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Dormant company in
Hong Kong

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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:

  • Declaring that the company will become dormant from either:
  • 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
  • Authorise the directors to file the special resolution to the Companies Registry

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:

  • Filing annual returns;
  • Holding annual general meetings;
  • Appointing auditors; and
  • Preparing audited financial statements.

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:

  • Have at least 1 individual director, 1 shareholder, a company secretary and a registered office;
  • Report any change of company structure and the particulars of the officers to the Companies Registry;
  • Renew Business Registration Certificate;
  • File the Profits Tax Return (if any) issued by the Inland Revenue Department.

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:

  • A financial institution as per the Banking Ordinance;
  • An insurer as per the Insurance Companies Ordinance;
  • A corporation licensed under the Securities and Futures Ordinance e.g. registered dealers, investment advisers etc.;
  • A Hong Kong company or a registered non-Hong Kong company which (i) is in a controlling entity relationship with a company which is an intermediary (i.e. licensed corporation or registered instruction) or (ii) receives or holds in Hong Kong client assets of the intermediary as defined in the Securities and Futures Ordinance;
  • A Mandatory Provident Fund Schemes Ordinance trustee;
  • A company subsidiary falling under any of the aforementioned categories; and
  • Companies which fall into any of the above during the preceding five years.

If you no longer require a dormant company, it is important to dissolve it formally. We will talk about this in a separate articleIf you need any assistance now, talk to us!

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