Considering Hong Kong Company Deregistration

This article is originated from:https://fastlanepro.hk/hong-kong-company-deregistration/

Hong Kong business owners are always concerned about how to incorporate a company and the logistics around running one. However, one aspect of running a business that many business owners fail to recognise is the Hong Kong company deregistration process. Closing a business once the decision has been made to do so, is not always as easy as people assume. There are often many complications surrounding this process and business owners may find themselves facing potential liabilities and penalties when this process is done incorrectly.

In this article, we look to provide guidance towards what the Hong Kong company deregistration process, what the conditions and requirements are, the procedures, and other aspects of the process that business owners must consider.

1. What Is Deregistration?

Deregistration is the process of dissolving a defunct and solvent private company or a company limited by guarantee. In relation to the above, the terms “defunct” and “solvent” refers to companies that no longer have business operations, or have no debts or liabilities.

2. What Are The Conditions / Requirements For A Company To Make An Application For Deregistration?

In Hong Kong, there are two types of companies that are ineligible to apply for deregistration.

• The companies specified in s749(2) of the Companies Ordinance, such as those recognized as an authorized institution under the Hong Kong Banking Ordinance
• A registered non-Hong Kong company, also commonly referred to as a Branch Office – although they have a presence, they do not have legal obligations in Hong Kong as they are not considered to have established a place of business in Hong Kong

Businesses can undergo the Hong Kong company deregistration process if:

• All members of the company agree to the deregistration
• The company has not commenced operations or business, or has not been in operation or have carried on business during the 3 months immediately before the deregistration application
• The company has no outstanding liabilities
• The company is not a party to any legal proceedings
• The company’s assets do not consist of any immovable property situated in Hong Kong
• If the company is a holding company, none of its subsidiary’s assets consists of any immovable property situated in Hong Kong
• The company has obtained a “notice of no objection to a company being deregistered” from the Commissioner of Inland Revenue

3. What Is The Deregistration Process?

While deregistration is similar to winding up a company, as both will result in dissolution, deregistration is comparatively simple, inexpensive and quick as there are no third-party creditors involved in this process. The deregistration process can be outlined in two steps. 

Apply for a Notice of No Objection

The deregistration process begins with applying for a Notice of No Objection (“Form IR1263”) with the IRD. A Notice of No Objection signifies that the company has cleared its outstanding tax obligations. 

In order to receive a Notice of No Objection from the IRD, the company must have cleared all their outstanding tax issues. For instance, any outstanding profits tax liabilities, business registration fees and offshore tax claims. 

To facilitate this step, companies should also prepare their final audited financial statements for submission to the IRD. The audited financial statements should cover the operations of the company, up till the cessation date of the company’s trading business activity. 

Deliver documents

Upon submitting Form IR1263, the company should receive a Notice of No Objection from the Companies Registry if the application is successful. The company should then, within 3 months from the date of issue of the Notice of No Objection deliver the following:

• Form NDR1 together with a non-refundable fee of HKD 420; and
• The Notice of Objection from the Commissioner of Inland Revenue

The above documents may be submitted either electronically through the Companies Registry’s online portal, or in hard copy form. To the extent that a company submits an online application, certified copies of the Notice of No Objection by the applicant, a company director, or the company secretary is required.

Oftentimes, the Companies Registry may request for further information / documentation to be submitted to support the deregistration application. In these circumstances, it is common for the Companies Registry.

4. What Are The Ongoing Company Obligations That Must Be Met During a Hong Kong Company Deregistration?

A Hong Kong company going through deregistration must ensure that they adhere to their statutory obligations, namely the disposal of their company property, annual return requirements and business registration requirements. 

Once a company has been dissolved, their assets, if any, would be vested in the Hong Kong Government as bona vacantia. In other words, the assets will be forfeited to the Hong Kong Government. As such, all assets and liabilities should be cleared.

• All property, plant and equipment must be disposed of
• All company bank accounts should be cleared and closed once it is confirmed that no more bank transactions are required
• All outstanding debt has to be settled, either by the company directors, members, related companies, or waived by the creditors

In respect of Annual Returns, all companies undergoing deregistration must file any outstanding Annual Returns, and to follow their duties as per the Companies Ordinance until the company has been dissolved, prior to submitting the deregistration application. For instance, besides ensuring the delivery of their Annual Returns, a company must also provide notifications on the change of address of their registered office, any changes in the company secretary and director and so on. 

Oftentimes, a company’s Business Registration Certificate will expire before the completion of the deregistration process. As companies must hold a valid Business Registration Certificate during these processes, companies in these circumstances should renew this certificate before the deregistration is approved by the Companies Registry. 

Any failure on the company’s part in adhering to their obligations can result in potential penalties and prosecution.

5. Is It Possible To Restore A Deregistered Company?

Yes! It is possible to restore a deregistered company by submitting an application to Hong Kong’s Court of First Instance. Once the court has obtained the court order and has acknowledged the received application documents are in order, it will take approximately 2 months to restore a deregistered company.

Conclusion

The deregistration process is an incredibly popular option for Hong Kong companies who wish to close their company affordably and quickly. While the process and rules surrounding deregistration are relatively simple and easy to adhere to, companies should take time to understand the deregistration process to avoid potential penalties and liabilities.

As a registered Hong Kong company secretary, the FastLane Group is well versed in assisting Hong Kong companies at all stages of their life cycle. Whether you are incorporating a company, running a company or wish to deregister one, please contact the FastLane Group for assistance!