Closing a company in Hong Kong, known as deregistration, is a relatively simple, inexpensive, and quick procedure for dissolving defunct solvent companies.
How to apply for a company deregistration in Hong Kong?
A private company or a company limited by guarantee may apply for deregistration and a private company must be no longer operating and has no debts or liabilities.
Conditions to deregister a company
Before a deregistration application, the following conditions must be satisfied:
- All the members (shareholders) of the company must agree to the deregistration;
- The company has never commenced business or operation, or has ceased to carry on business or ceased operation for more than three months immediately before the 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 located in Hong Kong; and,
- If the company is a holding company, its subsidiaries’ assets do not consist of any immovable property located in Hong Kong.
Assets of the company after deregistration
If the company will be dissolved on deregistration and, upon dissolution, all the company’s assets, if any, would be vested in the Government of the Hong Kong Special Administrative Region as ownerless property. All the assets will be held by the Hong Kong government. Therefore, before the application for deregistration, you must ensure that you have completed the disposal of your company property correctly.
Alternative to deregistration is to wind up the company
Although deregistration is a comparatively cheaper and simpler way to close a company, the largest drawback is that an aggrieved party (e.g., a creditor) may apply to the court for an order to restore the company. If you consider clearing all contingent liability once and for all, winding up the company will be a preferred choice.
There are two paths to winding up a company in Hong Kong – voluntary winding up or compulsory winding up.
Voluntary winding up of a Hong Kong company
The wind-up can be initiated either by members (shareholders) or creditors.
In a members’ voluntary winding-up, the members have the most say in the winding-up whereas the creditors have the most say in the event of a creditors’ voluntary winding up. Moreover, a members’ voluntary winding-up usually takes shorter time and involves a lower cost than a creditors’ voluntary winding up.
The aims of a members’ voluntary winding up is to liquidate a company when its shareholders no longer wish it to continue in business, to pay all the creditors in full and to distribute any surplus to the shareholders. A members’ voluntary liquidation may also take place in the context of a group restructuring.
In a creditors’ voluntary winding up, may be adopted by companies which are insolvent and have already ceased operation at the time the winding-up of the company is contemplated.
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The compulsory wind-up means a procedure engaged by the court. The company may either be solvent or insolvent. The most common ones are:
- the company is unable to pay its debt, which exceeds HK$10,000;
- the Court is of the opinion that it is just and equitable that the company should be wound up, e.g. deadlock in the management of the company; or
- the company has resolved by a special resolution that it would be wound up by the Court.
A creditor, a shareholder, or the company itself can file a winding-up petition against the company. A solicitor is normally instructed by the petitioner to prepare and file the winding-up petition.
We hope this article will help you understand more on the closing of a company in Hong Kong. For further enquiries, please feel free to contact us any time.