How to declare as a dormant company?
There are times when investors do businesses for some years but may wish for a rest after hectic trading. The company can consider pause the business activities and declare dormant status with Company Registry and Inland Revenue Department. This way, the company maintenance can be at lower cost while keeping and protecting the company name for intellectual property purpose.
Effect of Dormancy
The dormancy procedure only has about 25-year history in Hong Kong. Section 5 of the Companies Ordinance governs dormancy procedure and it only enables certain qualified Hong Kong companies to become dormant (i.e. inactive). A limited company in Hong Kong is considered as a dormant company when it has no significant accounting transactions. That being said, the business must have absolutely no entry during its accounting period. The company must also pass a special resolution authorising its directors to make and deliver to the Registrar of Companies a statutory declaration to the effect that the company will be treated as a dormant company. Once the Hong Kong Company Registry acknowledges the receipt of special resolution, the company is then exempt from its obligation to prepare financial statements, appointing auditor, and publishing financial records and statement.
How can a dormant company be reactivated?
If the company wants to cease its dormant status one day, the company has to pass a special resolution to declare its intention to enter into accounting transaction and the resolution has to be delivered for registration in time. You may ask what is an accounting transaction. Section 2 of Companies Ordinance addresses that a transaction that is required by Section 373 to be entered in the company’s accounting records, excluding a transaction arising from the payment of any fee that the company is required by an Ordinance to pay, i.e. business registration fee.
Does a dormant company require to pay the business registration fee and file the profit tax return annually?
Yes. A dormant company is required to renew its business registration license every year and file profit tax return when the Inland Revenue Department issues one. A dormant company is also required to maintain 1 shareholder, 1 director, 1 company secretary and a valid registered office address.
Does a dormant company require to file Form NAR1 (Annual Return)?
No. The requirement to deliver Form NAR1 (Annual Return) for registration does not apply to a dormant company. However, if a dormant company declares itself to be dormant after the 42nd day after the anniversary date of incorporation, it is required to deliver the Form NAR1 to Company Registry for registration.
What can I do when I no longer require my dormant company?
If you decide that you no longer want your dormant company, it is important to arrange the deregistration formally. The deregistration application involves with two government departments and a close down notice must be published in the Gazette. Please refer to Dergistration Service.
As an important reminder, even a company can be inactive, a dormant Hong Kong company still has to comply with some minimal formalities and regulations. If you need any assistance, please contact our Hong Kong company formation specialists at email@example.com for a free consultation.