Closing down a company in Hong Kong involves a certain number of formal steps and the overall process can take many months to complete.
The most common reasons for closing a company are:
failure of the company to carry on business
company is no longer profitable
inability to pay its debts
falling out between shareholders
non-compliance with statutory requirements, including mismanagement of company affairs
corporate restructuring of the group to which the company belongs
Companies can be closed down either by “Deregistration” or “Winding Up”. Although both the procedures will result in the dissolution of a company, the processes they entail are significantly different. This part deals with deregistration of a defunct Hong Kong private company.
1. Introduction to Deregistration (Strike off) of a Hong Kong Company
A Limited company, which is defunct and solvent, wants to cease its business must officially apply to the Companies Registry to deregister it or strike it off from the Register of Companies. A company is still required to file Annual Returns to the Companies Registry before it is officially deregistered. A penalty will be imposed on the Company and/or the management for failure of submission of Annual Return.
In applying for deregistration, certain declarations should be made by the applicant. Any person who knowingly and recklessly gives information to the Companies Registrar that is false or misleading in a material particular is liable to a fine and to imprisonment. As the deregistration process is more technical and affecting company’s property. A company should seek professional advices before making an application.
2. Requirements for Deregistration of a Hong Kong Company
In accordance with the Companies Ordinance, a private company, or a director or member of such a company, may apply to the Registrar under s291AA for deregistration. However, such an application could only be made if:
(a) all the members of the company agree to the deregistration;
(b) the company has never commenced business or operation, or has ceased business for more than three months immediately prior to the deregistration application;
(c) the company has no outstanding liabilities.
The application must be accompanied by a written notice from the tax authority stating that the Commissioner of Inland Revenue has no objection to the company being deregistered. The tax authority will only issue such a Notice if the following conditions are met:
(a) the company has never commenced business, or has already ceased business;
(b) the company will not start / resume business in the future;
(c) the company has disposed of all trading stock, landed property and securities, if any;
(d) the company has no outstanding tax liabilities which include Profits Tax, Property Tax, Stamp Duty, Business Registration fee, fines and penalties in connection thereof and court fees;
(e) the company has no outstanding obligations under the Inland Revenue Ordinance. These include submission of return(s) which has(have) been issued by the Inland Revenue Department, liability to notify the Commissioner of Inland Revenue in writing that the company is chargeable to tax for any year of assessment in which a return has not been received;
(f) there are no unanswered enquiries from the Inland Revenue Department (IRD);
(g) there are no unsettled objections or appeals in respect of assessments already raised.
Even the company is dissolved as of the date of registration, the liability (if any) of the officers and members of the company continues and may be enforced as if the company has not been dissolved.
The following categories of companies are not eligible to apply for deregistration:
(a) an authorized institution as defined in the Banking Ordinance
(b) an insurer as defined in the Insurance Companies Ordinance
(c) a company licensed under the Securities and Futures Ordinance
(d) a company having a subsidiary that falls within any of the above categories, and
(e) a company that has fallen within any of the above categories at any time in the preceding five years
In applying to have the company deregistered, it is of important that all the liabilities of the company be settled, and all assets disposed/processed. In particular, any balance in the bank account of the company should be transferred out.
3. Persons capable of filing an Application
(1) The Company
(2) A director or shareholder of the Company
4. Deregistration Application Procedures
(1) Hold a board meeting to pass a resolution to strike off the company;
(2) Apply in writing to IRD for a Notice of No Objection for Deregistration of a Defunct Company. It may take up to four weeks to receive the said Notice; Please be reminded that the said Notice will only be issued in the case that the company to be de-registered owes NO money to the Hong Kong Government and NO outstanding tax returns;
(3) Apply in writing to the Companies Registry for de-registration of the company. It may take well up to six months after the filing of application for the Companies Registry to de-register your company.