YTL LLP assisted in restructuring of a Chinese State-owned Enterprise


Corporate restructuring
Court-free amalgamation of HK companies

YTL LLP successfully assisted a PRC state-owned mining conglomerate in completing a court-free horizontal amalgamation under the Hong Kong Companies Ordinance (Cap. 622) as part of the streamlining of its overseas holding structure. 

Amalgamation under the Companies Ordinance makes the merger of Hong Kong companies easier, more efficient and achievable at a lower cost for intra-group restructuring.  It could be done horizontally or vertically – either between two or more wholly-owned subsidiaries of a company or between a company and one or more of its wholly-owned subsidiaries.

Once the amalgamation takes effect, each amalgamating company ceases to exist as an entity on its own, and the amalgamated company succeeds to all the property, rights and privileges, and all the liabilities and obligations of each amalgamating company.

Amalgamation overview

Statutory amalgamation requires that:

  1. Board approval and solvency statement: directors of each amalgamating company approve the amalgamation and issue a solvency statement confirming among others, that they are of the view that there is no ground on which the amalgamating company could be found to be unable to pay its debts and after taking into account all the liabilities of the amalgamated company (including contingent and prospective liabilities), the amalgamated company will be able to pay its debts as they fall due in the 12 months immediately after the date the amalgamation takes effect;
  2. Floating charge or other security: no floating charge of other security created by the amalgamating company over a class of assets to any of which the security interest has not attached, exists; or if they so exists, each person entitled to the charge or security has consented in writing to the amalgamation proposal;
  3. Notice: a notice of amalgamation be published in the newspapers and written notice to be given to secured creditors of each amalgamating company;
  4. Shareholders approval: a special resolution be passed by the shareholders of each amalgamating company approving the amalgamation proposal; and
  5. Filings: forms are required to be filed with the authority within the prescribed timeframe.

In normal circumstances, the estimated time required for statutory amalgamation is approximately 5 to 8 weeks.

Once the required formalities are complete and there are no objections from creditors or other stakeholders, the Companies Registry will issue a certificate of amalgamation specifying the effective date of amalgamation.

Points to consider 

Before proceeding with the amalgamation, the amalgamating companies should consider the following:

  1. Contractual or regulatory restrictions: The amalgamating companies may be subject to contractual or regulatory restrictions on amalgamation under existing contracts, which is commonly the case in facility agreements and supply agreements, and under applicable laws. A thorough review of the company’s existing contracts should be undertaken to ensure in proceeding with amalgamation, the company does not breach any existing contractual or regulatory obligations, and where needed, obtain the written consent of the relevant counter-parties or government authorities.
  2. Business transition: Even if not contractually obliged to do so, the amalgamating company should consider when and how to inform its counter-parties and stakeholders, including service providers and clients, in relation to the amalgamation.
  3. Solvency risks of the company: In making the solvency statement, the directors of each amalgamating company must have reasonable grounds for the opinion and fact expressed in it, failing which each director may attract personal criminal liability leading to a fine and imprisonment. The directors are advised to review the latest audited and management accounts, consult the company’s financial advisers and auditors as well as business and operation teams in order to formulate a better view as to the solvency position of the company.
  4. Taxation: The implications that the amalgamation has on the taxes and financial treatment of the amalgamating companies and the amalgamated companies, and the obligation to inform the Inland Revenue Department of Hong Kong, should be considered.

YTL LLP worked alongside with auditors and company secretary of the clients throughout the restructuring process. 

Let us know if you have any questions about the issues raised in this article.

Alfred Leung, partner (

Tammy Ha, associate (

Eunice Leung, trainee solicitor (

Ariel Kong, trainee solicitor (