A share purchase agreement governed by Hong Kong or English law: a step-by-step guide

The choice of governing law for a share purchase agreement is not a drafting formality. It is a commercial decision with enforcement consequences that run for years after closing. For a deal with a Hong Kong holding entity, a Mainland operating company, or offshore intermediaries in the BVI or Cayman Islands, the governing law of the share purchase agreement (the principal transaction document recording the sale and purchase of equity interests, commonly abbreviated as SPA) determines where disputes are resolved, how warranties are measured, and whether a judgment or award can actually be collected.

A share purchase agreement governed by Hong Kong or English law provides a buyer or seller with a mature, well-tested contractual regime backed by an independent judiciary and a clear path to international enforcement. The governing instruments are the common-law contract principles applied by the Hong Kong courts, the Companies Ordinance (Cap. 622) for corporate mechanics, and – where arbitration is chosen – the Arbitration Ordinance (Cap. 609). The cross-border interface between Hong Kong and the Mainland became materially stronger on 29 January 2024, when the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) took effect, enabling registration of effective Mainland civil judgments in Hong Kong and vice versa.

This guide sets out the sequence a deal team follows when structuring and executing a cross-border SPA under Hong Kong or English law: from the initial law and forum decision, through signing, to post-closing and enforcement. Each step identifies the gate the deal must pass before moving forward.

Why governing-law choice matters more than parties expect

Many sophisticated principals treat governing law as a standard negotiating point settled early and forgotten. That is a structural error with real consequences.

The governing law controls how warranties are interpreted, how material adverse change clauses are read, and how indemnification claims are quantified. Hong Kong and English law share common-law roots but are now distinct systems. English law has been shaped by decades of post-Brexit legislative change. Hong Kong law remains anchored in pre-1997 English common law, supplemented by local ordinances and the Court of Final Appeal's own jurisprudence. For a deal with assets or counterparties in Greater China, Hong Kong law carries an enforcement advantage that English law does not: the reciprocal-enforcement regime under Cap. 645 operates specifically between Hong Kong and the Mainland, not between the Mainland and England.

In our cross-border M&A practice, we regularly see mid-market deals – particularly those involving a BVI or Cayman holding vehicle above a Mainland or Hong Kong operating company – where the SPA is governed by English law as a perceived neutral choice. When the buyer later needs to enforce a warranty claim against a Mainland-based warrantor, the enforcement route through Hong Kong's reciprocal mechanism is blocked: Cap. 645 applies to Hong Kong judgments, not English judgments. The warrantor's Mainland assets may be effectively out of reach.

The cross-border interface is therefore the first decision gate in any SPA negotiation, not the last.

Step 1: Align the governing law with the deal architecture

Before a single warranty schedule is drafted, the deal team must map three elements: the jurisdiction of the target entity; the location of the assets and the warrantor; and the intended enforcement route if warranties are breached.

Where the target is a Hong Kong company (incorporated under the Companies Ordinance, Cap. 622) and the warrantor has meaningful assets in either Hong Kong or the Mainland, Hong Kong governing law is typically the stronger choice. The courts of the Court of First Instance are experienced in complex commercial SPA disputes. Judgments are enforceable on the Mainland via Cap. 645. Arbitration clauses seated in Hong Kong additionally benefit from the interim-measures arrangement in force since 1 October 2019, which allows a Hong Kong-seated arbitral tribunal to seek interim relief from Mainland courts – a mechanism unavailable to arbitrations seated elsewhere.

Where the target is an English holding company and assets are in the United Kingdom or in European Union jurisdictions, English law may be appropriate. Where the deal is structured through a BVI or Cayman holding entity, the SPA will often be governed by English or Hong Kong law regardless of the holding-vehicle domicile, because neither the BVI nor the Cayman Islands offers a comparably liquid court system for complex warranty disputes.

The gate at this step: the governing law, the dispute-resolution mechanism (litigation or arbitration), and the seat (if arbitration) must all be confirmed and aligned before term-sheet finalisation. Misalignment discovered at this stage is correctable. Misalignment discovered at the enforcement stage is expensive.

For a detailed discussion of acquisition vehicle structuring in Greater China transactions, see our analysis at Structuring the acquisition vehicle for a Greater China deal.

Step 2: Structure the transaction documents around the SPA

An SPA is the centre of a document suite. Treating it as a standalone instrument is a common mistake with downstream consequences.

The standard document architecture for a cross-border SPA under Hong Kong or English law includes: the SPA itself; a disclosure letter (the mechanism by which the seller qualifies warranty statements against facts already known to the buyer); any ancillary transaction agreements (shareholders' agreements, service agreements, licence arrangements, management accounts); and completion mechanics documents (board and shareholder resolutions, stock transfer forms, share certificates, and the Significant Controllers Register update required under the Companies Ordinance).

Where the Companies Ordinance (Cap. 622) governs the target entity, the Significant Controllers Register (the register of persons with significant control that Hong Kong companies have been required to maintain since 1 March 2018) must be updated at or after completion. Failure to update is a compliance default, not a technicality.

For offshore holding vehicles – a BVI company, for example – the target jurisdiction's company laws run in parallel. The BVI Business Companies Act imposes its own transfer mechanics. The deal team must satisfy both the SPA and the local registry requirements before title passes cleanly.

The gate at this step: the full document suite is identified, responsibilities allocated, and a completion agenda – listing every deliverable and its custodian – is agreed before signing.

Step 3: Conduct cross-border due diligence before warranties are set

Warranties are only as strong as the due diligence that precedes them. In a cross-border deal, the diligence perimeter regularly spans multiple legal systems with different disclosure norms, different land registration systems, and different approaches to intellectual property ownership.

For a Hong Kong target with Mainland operating subsidiaries, the diligence scope includes: corporate standing in Hong Kong (at the Companies Registry); corporate standing and registered capital for each Mainland entity (at the relevant Administration for Market Regulation, the Mainland registry body for commercial entities); land-use rights and property; employment and social insurance; tax compliance; and any regulatory licences.

Diligence findings directly populate the warranty schedule and the disclosure letter. A seller who identifies a Mainland compliance gap during diligence must decide whether to remedy it before signing, disclose it in the disclosure letter, or accept a price adjustment. A buyer who fails to identify the gap takes the risk of a warranty claim that the seller will defend on the basis that the information was available.

What foreign counsel frequently get wrong at this step is treating the Mainland due diligence as a translation exercise. In practice, the legal concepts – such as the registered capital mechanism, the distinction between land-use rights and property ownership, and the position on related-party transactions under PRC company law – require substantive legal analysis, not just document review.

The gate at this step: the diligence report is completed, findings are reflected in the warranty schedule and disclosure letter, and any remediation steps have a confirmed timeline before signing.

Our cross-border due diligence framework for Asia acquisitions is set out in our guide at Cross-border due diligence for Asia acquisitions.

Step 4: Draft and negotiate the core SPA terms

With the deal architecture, document suite, and diligence findings in place, drafting begins in earnest. Under Hong Kong and English law, the SPA follows a well-established structure. The principal negotiating points in a cross-border deal cluster around five areas.

First, the completion mechanism – whether the deal uses a locked-box model (price fixed at a historical balance-sheet date, with leakage protections) or a completion accounts model (price adjusted by reference to financial position at closing). Each has different risk profiles for a buyer acquiring a Mainland-opco group, where the gap between signing and completion can allow earnings or cash to shift.

Second, the scope and qualifications of the warranty and indemnity package. Under Hong Kong and English law, warranties are contractual statements; breach gives rise to a damages claim, not rescission (absent fraud or a specific condition precedent). The warrantor will seek to qualify warranties by knowledge, materiality, and the contents of the disclosure letter. The buyer will seek the broadest possible warranty statement with the narrowest possible qualifications.

Third, the conditions precedent to completion. A cross-border deal commonly requires regulatory clearances – foreign investment approvals, merger control filings, or licence transfers – in more than one jurisdiction. Each clearance creates a condition. If a condition is not satisfied or waived by a long-stop date, the SPA permits either party (or the buyer only) to terminate. The drafting of the long-stop provision, and the consequences of a failure to obtain clearance, is one of the highest-stakes points in any cross-border negotiation.

Fourth, the dispute-resolution clause. For Hong Kong governing law, parties have a genuine choice between Hong Kong court litigation and HKIAC arbitration. The HKIAC Administered Arbitration Rules, in force in their current edition effective 1 June 2024, offer a modern, confidential regime well-suited to commercial disputes. Arbitration awards made in Hong Kong-seated proceedings are enforceable in over 170 jurisdictions under the New York Convention. Where the warrantor has Mainland assets, the Mainland–HK arbitral-award enforcement arrangements provide a parallel route.

Fifth, the governing law and jurisdiction clause itself. In a Hong Kong-law SPA, this clause should specifically submit disputes to Hong Kong courts or a Hong Kong-seated arbitral tribunal. Vague or split-jurisdiction clauses – common in templated deals – create uncertainty at the enforcement stage.

The gate at this step: a complete, agreed draft SPA with all schedules and annexures, ready for execution.

Step 5: Manage the signing-to-completion interval

In a straightforward single-jurisdiction deal, signing and completion may occur simultaneously. In a cross-border transaction, the gap between signing and completion can run from several weeks to several months, depending on the regulatory clearances required.

During this interval, the SPA imposes obligations on both parties. The seller typically gives covenants to carry on the business in the ordinary course. The buyer has an obligation to pursue regulatory clearances diligently. The parties have joint obligations to keep the transaction confidential and – where applicable – to make necessary public disclosures.

For deals involving Mainland approvals, the timeline is driven by the Ministry of Commerce or its local counterpart, and by the State Administration for Market Regulation where merger control is triggered. Neither operates on a fixed statutory timetable in the same way as, for instance, the European Commission's merger control regime. Parties should factor meaningful buffer time into the long-stop date.

A common mistake is for deal teams to treat the signing-to-completion interval as a quiet period. It is not. Leakage under a locked-box mechanism must be monitored. Warranty compliance certificates must be prepared. Board and shareholder approvals at the target must be choreographed to align with the completion date. A completion agenda prepared at the drafting stage makes this interval manageable.

The contextual bridge from this step to the next is the completion meeting itself – the single moment when all deliverables are exchanged and title passes. Every gap identified now is significantly cheaper to address than a dispute about completion shortfalls after the deal has closed.

If a prior attempt at completion stalled or produced a contested position on deliverables, a second read of the SPA mechanics often identifies where the sequence broke down and what routes remain open. For a structured review of your transaction position, write to us at info@lockhartyip.com.

Step 6: Complete the transaction and execute post-closing steps

Completion under a Hong Kong or English-law SPA is a formal exchange of deliverables. Title passes when the parties have exchanged all items listed in the completion agenda: the signed stock transfer form, the original share certificate (cancelled and reissued), the board resolutions approving the transfer, the payment of the purchase price, and any ancillary documents required under the SPA.

For a Hong Kong-incorporated target, the transfer must be notified to the Companies Registry by the company, and stamp duty on the transfer of Hong Kong stock applies at an ad valorem rate of 0.1% per party (0.2% in aggregate) calculated on the higher of the consideration paid or the value of the shares. Completion without attending to stamp duty creates a document-admissibility risk in any subsequent proceedings.

Post-completion, the typical obligations include: filing the stamp-duty return and paying the duty; updating the register of members; updating the Significant Controllers Register; and completing any regulatory notifications required in the target's operating jurisdictions. For a deal with Mainland operating subsidiaries, the foreign investment registration may require updating at the Mainland registry to reflect the new ultimate beneficial owner.

An Asian technology group we advised in a mid-market acquisition in late 2025 – acquiring a Hong Kong holding entity with subsidiaries in both the Mainland and Singapore – encountered a post-completion gap precisely here. The Mainland foreign-investment registration had not been updated within the required period, creating a compliance exposure in the operating subsidiaries. We coordinated with locally licensed counsel in the Mainland and Singapore to complete the registrations and document the remediation. The lesson: post-completion steps in cross-border deals are not administrative tail. They are structural requirements with their own deadlines.

The gate at this step: all post-completion obligations are discharged, evidenced, and filed before the deal team disperses.

Decision checklist: aligning the SPA with your cross-border position

Before the SPA is signed, a deal team operating across the Hong Kong–Mainland–offshore corridor should be able to answer each of the following questions affirmatively.

Has the governing law been selected with the enforcement route in mind, not just the drafting convention? A Hong Kong-law SPA maximises the use of Cap. 645 and the Mainland–HK arbitration arrangements. An English-law SPA does not.

Is the dispute-resolution clause (litigation or HKIAC arbitration) consistent with where the warrantor holds assets? If the warrantor's assets are in the Mainland, a Hong Kong-seated arbitration clause enables the 2019 interim-measures arrangement and the arbitral-award enforcement mechanism.

Has the full document suite – SPA, disclosure letter, completion accounts or locked-box mechanics, ancillary agreements, completion agenda – been prepared and reviewed? Missing one instrument at signing creates a gap that cannot be remedied after title has passed.

Has cross-border due diligence covered every jurisdiction where the target holds assets or licences? Diligence limited to the holding entity, without descending to Mainland or Singapore subsidiaries, leaves the warranty package exposed.

Are all regulatory conditions precedent identified, with realistic timelines and a properly calibrated long-stop date? A long-stop date set without reference to actual Mainland or offshore approval timelines will be the first term renegotiated under pressure.

Have post-completion filings – stamp duty, Companies Registry notification, Significant Controllers Register, foreign-investment registration – been allocated to a responsible party with a confirmed deadline? Unallocated post-completion obligations are routinely dropped.

Has the stamp-duty position been assessed for all shares being transferred? For shares in a Hong Kong company, ad valorem duty applies. For shares in a BVI or Cayman holding entity that holds no Hong Kong-situated assets, the position is ordinarily outside Hong Kong stamp duty – but this requires a factual analysis on the specific structure.

The sequence above describes the standard position across a well-run cross-border SPA. Your matter turns on the specific documents, the jurisdictions actually engaged, and the order of steps – which is where the route is won or lost. For a structured assessment of your SPA position across the relevant jurisdictions, write to us at info@lockhartyip.com.

Related practices

• M&A & Transactions – cross-border deal structuring, SPA drafting and execution across Greater China and offshore centres
• Holding Structures – BVI, Cayman and Hong Kong holding architecture above operating entities in Greater China

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• Ma Transactions
• Structuring Acquisition Vehicle Greater China Deal
• Cross Border Due Diligence Asia Acquisition Guide

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