Where a share purchase agreement governed by Hong Kong or English law stands now

A share purchase agreement (the principal transaction document recording the terms on which shares in a target company change hands) governed by Hong Kong or English law sits at the intersection of two mature common-law systems. The choice between them is rarely neutral. It shapes jurisdiction clauses, enforcement routes, and the practical remedies available when something goes wrong across a cross-border deal structure.

The cross-border deals our desk sees in late 2026 share a common tension. The governing law of the acquisition document is agreed at signing, usually in a negotiated clause. But the assets, the regulatory clearances, and the counterparties are distributed across Hong Kong, the Mainland, the British Virgin Islands, the Cayman Islands, and sometimes a European holding layer. When the agreement is tested – whether at completion, through a claim on representations, or at the enforcement stage – the governing law and the seat of any dispute resolution mechanism have to do real work across that distribution. This analysis sets out where that work is harder than buyers and sellers expect.

We examine the commercial stakes, the governing instruments that matter, the comparative read between Hong Kong and English law as the choice, and where the risk now sits for cross-border principals active in Greater China and the principal offshore centres.

What is actually at stake commercially when governing law is chosen?

Governing-law choice in a share purchase agreement is not a boilerplate decision. It determines which courts or tribunals can interpret the document with authority, which implied terms and doctrines apply, and which remedies are available if a party defaults, misrepresents, or triggers a condition that stalls completion.

For a deal involving a Hong Kong holding entity above Mainland Chinese operating companies – the structure our desk encounters most often – the commercial stakes of that choice are immediate. The target entity may be incorporated in the Cayman Islands. The seller may be a BVI vehicle. The buyer may be an Asian group or a fund with European institutional investors. The acquisition finance, if any, may run through Hong Kong-licensed lenders. At that point, the governing law of the share purchase agreement determines which court's implied doctrines fill the gaps in the document and which forum can reliably hear a misrepresentation or indemnity claim against a counterparty that may have reorganised or relocated its assets by the time a dispute arises.

The gap between what a deal lawyer negotiates and what an enforcement lawyer inherits is where governing-law choice matters most. In our cross-border practice, we have seen share purchase agreements that were technically well-drafted under one system produce enforcement problems because the chosen dispute resolution mechanism did not align with where the assets or the counterparty entity sat at the time of breach.

That misalignment is not hypothetical. It is a structural feature of deals in which the governing law was fixed at speed, without a clear analysis of the enforcement perimeter at each point in the deal structure.

How does the governing framework bite in cross-border deals?

Both Hong Kong and English law apply the same foundational common-law principles to share purchase agreements: offer and acceptance, consideration, contractual certainty, and the rules on misrepresentation and breach. The doctrinal starting points are the same. The differences emerge at the edges – and it is at the edges that cross-border deals are won or lost.

Hong Kong law governs a share purchase agreement through a body of case law developed in the Court of First Instance, the Court of Appeal, and the Court of Final Appeal. Because Hong Kong maintains a common-law system under the one country, two systems framework, the courts apply precedent in the English tradition, and decisions of the United Kingdom Supreme Court and the Privy Council remain persuasive. This means that on most doctrinal questions – the availability of specific performance, the test for remoteness of damage, the construction of entire-agreement clauses – the two systems produce the same answer.

The practical differences are jurisdictional and procedural. A Hong Kong-law share purchase agreement with a Hong Kong court jurisdiction clause creates a filing point at the Court of First Instance. That court operates in English, applies common-law procedure, and – critically – since 29 January 2024, operates under the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645). This means a money judgment from the Court of First Instance on a contractual claim in a share purchase agreement can now be registered and enforced in Mainland courts, and vice versa, subject to the conditions and exclusions in Cap. 645.

An English-law share purchase agreement with English court jurisdiction produces a judgment in the jurisdiction of England and Wales. That judgment is not automatically enforceable in Hong Kong under the same regime. Enforcement in Hong Kong would run at common law or, where applicable, through the reciprocal enforcement regime under the Foreign Judgments (Reciprocal Enforcement) Ordinance – a different instrument, with different conditions. Enforcement in the Mainland is not available through the Cap. 645 route. For a deal where the seller's assets, or the target's assets, are concentrated in the Mainland or Hong Kong, this difference is material.

The enforcement perimeter, not the doctrinal elegance of the governing law, is what shapes the practical choice.

How do Hong Kong law and English law compare as governing-law choices for a share purchase agreement?

In practice, both Hong Kong and English law are commercially recognised, professionally administered, and sufficiently certain to govern complex acquisition documents. The question is not which system is better in the abstract. It is which system produces better outcomes for the specific counterparty profile, asset location, and dispute resolution mechanism of the deal at hand.

Consider the representations and warranties package. Under both systems, a seller's disclosure against representations limits liability. The standard of disclosure – what the seller is taken to have disclosed, and how specific the disclosure must be – is a matter of contractual construction in both jurisdictions. Courts in both centres would approach an entire-agreement clause with the same analytical tools. The difference is which court applies those tools and whether its judgment can be enforced where the relevant assets sit.

The indemnity and specific performance position is similar. Under Hong Kong law, specific performance of a share sale is available in appropriate circumstances, as it is under English law. The court's discretion applies in both systems. A buyer seeking to compel completion under a locked-box mechanism or a deferred-payment structure has broadly equivalent tools under either governing law, provided the dispute resolution mechanism routes the claim to a court or tribunal with jurisdiction over the relevant party.

Where the systems diverge in practical terms is in the availability and quality of legal infrastructure supporting the deal. A Hong Kong-law agreement, with dispute resolution by HKIAC arbitration or Hong Kong court, connects directly to the Mainland interim-measures arrangement. Under the arrangement in force since 1 October 2019, a party to a Hong Kong-seated arbitration may apply to Mainland courts for interim measures before or during the arbitration. That mechanism is not available from an English-seated arbitration. For a seller or buyer whose principal exposure is to a Mainland-based counterparty, this is a decisive operational difference.

An Asian strategic buyer acquiring a target with Mainland operations, where the seller is a foreign fund with a BVI holding entity, faces a specific question: if the seller breaches the non-compete or the earn-out provision, where are the seller's assets, and which court or tribunal can move quickly enough to preserve them? The answer to that question should drive the governing-law choice, not the other way around.

What are the structural alignment requirements across the deal perimeter?

The central discipline in a cross-border share purchase agreement is alignment: the vehicle used for acquisition, the governing law of the share purchase agreement, the dispute resolution clause, and the clearance regime applicable to the transaction must all point in the same direction.

Misalignment is the most common structural error we see when reviewing distressed or disputed cross-border deals. A Cayman Islands holding entity purchasing shares in a Hong Kong target may have the share purchase agreement governed by English law, with arbitration in London. If the target's principal assets are Mainland operating companies, that structure leaves the buyer without access to the Mainland interim-measures arrangement, and leaves any arbitral award to be enforced in the Mainland through the 1999 Arrangement and its 2020 Supplemental Arrangement – a longer and less certain route than using Hong Kong-seated arbitration and the Cap. 645 regime for judgments.

The alignment test covers four elements. First, the acquisition vehicle: a Hong Kong company, a BVI entity, or a Cayman entity each interacts differently with the stamp duty regime and the regulatory clearance requirements at the target level. Under the Hong Kong stamp duty regime, the transfer of shares in a Hong Kong-incorporated company attracts ad valorem stamp duty at 0.1% per party (0.2% in total) on the higher of consideration or value. The transfer of shares in a BVI or Cayman holding entity that does not hold Hong Kong-situated assets directly is generally outside that charge – a structural point that is properly planned in advance, not corrected after signing.

Second, the governing law of the share purchase agreement: for the reasons above, Hong Kong law produces better enforcement alignment with the Mainland and with HKIAC arbitration than English law for deals where the asset base or the counterparty is centred on Greater China.

Third, the dispute resolution clause: arbitration under the HKIAC Administered Arbitration Rules (2024 edition, in force from 1 June 2024) provides a well-tested set of rules, including expedited procedure, emergency arbitrator provisions, and the benefit of the Mainland interim-measures arrangement for Hong Kong-seated arbitrations. Litigation in the Hong Kong courts provides a direct route to enforcement under Cap. 645 in the Mainland. The choice between arbitration and litigation turns on confidentiality, the counterparty's enforceability profile, and whether third parties (lenders, regulators, joint-venture partners) have an interest in the dispute mechanism.

Fourth, regulatory clearances: a share acquisition that triggers a mandatory filing with a Mainland regulator, a competition authority, or a sectoral licensing body has a completion timeline that must be reflected in the long-stop date and the material adverse change provisions of the share purchase agreement. A governing-law choice and forum-selection clause that do not account for regulatory delay in the relevant jurisdiction will produce disputes about what constitutes a valid excuse for non-completion.

How does enforcement risk actually materialise in these agreements?

Enforcement risk in a share purchase agreement is not principally a risk at signing. It materialises at three points: when a completion condition fails, when a warranty or indemnity claim arises after completion, and when a payment obligation (deferred consideration, an earn-out, or a price adjustment) is disputed.

At the completion-condition stage, the question is whether a party can be compelled to complete, or whether the remedy is damages. Under both Hong Kong and English law, specific performance is theoretically available. In practice, the speed and cost of obtaining interim relief to prevent a party from dissipating assets or transferring shares to a third party depends on the forum.

For a Hong Kong-seated HKIAC arbitration, the 2024 Rules provide for an emergency arbitrator who should ordinarily complete emergency-relief proceedings within 14 days of transmission of the file. That speed matters where a seller is attempting to complete a competing transaction or to transfer assets offshore before an award is obtained. The Mainland interim-measures arrangement provides a parallel route to preservation orders in Mainland courts for assets held by Mainland entities within the target group.

After completion, warranty and indemnity claims are the most common source of dispute in share purchase agreements. The seller's financial exposure under a warranty claim depends on the liability cap, the basket, and the limitation period agreed in the document. Under both Hong Kong and English law, those provisions are construed by reference to the express terms and, where ambiguous, by reference to the parties' objective intentions at the time of signing. Warranty and indemnity insurance has become a standard feature of mid-market cross-border deals. The underwriting requirements for that insurance are in practice shaped by the governing law of the share purchase agreement, because the insurer's subrogation rights depend on the remedies available under the applicable system.

For earn-outs and deferred consideration, the enforcement question is whether the payer has the assets and whether the dispute resolution mechanism can produce an award or judgment quickly enough to matter. A three-year earn-out structure in which the buyer is a Mainland group with assets in the Mainland and Hong Kong creates a specific enforcement calculus: a Hong Kong-law agreement with Hong Kong court jurisdiction, registered in the Mainland under Cap. 645, is a stronger enforcement position than an English-law agreement with London arbitration for a creditor whose debtor's assets are in Greater China.

We have acted on matters where a seller, holding an earn-out claim against a Mainland buyer, had to work through the enforcement route that the governing-law clause had prescribed years earlier. The route chosen at signing – and the assets available at the time of enforcement – determined the outcome of that claim more than the merits of the underlying entitlement.

What do international buyers and sellers most commonly get wrong?

Foreign principals – particularly those advised primarily by counsel from the United States, continental Europe, or the United Kingdom without a Greater China cross-border practice – make a set of recurring errors when governing-law and forum-selection clauses are negotiated for share purchase agreements with Greater China exposure.

The first error is assuming that English law and a London arbitration clause is a neutral, safe default. It may be neutral as between the counterparties in terms of doctrinal sophistication. It is not neutral in terms of enforcement outcome for a deal where the assets are in Hong Kong or the Mainland. A London-seated award is enforceable in Hong Kong under the New York Convention, and in the Mainland under the 1999 Arrangement and its 2020 Supplemental Arrangement. But the additional steps in that enforcement chain – compared with a Hong Kong-seated award or a Hong Kong judgment under Cap. 645 – create delay and cost that can determine whether a creditor recovers at all.

The second error is treating the dispute resolution clause as separable from the governing-law clause. In formal terms, they are separate. In practice, the combination of governing law and dispute resolution forum determines the enforcement perimeter. A Hong Kong-law agreement with London arbitration, or an English-law agreement with Hong Kong arbitration, creates a split that advisers must consciously choose rather than arrive at by default.

The third error is failing to align the acquisition vehicle with the governing-law and forum choices. A BVI holding entity purchasing a Hong Kong target, with the share purchase agreement governed by Hong Kong law and HKIAC arbitration, is a coherent structure. Adding an English-law governing clause to the same structure to satisfy the preferences of a European co-investor may create a gap between the governing law of the acquisition document and the governing law of the co-investment agreement – a gap that produces disputes about which document controls when the two sets of provisions conflict.

The sequence matters. The share purchase agreement governing law and forum should be agreed first, with reference to the enforcement perimeter. The co-investment, financing, and ancillary documents should then align to the same choice, or expressly address the interface where they differ.

The sequence above describes the standard position. Your matter turns on the documents, the jurisdictions actually engaged, and the order of steps – which is where the route is won or lost. To discuss how the governing-law and forum analysis applies to your specific deal structure, write to us at info@lockhartyip.com.

What is the current risk read, and where is the market moving?

In our cross-border M&A practice, the trend since the Mainland Judgments Ordinance came into force on 29 January 2024 has been a measurable increase in the use of Hong Kong-law governing clauses and Hong Kong-court jurisdiction clauses in share purchase agreements for Greater China deals. The mechanism Cap. 645 provides – registration of an effective Mainland judgment with the Court of First Instance, and vice versa – has made the Hong Kong court forum more attractive for deals where one counterparty or one asset pool has Mainland exposure.

The removal of the old exclusive-jurisdiction requirement under Cap. 645 (which had applied under its predecessor, the 2008 Choice-of-Court regime) has broadened the category of judgments that can be registered. That change was commercially significant. Under the 2008 regime, only judgments from courts that had been given exclusive jurisdiction in a written agreement were eligible for reciprocal enforcement. The connection-based test under Cap. 645 is less restrictive and makes the regime available to a wider range of commercial disputes – including disputes arising from share purchase agreements where the jurisdiction clause is non-exclusive or where the parties agreed post-signing to litigate in the Hong Kong courts.

At the same time, the use of HKIAC arbitration with the 2024 Rules has continued to grow for mid-market and upper-mid-market cross-border acquisitions. The 2024 Rules introduced several refinements that are directly relevant to share purchase agreement disputes: clarifications to the emergency arbitrator procedure, updated provisions on the joinder of additional parties (relevant where warranty and indemnity insurers are involved), and enhanced case-management tools for multi-contract disputes. These are operational improvements that make HKIAC arbitration a better-aligned mechanism for complex share purchase agreement disputes than it was under earlier versions of the Rules.

The risk that remains elevated is structural misalignment in legacy deals – share purchase agreements signed before 2024 under English law with London arbitration, where the enforcement analysis now looks different in light of the Cap. 645 regime. Parties in earn-out, deferred-consideration, or post-completion indemnity positions under those legacy agreements should assess whether the governing-law and forum combination they have actually produces an enforceable claim against the counterparty and its assets as they currently stand.

If an earlier filing, structure or enforcement attempt produced an adverse or stalled result, a second read can identify the strategic error and the routes still open. Write to us at info@lockhartyip.com to discuss a structured assessment of your position.

Micro-scenarios: where the analysis plays out

The following anonymised scenarios illustrate how the governing-law and forum choice operates in practice. No client is identified, and no figures are given beyond what is verified in our published data.

Scenario one. A Southeast Asian strategic group acquired a Cayman-incorporated holding entity whose principal asset was a Hong Kong-listed subsidiary with Mainland manufacturing operations. The share purchase agreement was governed by English law, with London-seated LCIA arbitration. After completion, the seller made a substantial warranty claim alleging that the buyer had failed to disclose a material liability in the target's Mainland entities. The buyer's assets, by that point, were concentrated in the Mainland. The seller's enforcement route through the London award required separate recognition and enforcement steps in both Hong Kong and the Mainland – a chain that added material time to the recovery process. A Hong Kong-law agreement with HKIAC arbitration would have allowed the seller to apply for Mainland interim measures during the arbitration and to enforce through Cap. 645 for the Hong Kong-situated assets. The lesson was not that London arbitration was wrong; it was that the enforcement perimeter had not been mapped at the time the governing-law clause was agreed.

Scenario two. A European family office, selling a minority stake in a Hong Kong operating company to a Mainland strategic investor, insisted on English-law governing clauses and London court jurisdiction as a condition of the transaction. The buyer agreed. After signing, a condition relating to a Mainland regulatory clearance was not obtained within the long-stop period. The seller sought to terminate and retain the deposit. The dispute was litigated in London. The English court had jurisdiction and the law was clear. But enforcing the resulting judgment in the Mainland against the buyer's assets required a separate recognition process that was outside the Cap. 645 regime (which covers Mainland–HK reciprocal enforcement, not England–Mainland enforcement). The seller recovered, but later and at greater cost than a Hong Kong-law structure with Hong Kong court jurisdiction would have produced. The lesson: for a seller whose counterparty's assets are in Greater China, the forum is as important as the governing law.

Self-assessment: questions for principals reviewing a share purchase agreement

Before fixing the governing law and dispute resolution clause in a cross-border share purchase agreement, a principal should be able to answer five questions. Each points to a structural decision, not a drafting preference.

First: where are the counterparty's assets now, and where are they likely to be if a claim arises? The governing-law clause should produce a judgment or award that can be enforced where the assets sit, without additional recognition steps.

Second: does the deal involve Mainland-incorporated entities, Mainland operating companies, or Mainland regulatory approvals? If yes, a Hong Kong-seated arbitration clause gives access to the interim-measures arrangement with Mainland courts that an English-seated arbitration does not provide.

Third: is the acquisition vehicle a Hong Kong company, a BVI entity, or a Cayman entity? The stamp duty and regulatory clearance implications differ, and the vehicle should be chosen before the governing law of the share purchase agreement is fixed.

Fourth: is there warranty and indemnity insurance on the deal? If yes, the insurer's subrogation rights and the underwriting conditions may influence the governing-law choice. Insurers active in the Asia-Pacific market are familiar with both Hong Kong and English law; the alignment between the policy governing law and the share purchase agreement governing law is worth confirming at the underwriting stage.

Fifth: does the long-stop date account for the regulatory clearance timeline in each jurisdiction where approvals are required? A share purchase agreement that does not build in adequate time for Mainland regulatory clearances will produce a completion risk that sits in the material adverse change and termination provisions – a risk that both parties will dispute under the governing law the document prescribes.

Related practices

Related practices

• M&A & Transactions – Cross-border acquisition structuring and transaction execution across Greater China
• Holding Structures – Vehicle selection and structural alignment for offshore and Hong Kong holding layers
• Disputes & Arbitration – HKIAC arbitration, enforcement, and interim measures across Mainland and offshore jurisdictions

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This publication is general information and does not constitute legal advice. For advice on your situation, contact info@lockhartyip.com.