An Instrument of Transfer is a written instrument that effects a transfer of shares in a company, usually between a buyer and seller.
It is a necessary document required to enable the legal title to the shares to be transferred from one party to the other. An Instrument of Transfer attracts stamp duty and must be stamped in accordance with the rules set out in the Stamp Duty Ordinance (Cap 117).
A transfer of shares in a Hong Kong company cannot be made without a proper Instrument of Transfer. The Instrument of Transfer contains the details of the transferor, the details of the transferee, and the details of the shares being transferred, including the number and type of shares being transferred.
In Hong Kong, stamp duty must be paid on the transfer of Hong Kong shares. An Instrument of Transfer must therefore be taken to the Stamp Office of the Inland Revenue Department for stamping before the date of execution if it is to be executed locally, and within 30 days after the date of execution, if executed outside Hong Kong.
In the case of shares being transferred by way of gift (in which case no consideration is paid) the Instrument of Transfer must be stamped within seven days if it is executed locally and within 30 days if it is executed outside Hong Kong.
When drafting an Instrument of Transfer, it is important to focus on a number of key clauses, in particular: