What if the business plan doesn’t work out?
Starting a business in Hong Kong is an exciting experience. However, if the business plan does not work out, what are the options? One of the simplest ways to close a company is to initiate the deregistration process. The application must be approved by both the Inland Revenue Department and the Hong Kong Company Registry. Once the Inland Revenue Department issues the “no objection notice” to the application, the Company Registry will then publish a close down notice in the Gazette. From our experience, it usually takes around 6 months to close a company in Hong Kong.
There are several conditions that the company must meet to apply for the deregistration:
- All members of the company must agree to the de-registration
- The company has either never started operation or has not been carrying on any business activities 3 months before the application
- The company has no outstanding liabilities
- The company is not under in any legal proceedings
- The company will not start or resume business in the future
- The company has disposed all the trading stock and securities
- Assets of the company do not consist of any immovable property situate in Hong Kong.
- The company has no other outstanding tax liabilities which include profit tax, property tax, business registration fee, stamp duty, fines or penalties.
The deregistration application can be applied by either a shareholder or a director of the company. During the application process, the applicant company is required to remain in good standing status. That being said, the company must have a clean record, file and pay out all the outstanding government fees. The company must also continue to observe its obligations under the Companies Ordinance until it has been fully dissolved in the whole 6 months period. In a situation that the company fails to comply or carry outstanding items, the company will be liable to prosecution. In most cases, the government will not grant any discretion and government officers can discontinue the application. Nevertheless, the company applicant can only re-submit the application for completion of the outstanding notification as soon as it clears all the outstanding matters or liabilities. There is no need to pay additional fee on the re-submission.
Once the Inland Revenue Department approve the application, they will issue a Notice of No Objection to Deregistration. While there is no time limit addressed in law for the delivery of the application to the Company registry, the applicant company shall bring this notice to Company Registry and finalize within 3 months from the date of No Objection notice made. Failure to do so may result in the application being delayed or even rejected. Usually, the Gazette Notice will be published in about 3 weeks after the date of Company Registry acknowledging receipt of the application with No Objection Notice. You may view the Gazette at the website of the Government Logistics Department. If there are no other objections from any parties, the company will be successfully deregistered.
If the company applies for deregistation, does it need to submit audited account to support its profit tax return?
Once the company applies for deregistration, Inland Revenue Department will request the company to file the last profit tax return including the cessation date of business. The company must submit audited accounts prepared by HKCPA to support its profit tax return form. Unless it is a dormant company, i.e. the company has no accounting transaction during the account period, then it is not required to file the audited account. Please note that under section 758(1) of the Companies Ordinance, every director of the company before the company dissolution must ensure all business records and papers are kept at least 6 years after the date of company dissolution.
When shall the company close its company bank accounts?
The company shall close its company bank account when 1) it clears the outstanding money that the company owes to anyone. The bank account should not be emptied or closed until all company debts have been cleared, which include salaries or loans to company directors or shareholders. 2) A corporate tax, if any, should also be paid out from this company bank account. Please note that all cash or cash equivalents items will be transferred to the HKSAR government treasury upon successfully deregistration.
Does the company still need to pay the business registration fees and levies after submission of deregistration application?
If the applicant company is incorporated under the Companies Ordinance, it is required to renew its business registration certificate fee or branch registration fee until Company Registry approve the deregistration. However, Inland Revenue Department will consider holding the payment request in respect of the certificate anniversary date and the deregistration submission date. The following table is Inland Revenue Department detailed arrangement.
If you are thinking about to deregister your company, you are recommended to contact our corporate maintenance specialists at email@example.com. We can provide you with more details.