Declaring a Dormant Company in Hong Kong
8 minute read
Do you want to save cost for your inactive company? Well, under Section 5 of the Hong Kong Companies Ordinance, private companies can apply for dormant status to be exempted from complying with certain statutory requirements. Most companies apply for a dormant status can save both time and money involved in filing annual returns, holding annual general meetings, appointing auditors and preparing audited financial statements.
A dormant company in Hong Kong that must not have any accounting transactions or any financial transactions in its accounting books during dormancy, excluding transactions arising from the payment of any fee that the company is required by an Ordinance to pay. The Companies Ordinance allows a company to declare itself as dormant and continue with the same status for a minimum maintenance cost as long as it does not have any accounting transactions.
How to declare as a dormant company
An inactive company which does not have any accounting transactions is required to officially declare itself as dormant as it will not be automatically considered dormant. Without the declaration and even if the company actually has no business or accounting transactions , it will continue to incur cost and needs to comply with all the statutory requirements laid down by the Companies Ordinance.
In order to declare dormant, the members of the company should pass a special resolution:
- The date of delivery of the special resolution to the Registrar of Companies; OR
- Any later date that is specified in the special resolution; and
The directors should file the special resolution with the Companies Registry within 15 days after passing the resolution.
The responsibilities of the officers and obligation of a dormant company
Once your company has declared as a dormant company, it can remain in the inactive status at a minimum cost and exempt from:
However, the officers of the company still have the same responsibilities as a usual active company and need to observe their responsibilities and carry out their duties under the Companies Ordinance.
The dormant company has to:
Relevant accounting transactions
Section 2 of the Companies Ordinance states that an accounting transaction means a transaction that is required by section 373 to be entered by the company’s accounting records, e.g. receipt and expenditure of money, assets and liabilities. Any transactions which arises from the payment of any fee which the company is required by any ordinances is excluded, e.g. payment of business registration fee should not be regarded as an accounting transaction.
Take for example if the company has a bank account, any service fees charged by bank or any interest credit to the account would be regarded as accounting transactions. The company would not be eligible to apply for dormant status.
Cessation of Dormant Status
If you wish to resume your company’s business or there is an accounting transaction in relation to the company, the company should cease to be dormant. The company has to pass another special resolution declaring that the company intends to enter into an accounting transaction and the directors should deliver the special resolution to the Companies Registry for registration.
Thereafter, the company will resume its active status and has to observe all its statutory requirements. The above-mentioned exemptions are no longer applicable.
Companies not allowed to claim dormant status
A company that is not private or fall within any of the following categories cannot claim a dormant status in Hong Kong: