WBA: Liquidity events – a term covering public listings of firms as well as sales of private firms – are thriving in Hong Kong. In general terms, how would you characterise the liquidity event environment and its impact on HNW individuals/families? 
Ross Davidson: Hong Kong’s liquidity market has real momentum again. We are seeing a steady pipeline of listings, including Chinese companies choosing Hong Kong alongside – or instead of – the US, often to reduce regulatory exposure and access Asian capital more directly. At the same time, private sales remain active, with strategic buyers and private equity generating meaningful exits for founder families across the region.

What strikes me most is the compression of time. A founder may spend 20 years building a business; the liquidity event itself happens almost overnight. The consequences, however, tend to last for decades.

In an IPO, wealth becomes visible – sometimes very publicly so – but is often locked up. In a private sale, liquidity can arrive immediately. In both cases, the shift is profound. Entrepreneurs become asset allocators.  A single operating business becomes a diversified portfolio. Questions around succession, cross-border exposure, governance and reputation move to the foreground very quickly.

The families who navigate that moment well are almost always those who prepared in advance. For those who did not, the questions do not disappear; they simply become more urgent – and more expensive – to resolve.

In both cases, the families who handle that moment well are almost always the ones who prepared for it. Those who have not find the questions do not go away – they simply become harder and more expensive to answer.

Wei Kang: Perhaps the indirect evidence of Hong Kong’s IPO boom is that Hong Kong Securities and Futures Commission issued a significant SFC Sponsor Circular in January 2026 to warn the sponsors of the regulating body’s concerns over the quality of the listing documents. 

Generally, there are two ways HNW individuals respond to the uptick in liquidity events. For those who have prepared in advance, the liquidity event is a desirable step forward, with proceeds to go to a wealth structure which has been set up to address the family’s succession needs in a tax-efficient manner. For the HNW individuals who have not considered wealth planning, the liquidity event can be a daunting event that can increase the family’s overall risk exposure, but setting up proper wealth structures can be a challenging task timing wise, due to the tight deadlines often associated with all the corporate transactions which have to take place as part of the liquidity event.  

WBA: When IPOs and other liquidity events happen, what typically happens in terms of how a beneficiary of such an event acts? What are the first steps that such beneficiaries take? 
Ross Davidson: There is usually relief first – understandably so. Getting to a listing or sale is exhausting. But in my experience, the planning questions begin before the celebration is over. After an IPO, wealth may be substantial but illiquid, and suddenly very public. After a private sale, the business has gone and is replaced by cash. Both positions can feel unfamiliar.  

If planning was done early, the first calls are confirmatory – to legal, tax and fiduciary advisors – and the transaction simply activates a structure that was already in place. If not, the priority is to slow things down and assemble the right team quickly. We need a complete picture: assets, jurisdictions, residency history, family dynamics. At the same time, we focus on immediate risk management – where proceeds are held, concentration exposure, and governance over decision-making.

The earlier that clarity is achieved, the more options remain. Once capital is deployed or positions are taken, flexibility narrows.

Wei Kang: A liquidity event is an important milestone in the journey to grow family wealth. After the great joy is often the realisation of one’s responsibility to look after family members and often one’s long-time executives or employees. We encourage HNW individuals to take a long-term and holistic view over how their family wealth should be managed and distributed. Their succession objectives and any relevant tax issues (for example, the current and future tax residency of the family members) are the determining factors for the design of a wealth structure which can withstand the test of time.   

WBA: How does a firm such as yours initially engage with such people? Do they approach you? Vice versa? Do you connect via networks, word of mouth, other?
Ross Davidson: Almost always by referral, and usually at a very specific moment – when someone already close to the family recognises that the private wealth dimension of a transaction needs specialist attention.

Investment banks and corporate advisors know their clients well. When they see that holding structures or succession planning have not kept pace with the business, they introduce us. In this market, those referrals carry weight; no one makes them lightly.  

Hong Kong is also a relationship-driven community. At the ultra-HNW level, families know each other socially and commercially. Some of our introductions have come simply because one family mentioned us to another over dinner. That kind of recommendation is very different from formal marketing.

When we are introduced, the first step is a conversation, not a pitch. Families are looking for judgement and discretion. We spend time understanding the history of the wealth and the family’s concerns before outlining options. If it works, the relationship becomes long term rather than transaction-specific.

Wei Kang: Word of mouth is most important because most clients come to us through referrals. We are an integral part of the private wealth ecosystem which consists of private bankers, law firms, accounting firms, external asset management companies and family offices. Sometimes HNW clients or their gatekeepers may find us through ranking agencies. We are one of the very few private client teams in Hong Kong which have obtained tier one ranking from both Chambers High Net Worth and Legal 500. We also work closely with the family office team of Invest Hong Kong which is a government agency.

WBA: With people benefiting from these events, what in your experience are the best ways to ensure that there is a relatively smooth process, and what sort of problems arise? What kinds of mistakes tend to get made that others can learn from? 
Ross Davidson: The clearest predictor of a smooth liquidity process is simple: start early. Not weeks before completion, but 12 to 24 months out. That allows time to put appropriate structures in place, review cross-border exposure and align family expectations.  

Leave it too late and options narrow quickly. Once a prospectus process is underway, restructuring becomes difficult and highly visible.

Cross-border issues are a common stumbling block. Families are often spread across jurisdictions – children abroad, property offshore, business interests in mainland China. Those connections can trigger tax or succession consequences that only become obvious once liquidity crystallises. They are manageable, but much easier addressed in advance.  

Another recurring mistake is behavioural. After a sale, families can feel pressure to deploy capital quickly. Without a clear framework, informal investments and undocumented arrangements can create avoidable problems. The families who fare best prepare early, understand their cross-border profile and impose structure – legally and in decision-making – before significant capital moves.

Wei Kang: Recently the founder of a Hong Kong listed company approached us to set up a philanthropy foundation to support certain schools in Asia. After our discussions with his in-house counsel and tax advisors, the founder incorporated a philanthropic foundation which was then appointed to be an additional beneficiary of the master trust which had been set up before IPO for the purpose of holding shares of the Hong Kong listed company.

This foundation could be funded directly by the master trust. If we had not set up the master trust prior to IPO, the founder would have had to transfer assets from his holding company to his personal name and then make another transfer to his philanthropy foundation. The extra asset transfer steps would expose the founder to unnecessary risks.  

WBA: There is a toolkit of trusts and other structures that can be used by beneficiaries – not just to mitigate tax, but also for wealth structuring/protection purposes – can you talk about these and the pros and cons. What trends do you notice in terms of the structures that people use?
Ross Davidson: The structuring conversation looks very different from a decade ago. Regulation, transparency and client sophistication have all changed the landscape.

The discretionary trust remains a core tool, particularly for families with common law backgrounds. It offers flexibility and a well-tested legal framework. But concerns about control have led to more tailored approaches – reserved powers, protectors and private trust companies. For families from civil law jurisdictions, foundations have grown in popularity. They have legal personality and can be easier to explain conceptually. The trade-off is usually reduced flexibility compared with a discretionary trust.

We also see increasing use of family investment companies and more formalised family offices, particularly after major liquidity events. That reflects a broader shift from entrepreneur to institutional asset manager.

What has changed most is the regulatory backdrop. With global reporting standards and beneficial ownership regimes, opacity is no longer sustainable. Modern structures are designed to be transparent, coherent across jurisdictions and defensible over time. Ultimately, the question is not which structure is fashionable, but which combination genuinely fits the family’s objectives and will endure across generations.

Wei Kang: Trusts remain the popular tool in addition to wills and enduring power of attorney (which in my view are a must for any client). However, a trust is an extremely versatile tool and there are many nuances when it comes to trust planning. Compared with a decade ago, the tax compliance requirements are stricter than ever, and the regulatory compliance landscape is more robust.

It is more important for HNW individuals to ensure that their trust structures have sufficient substance and can go through stress tests. In practical sense, this means that trusts made from cookie cutters can no longer meet the needs of HNW individuals. We have seen increasing demands from HNW families and their advisors for bespoke trust solutions which can consider the family’s long-term interests and address their tax and non-tax related concerns. Sometimes we need to pay the devil’s advocate role to help the family to find the best solutions.   

WBA: Cross-border issues: How much of the beneficiaries of liquidity events are in mainland China, and outside (Europe, Middle East, rest of Asia, North America, other)? What sort of challenges can cross-border flows create?
Ross Davidson: Almost every liquidity matter we handle in Hong Kong has a cross-border dimension. The largest cohort involves families with substantial mainland China connections, but we regularly advise on structures touching the US, Canada, Europe, South-East Asia and increasingly the Middle East.

Complexity arises when legal systems take different views of the same asset or relationship. A common law trust, for example, does not sit neatly within PRC law. US tax residence can bring worldwide reporting obligations into what appears to be a Hong Kong structure. European forced heirship regimes can cut across succession planning.  

These issues are not theoretical; they affect real outcomes. 

What makes a difference is integrated advice. We work closely with colleagues across Stephenson Harwood’s network – including London, Paris, Dubai and Singapore – and we are one of the few law firms with a real focus on and office in mainland China. That allows us to coordinate advice across jurisdictions as a single team.

In cross-border wealth, fragmentation is the real risk. Families benefit most when advisors see the whole map from the outset.

WBA: I see that there is a Canadian aspect and there are a lot of people with Hong Kong backgrounds who reside in places such as Vancouver, etc. Can you talk a bit about the requests and challenges that this client cohort presents. 
Ross Davidson: There is a long-established diaspora of Hong Kong families in Canada, concentrated in Vancouver and Toronto, many of whom left in the years around 1997 and have since built significant wealth or maintained substantial interests in both countries. We are also seeing a more recent wave –families who acquired Canadian permanent residence or citizenship, often for the next generation, and who are now actively involved in businesses and liquidity events in Hong Kong.

The Canadian-connected community is a particularly complex cohort when it comes to cross-border planning. The key is integrating Canadian analysis from the outset, working closely with specialists such as Wei so that Hong Kong, PRC and Canadian elements are addressed together rather than sequentially.

Wei Kang: Canada, like many western countries, taxes tax residents on their worldwide income and imposes reporting requirements on foreign assets. There are two sets of challenges for HNW families with Canadian connections. 

The first challenge relates to the determination of Canadian tax residency. There is a widespread misconception that a person who does not spend more than 183 days in Canda in a calendar year is not a Canadian tax resident. In fact, Canadian tax residency is a matter of residency ties. Therefore, it is possible for a businessman to spend very few days in Canada each year and is still considered a Canadian tax resident (for example, especially where the spouse or children live in Canada). 

For individuals who are considered to be a tax resident in two jurisdictions such as Hong Kong and Canada, it is also necessary to consider the tie-breaker rules under applicable tax treaties and compare the residential ties in both jurisdictions before arriving at a conclusion. We always encourage HNW clients who have substantial ties in Canada to seek professional advice to avoid becoming a Canadian tax resident inadvertently. 

The second challenge is being unaware of a “time bomb” if members of second or third generations may wish to live in Cananda. If the asset owner remains a non-tax resident of Canada, they can set up a straightforward family trust to benefit Canadian family members on a tax-free basis and avoid having to pass substantial assets to the same Canadian family members through personal gifts or wills probate. This benefit will continue even after the settlor passes away. If they do not use a family trust, their assts, when inherited by a Canadian family member, will be owned by Canadian tax residents and thereafter be subject to Canadian taxation.    

WBA: In May 2025, the Hong Kong government introduced a company re-domiciliation regime under the Companies (Amendment) (No. 2) Ordinance 2025. It established a formal re-domiciliation pathway for overseas companies. How has this new rule affected the work you do?
Ross Davidson: The new re-domiciliation regime introduced in May 2025 has changed the conversation. Previously, migrating an offshore holding company into Hong Kong typically meant liquidation or asset transfers – both disruptive and potentially tax-sensitive.  

The new framework allows a company, subject to conditions, to re-domicile while preserving its legal identity. That continuity is significant.

Many families established BVI or Cayman vehicles decades ago because that was standard practice. Today, where assets and governance are centred in Hong Kong, those structures may no longer fit as naturally. Re-domiciliation offers a cleaner alternative – though tax and regulatory analysis remains essential.

As Hong Kong positions itself as a family office hub, this regime is a practical addition to the toolkit.

Wei Kang: This is a much needed change to increase Hong Kong's attractiveness in private wealth structuring. In practice there are two main considerations for clients who would like to use the re-domiciliation regime to transfer an offshore company into Hong Kong. The first consideration is predictable compliance costs without the “offshore” label. Major offshore jurisdictions have significantly increased the compliance and disclosure obligations for companies over the years. This trend is continuing. 

By comparison, Hong Kong provides the opportunity to set up companies within a clear compliance framework and closer to the home jurisdictions of the clients. The second advantage is access to the numerous double tax treaties of which Hong Kong is a party. For example, we are discussing with several clients the possibilities of re-domiciling the offshore holding company to Hong Kong to allow the corporate structure to access the tax agreement between Hong Kong and mainland PRC. If the conditions are met, a dividend declared by the mainland subsidiary to its Hong Kong parent company is only subject to 5 per cent withholding tax as opposed to 10 per cent if the parent company is incorporated in a jurisdiction which does not have any tax agreement with mainland PRC.  

WBA: There are specific rules regarding pre-IPO investments and the treatment of pre-IPO investors' shares after the IPO in Hong Kong. For example, pre-IPO investors may be subject to lock-up periods, and their shares may be counted as part of the public float. How significant is it as an area of business?
Jane Ng: Hong Kong’s IPO market has strengthened considerably since 2024, with the city reclaiming its position as the world’s top fundraising venue, raising HK$285.8 billion ($36.5 billion) from 119 listings in 2025. 

This recovery has revived deal flow across sectors. In particular, companies engaged in complex, high-technology areas, including the biotech and specialist technology sectors (such as semiconductors, AI, robotics, EVs, new green technologies) form a substantial part of the pipeline.

These companies tend to operate on a more capital-intensive model and have numerous pre-IPO investors in multi round pre-IPO cap tables. At the same time, regulators have tightened scrutiny of applicant quality and pre-IPO investment terms, noting concerns about governance and due diligence standards in late 2025 listings.

Pre-IPO investors often make their investments on more favourable terms than IPO investors. However, under Listing Rule principles, all holders of securities must be treated fairly and equally, and issuing and marketing securities must be conducted in a fair and orderly manner. For example, the Stock Exchange generally requires pre-IPO investments to be completed at least 28 clear days before A1 filing or 120 clear days before the first day of trading, whichever is earlier. In terms of lock-up and public float requirements, certain investors including core connected persons, cornerstone investors and controlling shareholders will be requested to lock-up their pre-IPO shares for at least six months. 

Shareholdings of core connected persons may or may not count towards the public float, depending on independence, investor relationships and special rights. As for preferential rights granted to pre-IPO investors including put options, vetoes, anti-dilution protections, guaranteed returns or special exit arrangements, these special rights must be removed or automatically terminated upon listing.

Due to increased regulatory scrutiny, pre-IPO investor related work covering rights clean up, compliance with lock up rules, assessment of public float eligibility and restructuring of investment instruments etc. have become a more substantial and strategically important part of IPO execution. Even though the absolute number of listings has not returned to earlier peaks, the complexity of each transaction has increased, ensuring that advisory work in this area remains busy and highly valued.

Ross Davidson: Pre-IPO structuring has been a significant area of activity alongside the recovery of the IPO market. When listings increase, so does private wealth work.

Pre-IPO investors are often subject to lockups, and their classification for public float purposes can materially affect liquidity. Those distinctions have very practical consequences. In H-share listings, even once lockups expire, underlying PRC capital controls can affect how and when proceeds move offshore.

From a private wealth perspective, timing is everything. If shares are held personally or through simple vehicles, restructuring options narrow quickly once the listing process is underway. Encouragingly, we are now often engaged at the investment stage, well before a listing is contemplated. That shift makes a significant difference. When the IPO arrives, families who planned early are activating a structure already designed to withstand it.

About the lawyers

Ross Davidson is co-head of the private wealth practice at Stephenson Harwood in Hong Kong. He advises high and ultra-high net worth individuals, family offices and fiduciaries on complex cross-border wealth structuring, international tax, trust law, succession planning, and the private wealth consequences of major liquidity events including IPOs and corporate disposals.  

Wei Kang is an APAC-based practitioner with experience in both China and common law jurisdictions. She has experience in complex family trust, tax advisory and compliance and succession planning involving multiple jurisdictions. She is dual-qualified in Hong Kong and British Columbia.
 
Jane Ng has more than 30 years' experience in corporate finance and mergers and acquisitions transactions, broadly with a PRC and regional focus. Her clientele includes listed companies and financial institutions.