De-registering (closing) a company
Continue reading to understand all about closing a company in Hong Kong.
If you have incorporated a company in Hong Kong, it is important to know how essential it is to stay up to date with the annual filings. Companies are not allowed to just simply stop their company filings, even if the company is about to be deregistered. The HK government does not automatically just strike off a company. In Hong Kong, to deregister a business, you would have to follow the proper procedure for filing the appropriate forms and notifying the Company Registry in Hong Kong.
Keeping in mind that your business is no longer functional, and it does not have any liabilities or debts, you can deregister the business. Closing a company in Hong Kong includes some specific steps to follow and documents to submit. Moreover, the processes may take months to complete, while the cost of these processes depend entirely on how the company is being closed.
Anyway, life happens, businesses change and things go on. So, if you have concluded that you no longer want your Hong Kong Private Limited Company, continue reading to understand all about closing a company in Hong Kong.
As mentioned above, even though it might seem the most sensible thing to do, unless it is entirely unavoidable, you should avoid closing a company in Hong Kong. But if you still want to close it, your company has to be eligible to close down as well. The common reasons why a business in Hong Kong can be closed are:
- The failure of the company to carry on any kind of business activities.
- The company is no longer profitable.
- The incapacity to pay the debts of the business.
- The falling out between the shareholders of the corporation.
- Non-compliance with statutory responsibilities, that further includes the mismanagement of business affairs, etc.
- Corporate restructuring of the union to which the corporation belongs.
Other than these reasons, the government of Hong Kong would not accept any request in Hong Kong to deregister a company. To deregister a company means to close it or to liquidate it. In conventional terms, it is known as the liquidation of a company.
Moreover, there are three methods where a company gets dissolved: deregistration, striking off and winding up. Even though the three processes lead to the dissolution of the company, each follows a significantly distinct method.
What is de-registration(closure) of a company
A defunct solvent company can be dissolved easily which meets the requirements by applying for the deregistration process. This process falls under the section 750 of the Companies Ordinance. Overall this method is the most straightforward way to close a company.
The closing of a company in Hong Kong via the deregistration process means to completely close the corporation that is no longer functional. Other than this, the company should not have any debts or liabilities, which would mean it is a solvent company. If you are making the application in Hong Kong to deregister your company, you need to check if your business meets the following obligations:
- all the members of the organization agree to the deregistration
- the corporation has not initiated service or business, or carried out business, or has not been in operation during the three months immediately before the application (application made at least three months after the cessation date)
- there are no outstanding liabilities of the company
- there are no legal proceedings or any such cases related to the company
- there isn’t any immovable property of the company that is situated in Hong Kong
- if the business is a holding corporation, none of its auxiliary assets include any immovable property located in Hong Kong
Other than this process, there are two others that also eventually result in the dissolution of the business. One is winding up of the business, and the other is the striking off of the business.
Striking Off a Company
Under any condition or circumstance where the Company Registry feels that the business is not in operation or is not carrying out any business, they would strike the name of the company off the Company Registry. And as soon as the name of the firm gets struck off the Companies Register, it would be dissolved. Striking off is a legal power bestowed on the Registrar, a company cannot apply for striking off.
Winding Up a Company
Another process of closing a company in Hong Kong is winding up. It is the process of settling the accounts of the business and eventually liquidating the assets of the business to make the distribution of the total assets to its members and dissolving the company. Moreover, there are two paths to wind up the business for closing the company in Hong Kong – compulsory winding up or voluntary winding up.
The voluntary winding up of the company can be initiated by with the creditors or the members (shareholders). The government itself proceeds the compulsory winding up method, and it takes place when the Hong Kong Court orders the compulsory winding up of the company.
Which Company can get Deregistered in Hong Kong?
In Hong Kong, to deregister a company, it has to be a local private company by guarantee or a local limited company. This is since these are the only types of businesses that have the eligibility to get deregistered. Other than this, the company has to be listed in the Companies Ordinance either under the section 749(2) or the Part XI. Moreover, the company has to also be a firm that is a solvent business.
How to de-register a company
Now that it is clear what the different processes of closing a company in Hong Kong are, let us now understand more about the deregistration process of a defunct solvent company since it is the easiest, and the most straightforward method. There are a few steps that have to be followed when talking about the process of the deregistration of a business and they have been explained in brief below:
At first, it is vital to apply for the “Notice of No Objection to a Company being Deregistered.” It is also called the “Notice of No Objection,” and it is obtained from the Commissioner of the Inland Revenue Department. To get this, you would have to fill the Application form that can be obtained from the agency that helped you with the startup in Hong Kong.
A company has the rights to request for the “Notice of No Objection” for the process of closing a company in Hong Kong under the section 750 of the Companies Ordinance. Also, as per the section 88B of Inland Revenue Ordinance, a request that has been made by a person who is entitled to apply for the private company’s deregistration under section 750 of the Companies Ordinance, the Commissioner of the Inland Revenue Department might issue a written notice stating that there is no objection regarding the company being deregistered.
Who can make the request?
The request can be made only by the:
- any person who was nominated by the firm (with copy of nomination letter)
- a member or the director of the corporation (with copy of authorization letter)
Processing of the request
The normal time for the processing of the issue of the No Objection notification in Hong Kong to deregister a company is about 21 working days. The time starts from the lodgement date for the notification by the submission of a valid application along with the payment of the prescribed fee.
The earliest a person can obtain the demand notice is within 14 days. But in case an applicant wants to get it much before this date, they would have to submit the completed application form and give the hard copy to the Deregistration Section at 11/F Revenue Tower, Hong Kong. In this case, a demand note would be issued on the next day of the payment. This is since the Department would only start the processing of the request upon receiving the confirmation of the relevant fee receipt.
And the notice of no objection to a business would be issued by the Commissioner of the Inland Revenue Department for the issuer to go ahead in closing the company in Hong Kong. This will only be issued if the company has no outstanding liabilities and tax matters. Otherwise, the business would instead get a notification stating the obligations or issues that are outstanding.
As soon as all the outstanding things are cleared, the applicant would be able to re-submit the application for the completion of the notification. Also, there wouldn’t be any need to pay the fee on the re-submission.
Company Accounts and Taxation
Once you proceed with deregistering a company, you would need to submit the final accounts of the company up until the cessation date (last day of business) for the company. These company accounts would state the last financial period of the company, and show the IRD that the company has cessed business activities thereafter.
The importance of this cessation date is also as reference to the IRD for issuing the Profits Tax Returns (PTRs) for the company, and any provisional tax held over. Note that the IRD will not ask for the next year’s provisional tax in the case of a company’s final accounts for de-registration. Otherwise, you may state to the IRD when you receive the tax demand note that the company’s has ceased business and will de-register.
For compannies conducting business overseas and have applied for the profits tax exemption, the company’s accounts are also important, as the IRD may send a Tax Query Letter in regards to the profits exemption during the de-registration process. This letter will contain questions and requests for documents for the company’s tax exemption claim. If the company does not respond or provide sufficient evidence, they would not be able to de-register successfully. In this case, it is better to provide sufficient information and documents to the IRD.
Conditions for the issue of a “Notice of No Objection”
The IRD Commission would issue the notice of No Objection only if:
- there has never been any business activity in the business, or the company has ceased for some time
- there wouldn’t be any business activity in the company in the future
- if there are any securities, landed property, and trading stock, the company has disposed of all of it
- there aren’t any outstanding tax liabilities that includes the court fees, fines, and penalties, Business Registration fee, Stamp Duty, Property Tax, Profits Tax, and other payments related to this
- there aren’t any outstanding obligations under the IRD for the company. It includes the liability to inform the Commissioner of the IRD in writing that the business is responsible for paying the tax on the assessment of any year during which a return was not received, and the return(s) which have been issued by the IRD
- there aren’t any undecided inquiries from the Department
- there aren’t any unresolved appeals or disputes regarding the assessments already raised
In case any of the mentioned conditions are not satisfied, the company would not be able to obtain the notice of no objection. So, it is better to cross-check these things and make sure your business meets the requirements before closing the company in Hong Kong.
After the corporation obtains the “Notice of No Objection” from the IRD, it can further proceed with closing the company in Hong Kong. This can be done by posting the notification in the company Gazette.
Other than this, the following documents have to be submitted to the Companies Registry.
This has to be done within three months from the date of issue of the Notice of No Objection:
A correctly finished application form for closing the company in Hong Kong together with the fee.. The company has to be a Company Limited by Guarantee or a Private Company.
The original print of the “Notice of No Objection” from the IRD commissioner.
Any other documents or information that can be requested by the CR of Hong Kong related to the application to deregister the company.
All the documents original copies have to be submitted in the hard copy form. And for those applications that are delivered via the e-Registry the hard copies might still be needed by the director, company secretary or the applicant of the company.
De-registration after letter of “Notice of No Objection” – Step 3
After the documents have been submitted to the CR, the final steps for closing the company in Hong Kong begins. The steps that take place are:
- In case all the documents have been given in the right order, and the Company Registry is satisfied with it, the process would be taken to the next step. This is when the Approval Letter would be issued for closing the company in Hong Kong. This letter would come within five business working days.
- A notice of the planned deregistration would be posted by the Company Registry in the Gazette of Hong Kong. And if within 3 months, there aren’t any objection notices sent to the CR, it would then proceed to complete the process of closing the company in Hong Kong.
- The CR would then issue a final notice in the Gazette to announce about the company that would be deregistered. Additionally, a nominated person or the applicant would also be notified about this.
- As soon as the final notice has been published, the firm would then be dissolved.
- The complete procedure would take five to six months to complete.
- Along with the dissolution of the company, every asset of the business that also comprises the balance in the Business bank account would be considered to be bona vacantia. These would be held by the Special Administrative Region of the Hong Kong Government. It is better to get legal or professional advice for the assurance of the firm’s assets proper disposal before applying to closing the company in Hong Kong.
- If the business is about to discontinue, you would have to notify the Business Registration Office and the Inland Revenue Department within one month from the discontinuation. This is so that you can apply for the Business Registration cancellation.
- It is vital to adhere to the obligations of the business until the company has been deregistered. These obligations comprise of the filing of annual returns and the notification of situation of registered office. Failure to fulfil the obligations would make the company liable to prosecution.
Things to keep in mind
Now that you know all about the process in Hong Kong to deregister a company, there are many other things that have to be kept in mind. The following would help you determine the extra points that are vital:
- It is vital to notify the Companies Registry in the form of writing on a letter, if there is any changes in the address of the nominated person, the applicant or the presenter. This is so that the communication in the future can be easy.
- In case the registered office address of the company also changes, you would have to submit the form for notifying about the change.
- In case the address of the directors have changed, you would need to deliver the form for reporting the changes so that the process of closing your company in Hong Kong moves smoothly.
- You can know when the notice for your company’s deregistration is published on the Gazette. All the information sheets that are related to the publications of the Gazette Notices would be also placed on the public records of the company. You can find out about it by conducting a company research via the Cyber Search Centre or the Company Search Mobile Service of the CR. Other than this, you can visit the office to find out. You would need the company number for searching the needed information.
- Gazette Notices are usually published on Fridays and you can check it after 3 weeks from the date of the approval letter from the Company Registry.
- The Gazette Notices can be found at – www.gld.gov.hk/egazette
- Once you have deregistered your company, and you want to re-open it, you can make an application to the Court of First Instance to restore your company. It is advised to take legal help concerning the application procedure.
- If you choose to get the company restored back, it would take about 2 months for the restoration. Moreover, this can be done only when the company has obtained the court order and the requested documents have been submitted for the restoration process.
- If you have completed the process of closing your company in Hong Kong, and want to restore it but someone else has taken up the company name, you cannot use the same name. After the restoration process has been completed, you would have to change the name of the company within 28 days from the restoration time.
- In Hong Kong, to deregister a company isn’t the only method to dissolve a business, the government can also compulsory wind up or strike off the business. If you want to know if this action has been taken, you can check the Gazette Notices for any information on your company.
- If your company gets striked off by the Companies Ordinance, you may apply for the restoration of your company via the court order or by administrative restoration. For the court order, you would need to make an application to the Court of First Instance and are advised to take professional help for this process.
- The administrative restoration is basically a process of restoring a company in an administrative manner to the Companies Register by the CR. This process would also require professional help.
Some More Points
Here are some other points that can help you understand the process of closing a company in Hong Kong:
- As soon as you are about to apply in Hong Kong to deregister your company, it is advised to close the bank account and the credit card as soon as possible. This should be done before you make the application for the deregistration.
- You should also remove all the funds before you close the account since there are situations where after a business is deregistered, the banks do not allow the director to remove any funds. This then leads them to restore the company and then remove the funds from the bank account by showing the company documents and registration certificate.
- People with the credit cards that have time security deposits are advised to begin the process of closing a company 3 to 4 months earlier than the filing date.
- As mentioned above, once the process of closing a company in Hong Kong is completed, the company name becomes available for someone else. This is also the reason why some people choose to make their company dormant, rather than deregistering it. It should be noted here that the company name is not the same as the Hong Kong trademark that has a completely different process.
It has been mentioned above that the No Objection Notice can take up to 21 days to a month for obtaining it. While the other processes takes up to 5 months. This makes a total timeline of about 6 months for closing a company in Hong Kong. In short, to have a Hong Kong company officially struck off the Companies Registry takes about 6 months in total.
The time required is long since most of the processing time is taken up by the Inland Revenue Department and the Company Registry. The time here is taken to consider and approve the application for closing a company in Hong Kong. Moreover, if there is a deadline to complete the process, there is a little room to expedite the process. This is since they give about 3 months to the public for objecting in the deregistration of the business after all the other processes has been completed.
Hence, if you are about to deregister your company in Hong Kong, you need to be prepared to have a lot of patience.
Before we conclude, there are some other options that can be adopted instead of closing a company in Hong Kong with the deregistration process. You can either choose to “put it on ice” for about one year or even more till you are ready to use the company again. This would mean that you make the company dormant, as in most cases of inactivity of a company.
With this, you would be able to keep the company name along with the ownership of the assets such as the intellectual property in the company or the real estate.
This also includes holding the other agreements and the contracts with you even if the company is at a pause. But if you deregister the company, you would not be able to get all these things back when you restore it. If the company has been dormant, you can quickly start the business again from where it paused by using the option of re-activating the company. And after this, you can continue to offer the same operations as before.
NOTE: It must be kept in mind that if you choose to make your company dormant, you cannot operate the business at that time. In short, this means that you would not have any cash flow in it and no new business contracts or staff. It is just in existence but the company is not utilized.
But if you have decided that the company would never have to be restored and you are done with it, you can go ahead with the process of closing the company in Hong Kong. But the deregistration process needs some of the necessary know-hows and compliances with the many legal requirements and terms. Hence, it is advised to take professional help from an agency like Startupr to complete the process of closing your company in Hong Kong without much hassle. Connect with Startupr today to know more about the process and implement the idea soon!