Dissolving a Hong Kong Company | Article – HSBC VisionGo
Dissolving a Hong Kong company can be achieved by either deregistration or liquidation. This post will provide you with some insights on which is the better exit approach for you.
the company has not commenced business, or has not been in operation or carried on business during the 3 months immediately before the application for deregistration;
the company has no outstanding liabilities;
the company is not a party to any legal proceedings;
the assets of the company (and all subsidiaries) do not consist of any immovable property situate in Hong Kong; and
the company has obtained shareholders approval and a "Notice of No Objection" from the relevant authority in Hong Kong
According to the Companies Ordinance, every person who was a director of the company immediately before the dissolution (including both deregistration and liquidation) must keep the company’s books and papers for at least 6 years after the date of the dissolution.
An aggrieved party (e.g. a creditor) may apply to the court for an order to restore the company within 20 years of the deregistration.
The company must meet the following conditions:
obtain the board of directors agreement and approval for conducting MVL - a certificate of solvency will be issued, accompanied by the company's latest financial statements;
obtain shareholder approval on MVL and confirm the appointment of liquidator - the power of the company's directors will be ceased once the liquidator be appointed; and
obtain tax clearance from the Inland Revenue Department
The liquidator or any other person who appears to the court to be interested, may apply to the court for an order to declare the dissolution by way of MVL as void, such application must be made within 2 years from the dissolution date.
as mentioned above, every person who was a director of the company immediately before the dissolution must keep the company’s books and papers for at least 6 years after the date of the dissolution.
Other factors e.g. the cost of dissolution, time frame and the court application period (20 years for deregistration vs 2 years for MVL) should also be taken into account when making the decision.
Do we have the "3rd Option"?
An inactive company may register with the Companies Registry to become a dormant company. This approach allows the company in question to maintain its legal identity while in the meantime entitled to the exemption from fulfilling a number of key provisions under the Companies Ordinance e.g. deliver of annual return, which lightens the administration, legal and financial burden of the company.
This "3rd Option" is widely adopted by business owners and conglomerates as a pre-dissolving and pre-restructuring solution.
A company intends to undertake MVL is also recommended to do the same, because this could reduce the MVL process time and cost.