Overview

After operating a business in Hong Kong, there may come a time to reassess the future of your company. This could involve:

• Deregistering the company
• Winding up the company (liquidation)
• Keeping the company dormant

Understanding the distinctions between these options is crucial for making an informed decision while ensuring legal compliance.

How to Deregister a Company in Hong Kong

Deregistration (or striking off) allows a company to be removed from the Companies Register. This is suitable for businesses that have ceased operations and have no outstanding liabilities or assets.

Eligibility Requirements

To qualify for deregistration, the company must:

• Have ceased business for at least three months before the application.
• Have no outstanding liabilities.
• Not be involved in any legal proceedings.
• Have no immovable property in Hong Kong.
• Obtain a “Notice of No Objection” from the Commissioner of Inland Revenue.

Deregistration Process

1. Submit Form IR1263 to the Inland Revenue Department (IRD) to obtain the “No Objection” notice.
2. File Form NDR1 with the Hong Kong Companies Registry within 3 months of receiving the No Objection notice.
3. The company’s name is published in the Government Gazette for approximately 90 to 110 days.
4. If no objections are raised, the company is officially deregistered.

The entire process typically takes 6 to 9 months.

Winding Up (Liquidation) in Hong Kong

Winding up is a formal process of closing a company and distributing its assets to creditors and shareholders. There are two types:

1. Voluntary Winding Up

Member’s Voluntary Winding Up (Solvent Companies)

• The company must be solvent (able to pay its debts within 12 months).
• A declaration of solvency must be signed by directors and submitted to the Companies Registry.
• A special resolution (approved by at least 75% of shareholders) is required.
• A liquidator is appointed to oversee the process.

Creditors’ Voluntary Winding Up (Insolvent Companies)

• Suitable when the company cannot pay its debts as they become due.
• A declaration of insolvency must be made by directors.
• A creditors’ meeting is held to discuss and vote on the winding-up resolution.
• A liquidator is appointed to distribute assets and settle liabilities.

2. Compulsory Winding Up

This occurs when a court orders the winding up of a company, typically due to insolvency or legal reasons.

Common Grounds for a Court-Ordered Winding Up:

• The company owes HK$10,000 or more and is unable to pay.
• The company has resolved via special resolution to be wound up by the court.
• The court determines it is just and equitable to wind up the company.

A liquidator is appointed by the court to manage the company’s closure.

Dormant Status as an Alternative to Closure

A dormant company is one that remains registered but does not actively conduct business.

Conditions for Dormant Status

• The company must not engage in any business transactions except for certain permitted activities, such as paying fees.
• Relevant accounting transactions (such as sales, purchases, or financial transactions) must not occur.
• Annual compliance obligations (e.g., annual returns) must still be met.

To apply for dormancy:

• A special resolution (approved by 75% of shareholders) is required.
• The resolution must be filed with the Companies Registry.

Conclusion

The best approach depends on your company’s current status and future plans:

• Deregistration is suitable for companies with no ongoing activities.
• Winding up is appropriate for those needing to settle assets and liabilities.
• Dormant status is ideal for companies that may resume operations in the future.

Closing a company involves legal and financial complexities—contact us today for professional guidance to ensure a smooth transition.