,000,0003.75%  
HK$20,000,000HK$21,739,120HK$750,000 + 10% of excess over HK$20,000,000
HK$21,739,120 4.25%  

Procedurally speaking, the Government will introduce the Stamp Duty (Amendment) Bill 2024 (the “Bill”) to the Legislative Council following the delivery of the Budget. In the meantime, to enable property purchasers to benefit from the said measures as soon as possible, the Chief Executive has exercised his statutory power to make the Public Revenue Protection (Stamp Duty) Order 2024 (the “Order”) under the Public Revenue Protection Ordinance (Cap. 120) to give full force and effect of law to the Bill before its enactment as long as the Order remains in force.

Potential impacts on the property market

All “spicy measures”, which aimed at curbing speculation and stabilizing housing prices, often deterred potential buyers due to the high additional costs involved in property transactions. With the removal of the “spicy measures”, we anticipate that the residential property market will experience a surge in activity. With the potential buyers having higher affordability, it is expected that the demand for residential flats will increase and property prices will potentially be driven up in the short term.

In particular, given that the BSD (which targeted purchasers who are non-Hong Kong permanent residents) is now removed, more foreign and Chinese investors might be attracted to invest in Hong Kong residential properties. Moreover, the abolishment of the SSD (which targeted reselling of residential properties within 24 months of acquisition) is likely to further stimulate the local second-hand property market.

Holding residential properties by corporate vehicles

One point to note is that the removal of “spicy measures” might prompt some potential purchasers (in particular, properties on the expensive end of the spectrum) to purchase residential properties through limited companies which are established for the sole purpose of holding the properties. When it comes to selling the properties, instead of selling the properties directly, property owners can sell the entire shares of the companies which hold the properties, to the purchasers.

The obvious advantage of using this strategy is that the stamp duty for the sale and purchase of shares of a limited company in Hong Kong is currently only 0.2% of the stated consideration or the value of the company (which essentially is the value of the property when the property is the only asset of the company), whichever the higher.

For example, if an individual decides to purchase a residential property valued at HK$7,000,000 after 28 February 2024, the calculations of stamp duty payable under different situations are as follows:

  • If the purchaser purchases the residential property directly, the stamp duty payable would be HK$7,000,000 x 3% = HK$210,000
  • If the residential property is held by the seller through a limited company whose only asset is the property, and the purchaser acquires the entire shares of the company, the stamp duty payable would be HK$7,000,000 x 0.2% = HK$14,000

Although the savings in stamp duty can be quite considerable by using the abovementioned strategy, it should be noted that:

  • Transfer of shares in a limited company involves more complicated procedures as compared to ordinary property transactions. Most notably, lawyers will be more heavily engaged in such equity transactions for procedures such as (i) due diligence to ensure that the company has not, amongst others, incurred any liabilities, and (ii) drafting the share purchase agreement including various representations, warranties and indemnity, to protect the interest of the purchaser. Hence, the associated legal fees would most likely be higher than that incurred in an ordinary property transaction.
  • After acquiring the company, the purchaser would have to pay annual maintenance costs to the company secretary and accountant for, among others, filing annual returns, convening annual general meetings, preparing audited accounts and doing tax filings to fulfill the statutory requirements.
  • Owing to legal complexity and risks as explained in point (1) above, banks usually do not offer mortgages for property transactions camouflaged by share transfers. Purchasers therefore need to be prepared to pay 100% of the purchase price of the company/property by the time the transaction is completed. A bridging loan might be required in the circumstances.

In view of the high associated costs that may be incurred in a share purchase transaction as discussed above, normally speaking, only residential properties of a relatively high value will justify the use of a limited company to hold the property.

If you have any question regarding the topic discussed above, please contact our partner Victor Ng at victor.ng@oln-law.com or our senior associate Barbara Kwong at barbara.kwong@oln-law.com for further assistance.

Disclaimer: This article is for reference only. Nothing herein shall be construed as Hong Kong legal advice or any legal advice for that matter to any person. Oldham, Li & Nie shall not be held liable for any loss and/or damage incurred by any person acting as a result of the materials contained in this article.

Oldham, Li & Nie is Ranked in Chambers Greater China Region 2024 Guide

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The newly released 2024 edition of Chambers Greater China Region Guide acknowledged Oldham, Li & Nie in Corporate/M&A and Family/Matrimonial practice areas. Additionally, the Guide has spotlighted four of our lawyers as leading figures in the region’s legal landscape.

Chambers Greater China Region 2024 ranked firm Oldham, Li & Nie

Comments from clients include:

  • “Oldham, Li & Nie are extremely professional and reliable. Their lawyers are worldly, knowledgeable and respectful.”
  • “They are able to give practical advice by considering the circumstances of our company and our company’s primary commercial objectives.”
  • “They are highly professional and well organised. They are very efficient and speedy with their work.”

The four Odham, Li & Nie lawyers recognized among the premier lawyers in the Greater China region are:

To view the OLN’s full rankings, visit our profile on 2024 Chambers Greater China Region.

About Chambers Greater China Region Guide

Chambers and Partners interview every year thousands of lawyers, clients and third-party experts to evaluate law firms’ and lawyers’ reputation and expertise in all four jurisdictions of the Greater China Region: PRC, Hong Kong, Macau, and Taiwan. The Chambers Greater China Region rankings assess various factors, including technical legal skills, professionalism, customer service, and business acumen of the leading lawyers across the region.