How to transfer a business in Hong Kong: Guide for SMEs and entrepreneurs

Business transfer is a common practice in Hong Kong. While some choose to sell their business, others take over existing businesses through handover, saving the time and cost of starting from scratch. Whether it is a restaurant, retail shop, or SME, transferring a business allows for business opportunities and reallocation of resources.

Transferring a business is a complex process involving legal, financial, tax, and contractual considerations. Without proper preparation, mistakes can lead to failed transactions or legal complications. This article outlines the key steps and requirements for transferring a business in Hong Kong and explores how modern financial tools such as Airwallex can help streamline the process and support post-transfer operations.

What is a business transfer?

A business transfer, also known as a "takeover" or "buyout," involves transferring ownership of an existing business to a new buyer. The buyer may acquire either all company shares or specific assets, assuming associated rights and obligations upon completion.

Regardless of the business size, potential buyers should assess not only the potential return but also the business’s financial position, cash flow, liabilities, and potential risks before proceeding with the acquisition.

The most straightforward way to take over a business is by purchasing all company shares. This approach allows the buyer to take over an operational business with minimal setup – no need for renovations, licence applications, or new hiring. This approach also provides immediate access to an established customer base and revenue stream.

To formalise the transaction, both parties typically sign a Share Purchase Agreement detailing the price, completion date, responsibilities, and tax arrangements. Given the legal and financial complexity, transactions often take weeks or months. Engaging legal and accounting professionals is strongly recommended to ensure a smooth process.

Common types of business transfer

1. Share transfer

This is one of the most common methods. The buyer acquires all the company’s shares, thereby taking over all its rights, obligations, and liabilities. Prior to the transaction, the buyer should conduct thorough due diligence to ensure the business is suitable and financially sound.

2. Asset sale

If the buyer is only interested in a specific part of a business rather than the entire company, an asset sale is a more appropriate option. This involves purchasing selected assets and associated liabilities.

For example, if a tutorial centre operates multiple branches across Hong Kong and the buyer is only interested in the Mong Kok location, both parties can agree to transfer only the lease, equipment, student contracts, and relevant staff of that branch. This approach avoids the need to transfer company shares and does not affect the operations of other branches.

3. Business merger

A merger involves two or more businesses combining operations, either by forming a new company or by integrating one business into another. This allows for resource consolidation or market expansion.

In a merger, one company may fully absorb another’s assets, employees, and operations, effectively transferring the original business into the surviving entity or newly formed company.

Requirements for business transfer in Hong Kong

Transferring a business involves more than just price negotiation. Below are key legal, financial, and contractual requirements that both parties should prepare for:

Legal requirements

• Business Registration and licences: To prove that the company is legally registered and holds all necessary licences to operate.

• Shareholder agreements: For share transfers, the company’s Articles of Association and existing shareholder agreements must be reviewed for any restrictions or procedures related to share sales.

• Compliance audit: A compliance audit helps identify potential risks and ensures the transaction adheres to legal and regulatory standards.

Financial preparation

• Latest financial statements: Latest financial statements including income statements and balance sheets, which are essential for buyer due diligence and assessing the business’s financial health.

• Asset valuation: A third-party valuation helps determine the business’s market value.

Contractual documentation

• Transfer agreement and sale contract: A formal agreement must define the scope of assets, payment terms, handover arrangements, and responsibilities of both parties. Proper documentation helps protect both sides and prevent future disputes.

The process of business transfers

Preparation stage

• Business assessment and valuation: Engage professionals to conduct a valuation based on revenue, assets, brand value, and market potential. A realistic valuation helps establish a fair asking price and attracts serious buyers.

• Find a buyer or broker: Sellers can connect with buyers through business transfer platforms, accounting firms, or professional brokers. Some sellers may appoint consultants to handle the entire process, saving time and increasing the success rate.

Negotiation and documentation stage

• Sign a Non-Disclosure Agreement (NDA): Before sharing financial or operational data, both parties should sign an NDA to protect confidential business information.

• Due diligence: The buyer typically hires professionals to review the seller’s financial statements, leases, tax records, employment contracts, and other documents to identify any risks.

• Draft key terms and the Letter of Intent (LOI): Once both sides reach preliminary agreement on major terms (such as price, payment structure, and handover arrangements), they may sign an LOI as a basis for the final agreement.

• Sign the Formal Agreement of Transfer: After legal review and confirmation, both parties sign the final agreement, setting out the closing date and payment schedule.

Completion stage

• Pay applicable taxes: Share transfers are subject to stamp duty. Asset sales may trigger profits tax or other tax obligations. It's advisable to consult a tax adviser in advance.

• Update the records at Company Registry: If there are changes to shareholders, directors, or the company name, the Companies Registry must be notified by the Full Companies Ordinance.

• Transfer of assets and documents: Upon payment, both parties must complete the handover of assets (such as equipment, inventory, and trademarks), operational documents, licences, and other rights.

Cost and tax considerations of business transfers

Common costs include:

• Legal fees: Legal fees cover the drafting and review of the transfer agreement

• Brokerage fees: the commissions charged by platforms or consultants based on the transaction amount

• Valuation fees: The costs of engaging professionals to assess the value of the assets or business.

A business transfer may involve tax implications, including:

• Profits tax: Any profit earned from the sale of the business may be subject to profits tax; and 

• Stamp duty: If the transfer is conducted through a share sale, the corresponding stamp duty on the share transfer must be paid.

Funds settlement

After the business transfer is completed, the movement of funds must be handled carefully, especially in cross-border transactions. Remittance timing, exchange rate fluctuations, and bank handling fees can all affect the efficiency and cost of the transaction.

Streamlining post-transfer financial management with Airwallex

Following a business transfer, new owners often need to promptly reorganise financial operations, including setting up bank accounts, processing payroll, paying suppliers, and receiving customer payments. Traditional banking methods are often slow, complex, and costly, particularly for businesses with cross-border requirements.

Airwallex, a global financial and payments platform, enables seamless business continuity after acquisition. With a single account, you can efficiently manage payment collections, disbursements, expenses, and accounting integrations. Our all-in-one solution simplifies financial operations and improves overall operational efficiency.

Key advantages of Airwallex

• Open domestic and foreign currency accounts in minutes: Open local currency accounts in over 60 markets without the need to set up overseas entities. Accept payments in multiple currencies, making it easier to transact with customers around the world.

• Low-cost international payments and foreign exchange (FX): Airwallex offers competitive FX rates as low as 0.2% above interbank rates, significantly reducing transaction fees and currency conversion losses.

• Virtual Corporate Cards for flexible expense management: Instantly issue Corporate Cards to your team, allowing employees to spend directly from your account balance in multiple currencies. Control budgets and track expenses with ease.

• Integration with accounting and eCommerce platforms: seamlessly connect with leading business tools such as Xero, Shopify, and Amazon. Automatically sync transaction data to enhance accounting efficiency and transparency.

Whether you're a new business owner following a transfer or an SME expanding into global markets, Airwallex helps you control costs, streamline operations, and stay focused on growth.

Sources:

Information above was retrieved as of May 2025, from the sources below. Information provided is for reference only.

1. https://www.success.tid.gov.hk/tc_chi/sgbook/chapter_03.html

2. https://www.clic.org.hk/zh/topics/businessAndCommerce/setting_up_business_in_Hong_Kong/types_of_business_organisation/q4

Disclaimer: The information was based on our own online research and we were not able to manually test each tool or provider. The information is provided for educational purposes only, and a reader should consider the specific requirements of their business when evaluating providers. This research is reviewed every six months. If you would like to request an update, feel free to contact us at [email protected].