This article is originated from: https://fastlanepro.hk/dormant-company/
Oftentimes, one will incorporate a company in Hong Kong with the intention of conducting business but end up not doing so, their Hong Kong company becomes unused. As a result of inactivity, their company can enter a dormant state. While they are an incredibly common occurrence in Hong Kong, many individuals are not aware of the responsibilities they have in managing them. In this article, we look to provide insight towards what dormant companies are, how one can be managed and the rules surrounding them.
1. What is a dormant company?
It is a company that does not have any accounting or financial transactions – excluding transactions that arise from the payment of any fees that the Hong Kong company is obligated to pay under a Hong Kong ordinance. For instance, annual business registration fees are still required to be paid.
They are not to be confused with non-trading companies. Non-trading companies will not have any business activities but will still have financial transactions.
2. How to declare a dormant status
To declare a dormant status, a private Hong Kong company should pass and deliver to the Registrar of Companies a special resolution declaring that the company will become dormant.
Upon passing special resolution declaring dormancy, the company will become dormant from:
- The date of delivery of the special resolution to the Registrar of Companies; or
- Any later date that is specified in the special resolution
There are no rules that dictate how long a dormant can stay inactive for.
3. Obligations for managing a dormant company
Companies with a dormant status are still obligated to comply with many of the regulations governing Hong Kong companies.
- Maintain 1 director, 1 shareholder, a company secretary and a registered office;
- Report any changes of the officers or registered office to the Registrar of Companies
- Renew its business registration certificate
- Pay annual business registration fees to the Hong Kong Government; and
- File Profits Tax Returns as they are issued
However, they also are exempted from complying with many obligations that Hong Kong companies face, specifically:
4. Cessation of a dormant status
To cease a dormant status, the company must pass a special resolution declaring the intention to enter into an accounting transaction. The special resolution must then be delivered to the Registrar of Companies.
A company will then cease to be dormant when:
- A special resolution declaring the company intends to enter into an accounting transaction is delivered to the Registrar of Companies for registration; or
- If there is an accounting transaction in relation to the company.
5. What companies are not allowed to claim dormant status
Any company, or subsidiary of that company, cannot claim a dormant status in Hong Kong if they are:
- 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
- A Hong Kong company or a registered non-Hong Kong company which
- Is in a controlling entity relationship with a company which is an intermediary; or
- Receives or holds in Hong Kong client assets of the intermediary as defined in the Securities Futures Ordinance
- A Mandatory Provident Fund (“MPF”) Schemes Ordinance trustee
- A company which falls into any of the above categories during the preceding five years.
The FastLane Group is a licensed Hong Kong company secretary. We understand the statutory obligations that govern how Hong Kong companies can act and operate. We have assisted our clients in respect to all matters of a Hong Kong company – from their incorporation to their dissolution. Please contact the FastLane Group for your enquiries regarding how we can help you manage a company.
Created on Jul 9th 2020 01:30. Viewed 347 times.