As in other jurisdictions, the acquisition of a business in Hong Kong may be structured either as a sale of shares or as a sale of assets (or a combination of the two). The buyer may purchase the shares in the company operating the business from its shareholders or purchase the assets of the business directly from that company, with the former more common than the latter.

Auction processes are quite common in Hong Kong. They often involve a two-stage bid process, using non-binding bid letters at the indicative offer stage and binding bid letters at the final offer stage.

Broadly defined, a merger involves the absorption of one company (that ceases to exist) into another that retains its own identity and acquires the assets and liabilities of the former. Hong Kong provides a simple, court-free amalgamation procedure for effecting the merger of Hong Kong companies as long as the companies are sister companies or parents-subsidiaries and the statutory requirements can be satisfied. Complex amalgamations may be effected through a court-sanctioned scheme of the arrangement, though this is rarely used in practice. The court-free amalgamation procedure was introduced in March 2014 and the authorities have since provided guidance on the treatment of key elements, such as tax and employees. Where the legal position is unclear (e.g., whether employees transfer automatically), a more conservative approach is recommended. The economic results of a merger can also be achieved through any of the following:

• Transfer of one company's business assets to another company, followed by liquidation or disposal of the transferor company.
• Establishment of a new company that acquires the assets of two or more entities, which, following the transfer of assets, are liquidated or disposed of.
• Transfer of one company's (company A) shares to another company (company B), followed by liquidation of Company A and distribution of its assets in their present form to company B.

A Hong Kong target company or seller is typically a private company limited by shares incorporated in Hong Kong under the Companies Ordinance (Chapter 622 of the Laws of Hong Kong), which is the most commonly used entity form in Hong Kong. Such a company can be formed quickly and requires little formality.

A company formed under Hong Kong law may be limited, by shares or by guarantee, or unlimited. If a company is limited by shares, the liability of its members (i.e., "shareholders") is limited to the amount, if any, unpaid on their shares. A company limited by guarantee means that the parties involved are not shareholders but guarantee members. Instead of investing capital, the members guarantee to contribute a predetermined sum to the company to cover its liabilities in the event of a winding up of the company.

A company limited by shares can be either public or private. Certain restrictions are imposed on a private company. Its articles of association must restrict the right of members to transfer their shares, limit the number of members to 50 (exclusive of any member who is a current or past employee) and prohibit invitations to the public to subscribe for any shares or debentures. However, a private company may be converted into a public company at any time by removing these restrictions from its articles of association.

Limited liability companies in Hong Kong no longer have authorized capital, which limits the capital of the company, and shares no longer have a par value. The capital of a company may be denominated in any currency.

Private companies shall not have more than 50 members (exclusive of employee members). There is no similar limit for public companies.

A share acquisition is generally more straightforward to implement from both the seller's and the buyer's point of view. A share acquisition involves the transfer of ownership of only the shares in the target company and, as a matter of Hong Kong law, is a relatively straightforward process. An instrument of transfer and bought and sold notes executed by the buyer and seller are required for transfer of shares in a Hong Kong company. Legal title is considered transferred after the share transfer documents are stamped (stamp duty is payable at the rate of 0.2% of the consideration) and the register of members has been updated to reflect the name of the new shareholder. It also provides continuity for the business for the buyer and a clean break for the seller.

An asset sale involves the identification and transfer of title to specific assets or categories of assets, which is generally a more complicated process than a share acquisition. The target's assets may include land and premises, inventory and work-in-progress, book debts, intellectual property rights, goodwill, insurance, leases, hire purchase and other contracts, and plant and machinery. It may be necessary to transfer each asset or category of assets from the target to the buyer by way of separate conveyances, assignments and transfers and, in some instances, there may also be requirements for consent from third parties not directly involved in the transaction. New permits or authorizations may also be needed to carry on the business. Timing for obtaining consents or running by the necessary procedures may affect the timing of the transaction. The transfer of assets also raises additional concerns in relation to the employees of the business.

One of the main advantages of asset acquisitions is that the buyer may pick and choose specific assets or liabilities to be purchased or assumed, leaving behind those assets and liabilities that it does not require. The buyer of the assets will generally not inherit the target's liabilities, provided that the notice procedures under the Transfer of Businesses (Protection of Creditors) Ordinance (Ordinance) are followed. Otherwise, under the Ordinance, the buyer of a business, or part of a business, is deemed liable for all the debts and obligations arising out of the carrying on of the business by the seller.