Jurisdiction - Hong Kong
Reports and Analysis
Hong Kong – Amalgamation Provisions Under The New Ordinance.

5 May, 2015


Legal News & Analysis – Asia Pacific – Hong Kong – Corporate/M&A 


True mergers of companies in the same corporate group are often considered but were rarely implemented in Hong Kong as before the New Ordinance came into force in March of last year, there was no simple, court-free procedure for carrying out such mergers. Companies in the same corporate group that wanted to merge had to resort to court-sanctioned schemes of arrangement under sections 166 to 167 of the Companies Ordinance (Cap. 32) (the “Old Ordinance”). This was a costly and time consuming process and, as such, was rarely used.


The New Ordinance introduced a new, court-free regime for mergers, or “amalgamations”, of wholly-owned companies within the same group. This provides an easier method by which a corporate group can internally restructure and streamline its business.


The effect of an amalgamation is that all of the property, rights and privileges of the companies to be amalgamated (the “amalgamating companies”), as well as their liabilities and obligations, are transferred to a single surviving company (the “amalgamated company”). Once the process is complete, the amalgamating companies cease to exist as separate entities leaving only the amalgamated company surviving. Amalgamations may be vertical (i.e. between a holding company and one or more of its wholly-owned subsidiaries) or horizontal (i.e. between two or more subsidiaries of the same holding company).


In order to take advantage of the new provisions, a number of conditions must first be satisfied. These include the following:


  • Each amalgamating company must be a Hong Kong incorporated company limited by shares;
  • Each amalgamating company must be wholly-owned and part of the same group of companies;
  • The board of each amalgamating company must make statements to the effect that each amalgamating company is solvent, and the amalgamated company will be able to pay its debts for the 12 months following the amalgamation;
  • The solvency statements must also confirm that the assets of the amalgamating companies are not subject to any floating charges or, if such charges exist, that the creditors who has the benefit of the charges have consented to the amalgamation;
  • The amalgamation must be approved by the shareholders of each of the amalgamating companies; and
  • Secured creditors must be notified of the proposals in writing, and notices must be published in newspapers in Hong Kong.


Even if the above conditions are met, a shareholder, creditor or any person to whom an amalgamating company is under an obligation can still apply to court to object to the amalgamation on grounds that they would be unfairly prejudiced. The court may make any such order as it thinks fit in response to such an application.


There may also be unintended consequences of an amalgamation. For example, it is possible that the amalgamation may trigger events of default in contracts entered into by the amalgamating companies. It is therefore important that all existing contracts, financing arrangements, etc. are reviewed before the merger commences. There may also be unintended tax consequences. In fact, it is not yet clear what the tax treatment of amalgamations will be; the Inland Revenue Department is yet to issue any guidance on this point. Advice should therefore be sought and, if necessary, due diligence carried out before such amalgamations are effected.


Despite these uncertainties, the new amalgamation procedure is a welcome addition to Hong Kong company law, making it far easier for companies to restructure and rationalise their operations and without the involvement of the courts.




For further information, please contact:


Paul Westover, Partner, Stephenson Harwood

[email protected]


Victor Lee, Stephenson Harwood

[email protected]


Fiona Cheng, Stephenson Harwood

[email protected]


Homegrown Corporate/M&A Law Firms in Hong Kong 


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