Deregistration of a Defunct Solvent Company
Estimate time to read: 6 min
Has your Hong Kong business come to a grinding halt? For some years, the corporation has not done operations or taken in any income and you want to de-register it. This is certainly part of the journey of a businessman.
When you run a company in Hong Kong, it might not be an expected scenario, but then you come to a halt and need your business to shut down. It is reasonably important for any Hong Kong company to consider how to legitimately dissolve their business according to the laws of the jurisdiction, adverse market conditions, the inability to produce income, or whatever might be a cause for your business loss.
This article will also give a short guide for you to understand what to consider in the phase.
Table of contents
- What is deregistration?
- Common explanations which can contribute to the deregistration of your HK business
- What businesses are liable in HK for deregistration?
- Specific requirements for the deregistration of a Hong Kong organization
- Deregistration procedure in Hong Kong for a defunct solvent organization
- How long does it take to deregister my company?
- How to Obtain the Notice of No Objection?
- Restoration of a deregistered company
- Additional reasons for business deregistration in Hong Kong
What is deregistration?
Deregistration is the termination of a defunct private corporation where the company has no debts or obligations and is no longer functioning or doing any activity. Deregistration exists as a company asks to be disbanded by the company registrar if it is no longer operating and is stable, that is if it has more assets than obligations and is not in bankruptcy.
You may also know about businesses in Hong Kong being struck down. This arises because the company registrar assumes that the company is not inaction or doing any work. When the name of the company is deleted from the Registry of Companies, it is dissolved. This procedure is a statutory power granted by the Registrar. An enterprise is powerless to make a motion to strike itself off.
In short, the deregistration process begins with the order for deregistration of the company, while the Registrar of Companies conducts striking off.
Common explanations which can contribute to the deregistration of your HK business
There are hundreds of factors that can lead a corporation to a deregistration procedure in Hong Kong. And it is completely unexpected for someone to close their business, but in some conditions, it might be inevitable. For your understanding, below are some common examples:
- The business is unable to cope with the debts
- The owners of the company argue or fall out,
- Corporate reorganization to which the company belongs
- The corporation fails to comply with regulatory obligations, i.e. inappropriate corporate relations management
- The corporation struggles to carry out its business operations, allowing it to no longer be viable.
These should be noted that, notwithstanding the reasons why companies desire to deregister their companies, the deregistration of a Hong Kong corporation must be carried out in an organized manner.
What businesses are liable in HK for deregistration?
The deregistration can be demanded by a private corporation or a company restricted by guarantee. The following two forms of corporations are however not eligible to apply for dissolution deregistration:
- Companies mentioned in the Ordinance of Companies s749 (e.g. public companies, banks, insurance companies, trust companies, etc. and their holding companies during the five years immediately before the deregistration application is made)
- A registered non-Hong Kong corporation, under Section 16 of the Companies Ordinance
A defunct solvent corporation must be a private entity. It is a term that identifies a corporation that is no longer running and has no obligations or liability if you are not sure what a defunct and solvent implies.
Understand that eight types of businesses referred to in section 749(2) of the Companies Ordinance are shielded by:
- Affiliated company for Part VI of the Ordinance on Shares and Futures (Cap. 571) of a corporation listed in section (c)
- Authorized trustee as specified by the Required Provident Fund Schemes Ordinance under section 2(1) (Cap. 485)
- A corporation licensed under Section VIII of the Trustee Ordinance as a trusted company (Cap. 29)
- Licensed institution as described in the Banking Ordinance under section 2(1) Limit. 155
- Insurer as described by the Insurance Ordinance in Section 2(1) and (2) (Cap. 41) (Amended 12 of 2015 s. 167)
- An organization permitted to do business in any controlled operation under Part V of the Securities and Futures Ordinance (Cap. 571) as specified in Section 1 of Part 1 of Schedule 1 of that Ordinance
Specific requirements for the deregistration of a Hong Kong organization
If the business satisfies all of the following requirements, an appeal for deregistration to dissolve the business can be submitted by the corporation itself a director, or a manager of the company:
- There is no party to any court action by the company;
- The properties of the company do not consist of any immovable property in Hong Kong.
- If the corporation is a holding company, none of the resources of its subsidiary consist of any immovable property situated in Hong Kong
- The company should not have debts outstanding;
- The corporation has not come into action or undertaken any business or has not been in operation or conducted any business during the 3 months directly before the inquiry.
- All of the company’s executives consent to the deregistration;
- “The corporation has received from the Commissioner of Inland Revenue a “Notice of No Objection to a Company being Deregistered” (“Notice of No Objection”)
Deregistration procedure in Hong Kong for a defunct solvent organization
The deregistration method for a Hong Kong business is as described before, quick, fast, and inexpensive. You could de-register your HK company with a 2-step order as follows:
Step – 1 Obtain a Notice of No Objection provided by the Commissioner for Inland Revenues
You need to complete Form IR1263, which can be downloaded from the Inland Revenue Department website, to apply for a “Notice of No Objection to a Company being Deregistered.” Then, apply to the Inland Revenue Department the form along with a non-refundable fee.
Step – 2 Deliver documents to the Companies Registry
After receipt of the Notice of No Objection, you are requested to deliver to the Registry of Corporations the following documents:
- Original copy of the “Notice of No Objection” (hard copy or certified copy if issued electronically)
- A completed Form NDR1, plus a submitted HK$420 charge, which in all cases is nonrefundable;
- Supplementary information may be needed.
How long does it take to deregister my company?
In Hong Kong, the whole procedure for business deregistration usually takes about 5 months.
Initially, you will receive a letter of approval for the deregistration request within 5 working days if nothing goes wrong with your papers. A notification of the planned deregistration will then be published in the Hong Kong Gazette by the Registrar of Companies.
If no objection to your deregistration has been presented within 3 months of the publication date, the Registrar will continue to send the second final) notification to notify the company that you will be deregistered. The corporation is legally terminated following the final notice announced.
Similarly, the applicant/nominated person may also be notified of the business deregistration in the application.
How to Obtain the Notice of No Objection?
First, request for a document called the Inland Revenue Department (IRD) Commissioner’s Notice with No Objection. This process is often referred to as tax clearance which is the most important aspect.
Your corporation should resolve any pending tax issues (e.g. any unpaid tax return on income, corporate filing fees, offshore charges, etc. and pay the Inland Revenue Agency all the required taxes. The IRD will issue a Note of No Opposition to a Corporation Being Deregistered in the event of no unresolved tax problems.
To comply with the tax approval, the corporation must compile, and send to the Inland Revenue Department, the final reports from the previous collection of audited financial statements to the business cessation date. The business closure day is the day from which the company’s trading firms ceased to work. That will usually be the day on which your last invoice was charged or the last cost incurred.
Restoration of a deregistered company
It is essential to determine for a request to return the corporation to the court. An appeal for the restitution of your business should be submitted to the Court of First Instance. To be considered for administrative restoration, the name of the company must have been deleted from the List of Corporations and the company must have been dissolved as a result.
Those are the conditions of a dissolved organization for administrative restoration:
- At the time the name was struck off the corporation was functioning or carrying on operations.
- The Government has indicated that it has no opposition to the restoration whether the corporation has any immovable property in Hong Kong that has been vested in the Government as bona vacantia.
- The company must update the business documents held by the Companies Registry
Additional reasons for business deregistration in Hong Kong
1. Annual Returns requirements
It must be noticed that before your company is fully deregistered, your Hong Kong firm must still meet all legal criteria under the Companies Ordinance. To put it plainly, you will have to keep your liabilities despite making the deregistration request for:
- Notifying the Companies Registry of the status of the registered office address if any modifications arise. In this case, to record the modifications, a Form NR1 should be sent.
- Annual Returns Filing;
- Giving notification of modifications to the business secretary and director(s) and their registration details. In this case, to record the modifications, a Form ND2B should be delivered.
Notice that any organization in Hong Kong that fails to meet its contractual responsibilities must be subject to civil fines. To guarantee that the deregistration process works seamlessly, ensure that you are properly aware of all liabilities and related procedures.
2. Disposal of company property
Make sure you have completed the disposal of your business property acceptably before sending the application for your HK company deregistration to the competent authority.
All the property of the corporation, the credit balance in the business bank accounts, landed property, or registered vehicles, to name a few would be called bona vacantia in compliance with the Hong Kong regulations. All of these properties must be retained by the Special Administrative Area of the Hong Kong Government upon the breakup of your corporation.
In short, Hong Kong company deregistration is a very common business option when it comes to how to close a company cheaply, efficiently, and easily. Remember, though, that there are also certain such requirements that you can take into consideration for the eligibility of applicants. As per the request of the Hong Kong Government, it is also necessary to understand a structured method of dissolving your company through deregistration, along with some legislative obligations involved.