The Fascinating Transformation from “Financial Tools” to “Social Gifts”

In Hong Kong’s financial market, Type 1,2,4,5,6,7,9 licensed corporations were originally established for regulated financial activities. Surprisingly, as these licenses became increasingly difficult to obtain and scarce, they developed an “alternative” use: some view them as “collectibles” that demonstrate status and power, while others use them as hidden channels for “gifts” or “benefit transfers”. Let’s analyze how these licensed companies transformed into “collectible gifts” and how they’re used to transfer benefits.

I. The Shift from “Active Business” to “Status Symbol”

1. Scarcity Creates “Collection Value” Hong Kong licensed companies must meet numerous compliance and staffing requirements, making companies “with licenses” quite rare. This scarcity makes them like “limited edition” collectibles, serving as status symbols in certain circles.

2. The “Keeping Up” Mentality In social settings, mentioning that you own a licensed financial company in Hong Kong – even without active operations – immediately creates an impression of “financial strength” and “extensive connections”. Many people care about “appearances” and feel that spending money on a licensed corporation is “prestigious”, even if it sits idle as a “collection piece”.

3. Easy to “Gift” or “Transfer” Licensed companies mainly transfer through share transactions. With the necessary transfer documents and proper reporting, control can be handed to others. Whether it’s a pure “gift” or “partial sale”, the licensed corporation can be transferred on paper. For some, it’s like passing an art piece from one collector to another, except the object is a Hong Kong-registered, licensed financial company.

II. Key Methods of “Gifting” and “Benefit Transfer”

1. High or Low Price Transfers as Disguised “Money Transfers”

• “High-Price Acquisition”: To transfer benefits to a “benefactor”, the license company can be bought at an inflated price, completing a benefit transfer through numbers.
• “Low-Price Transfer”: Or sell cheaply to the “benefactor”, who can then sell at a high price to a third party, profiting from the difference.

2. Multi-Layer Shareholding and Nominees to Hide Reality To conceal these “gifts'” true transaction background, multiple company layers or nominee shareholders are often used. This hides both the real beneficiaries and makes actual benefit distribution more discrete.
3. Intermediary “Commissions” or “Kickbacks” Intermediaries often plan and arrange these deals. “Benefactors” can also act as intermediaries to receive benefits. Due to market opacity, they can charge substantial commissions based on transaction amounts or gain through “price differences” or “kickbacks”.

III. Case Study: A “Gift” Transaction Story

To illustrate how licensed companies are used as gifts or benefit transfers, here’s a fictional but representative story.

Background A mainland Chinese businessman, Mr. Li, is well acquainted with Mr. Wong, a senior Hong Kong financial professional. Mr. Wong wants to thank his “benefactor” Mr. Li for help with other projects but wants to avoid direct cash or gifts, as large amounts would draw attention.

Process

• Mr. Wong happens to control an inactive licensed corporation (holding Types 1,4,9 licenses). The company has no actual operations, only basic compliance and staff structure.
• To repay Mr. Li’s help, Mr. Wong decides to transfer most of the company’s shares at a “friendship price”.
• On paper, it’s a normal share transfer: both parties sign agreements and submit for regulatory approval. Privately, Mr. Wong deliberately undervalues the company, letting Mr. Li acquire the licensed corporation far below market price.

Result While Mr. Li appears to pay something, compared to the company’s true “industry” value (potentially several times higher), it’s practically a “gift”. Thereafter, Mr. Li can claim ownership of an official Hong Kong financial institution, gaining both face and the ability to quietly handle cross-border investments or fund transfers.

Subtle Points

• Mr. Wong needn’t worry about cash gifts being noticed – on paper, it’s just a share transfer.
• Mr. Li receives “invisible” benefits: whether accessing certain investment projects or later selling the company at a high price, this “gift” has significant appreciation potential.
• The entire process appears “clean” and compliant, making it difficult to classify as illegal benefit transfer.

IV. Why Licensed Corporations Attract So Much Attention

1. Status Symbol: Owning or controlling a licensed corporation instantly labels individuals and businesses as “legitimate finance” players, demonstrating professionalism and capability.
2. Operational Flexibility: Share transfers are relatively flexible, allowing price and actual benefit adjustments based on different needs, with high confidentiality.
3. Scarcity and Appreciation Potential: Due to difficult approval processes or long timeframes, many believe “clean” financial license companies retain future value potential, possibly “appreciating while waiting”.

V. Conclusion: When Licensed Corporations Become “Collectible Gifts”

On the surface, Hong Kong licensed corporations have become “collectibles” used to display status, maintain relationships, and transfer benefits. They satisfy buyers’ “face needs” while creating “convenient” profit opportunities for sellers (or intermediaries).

Because of their “seemingly compliant but actually complex” flexibility, some treat this transaction method as a “stealth game” – achieving subtle benefit flows through price differences, hidden shareholding structures, and private commissions.

To outsiders, this niche “license trading circle” resembles an intriguing “collection show”: some eagerly hoard licenses as investments or status symbols, while others use them to manage relationships and repay favours. While we can’t predict how far this practice will go, its transformation from “financial tool to gifting vehicle” adds an alternative dimension to Hong Kong’s financial market.

Further Thoughts

• As more people choose to hoard “licensed companies” rather than operate them, will these companies continue appreciating in future?
• Might this share transfer “gifting” method face increased scrutiny or restrictions in an increasingly regulated environment?
• Traditional gifting methods transformed into “company transactions” suggest financial and legal tools’ dual flexibility; in a “relationship-based society”, how many subtle stories will this generate?

Whatever the case, for those fond of Hong Kong financial licenses, buying or gifting a licensed corporation isn’t just a business move but a complex art of relationship management. Thus, in certain social circles, it has remarkably transformed into a “collectible treasure”, giving food for thought.