Update: a share purchase agreement governed by Hong Kong or English law

Cross-border M&A deals routed through Greater China are generating a recurring question at the term-sheet stage: which governing law should the share purchase agreement carry, and does that choice hold once the target company, the buyer entity and the enforcement forum sit in different jurisdictions?

A share purchase agreement (the principal transaction document transferring legal title to shares in the target) governed by Hong Kong or English law gives a foreign principal access to a well-developed, commercially tested body of contract law, a neutral common-law forum, and – where assets or counterparties sit in the Mainland – a clearer path to enforcement under the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance, which came into force on 29 January 2024. The choice is not automatic. It depends on the deal structure, the jurisdictions engaged, and where any dispute is most likely to be resolved.

This briefing sets out the trigger, the corridor it affects, and the immediate steps a cross-border principal should take.

What is driving the question now?

Two developments are converging. First, the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) changed the enforcement calculus for deals with Mainland-side counterparties. Under the pre-2024 position, a Hong Kong court judgment on a share purchase dispute could only be registered and enforced in the Mainland if the original court had been designated as the exclusive forum in the agreement. That requirement has been removed. A connection-based test now applies for judgments made on or after 29 January 2024. That changes how governing-law and forum clauses should be drafted.

Second, deal structures in the corridor – the typical pattern of a BVI or Cayman holding entity above a Hong Kong operating company, or a direct acquisition of a Hong Kong-incorporated target – increasingly involve buyers and sellers from the Middle East, Central Asia, or Europe whose own counsel are not familiar with the Hong Kong/Mainland interface. The governing-law clause is sometimes left as a commercial afterthought. It should not be.

Who is affected across the corridor?

Any group acquiring or divesting shares in a Hong Kong-incorporated company, a BVI or Cayman holding entity with Mainland-side assets, or a target with a mixed Greater China footprint should review this position. The choice between Hong Kong law and English law is material in three specific respects.

First, stamp duty. The transfer of Hong Kong stock carries ad valorem stamp duty of 0.1% per party (0.2% in aggregate) on the higher of consideration or market value. Where the transaction is structured as a transfer of shares in a non-Hong Kong holding company that does not itself hold Hong Kong-situated assets, the position is different – but that analysis must be done on the facts of the deal, not assumed.

Second, enforceability against a Mainland counterparty. A judgment on a Hong Kong-law or English-law share purchase agreement obtained in the Hong Kong courts can now proceed under Cap. 645 without the old exclusive-jurisdiction requirement. That broadens the practical utility of a Hong Kong governing-law and forum package for deals where the counterparty's assets are on the Mainland side.

Third, regulatory clearances. The governing law of the share purchase agreement sits alongside, but does not replace, the merger-control and foreign-investment clearance regime applicable in each jurisdiction where the target operates. A well-drafted agreement identifies each clearance as a condition precedent and allocates the obligation and risk correctly. Our desk regularly sees share purchase agreements that treat Hong Kong as the governing-law jurisdiction while omitting to address Mainland regulatory approvals as a sequential condition. That misalignment creates completion risk.

For a structured read on merger-control and regulatory clearances across the Asia deal perimeter, see our analysis on merger control and regulatory clearances in Asia.

What to do immediately

Three steps deserve priority attention before heads of terms are signed.

Check the governing-law clause against the deal structure. Hong Kong law and English law are both sound choices for a cross-border share purchase agreement. The question is whether the choice aligns with the forum clause, the asset jurisdiction, and the enforcement route. A governing-law clause pointing to Hong Kong law paired with an arbitration clause seated in Singapore, for example, raises sequencing questions that are better resolved before completion than after a dispute arises.

Map the enforcement route at the outset. Under Cap. 645, the Court of First Instance can register an effective Mainland judgment – or provide the certification mechanism for a Hong Kong judgment to be used in the Mainland. That reciprocal pathway is available only where the judgment falls within the Ordinance's scope. Certain categories, including some insolvency-related and succession matters, are excluded. Deal counsel should identify whether any claim that might arise from the share purchase agreement would fall within or outside that scope.

Address minority protections and shareholder rights in the transaction documents, not the governing statute. Where the deal involves a joint venture or a partial acquisition, the governing-law choice interacts with the jurisdiction in which the target is incorporated. For Cyprus-incorporated joint ventures, which are a recurring structure on our desk for European-origin buyers accessing Greater China assets, our analysis on minority protections in Cyprus joint ventures addresses the specific overlay.

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 governing-law and forum alignment applies to your cross-border share purchase, contact us at info@lockhartyip.com.

For full coverage of our cross-border M&A and transactions work, see the M&A & Transactions practice page.

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• Ma Transactions
• Merger Control Regulatory Clearances Asia Deal Analysis
• Minority Protections Cyprus Joint Venture Cyprus Analysis

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