Frequently Asked Questions on Hong Kong Dormant Companies
What should I do to obtain the dormant status for my Hong Kong incorporated company?
Section 344A of the Hong Kong Companies Ordinance (the “Ordinance? allows a private company by passing relevant special resolution and delivering necessary documents to the Registrar, to declare as a dormant company.
What benefits does this Section 344A offer?
It allows an inactive company to be retained at a minimum maintenance cost since a dormant company under Section 344A of the Ordinance is Exempt from complying with the following requirements as laid down in the Ordinance.
# Section 107 to 111
- Filing of an annual return and holding of an annual general meeting
# Section 122 to 134, 140A to 141 and 141C to 141D
- Preparation of audited financial statements and appointment/resignation/removal of auditors
Under what circumstances can a company be deemed as dormant?
While a company is deemed to be dormant under Section 344A of the Ordinance, the company must not enter into a relevant accounting transaction, i.e. a transaction which required by Section 121 of the Ordinance to be entered in the books of accounts. Section 121 of the Ordinance requires that a company shall keep proper books of accounts. In particular, it states that “every company shall cause to be kept books of accounts with respect to?-
# all sums of money received and expanded by the company and the matters in respect of which the receipt and expenditure takes place;
# all sales and purchases of goods by the company; and
#the assets and liabilities of the company
Specifically excluded as a relevant accounting transaction us a transaction which arises from the payment of any fee which the company is required to pay by any Ordinance.
In breach of the above provision, the exemption conferred to a dormant company shall cease as from the date the relevant accounting transaction, and any shareholder of the company who know or ought to have known about the relevant accounting transaction, and all directors of the company shall be personally liable for any debt or liability of the company arising out of the relevant accounting transaction.
Is a dormant company still required to comply with the Ordinance, pay annual business registration fee and file tax return?
Yes. A dormant company is required to observe other provisions in the Ordinance. For instance, a dormant company is required to report the change of its directors/secretary or their particulars to the Registrar when a change has taken place. In addition, a dormant company is still required to pay its annual business registration fee and file its tax return when required by the Inland Revenue Department.
Are there any companies not allowed to claim as dormant?
Yes. Section 344A of the Ordinance does not apply to a company that is not a private company or that is any of the following types of companies as specified in the Sixteenth Schedule of the Ordinance:
# an authorized institution as defined in the Banking Ordinance
# an insurer as defined in the Insurance Companies Ordinance
# a dealer registered under the Securities Ordinance
# an investment adviser registered under the Securities Ordinance
# a dealer registered under the Commodities Trading Ordinance
# a licensed leveraged foreign exchange trader as defined in the Leveraged Foreign Exchange Trading Ordinance
# an approved trustee as defined in the Mandatory Provident Fund Schemes Ordinance
# a company having a subsidiary that falls with any of the above eight categories; or
# a company that has fallen within any of the above nine categories at any time during the preceding five years.
When can a dormant company cease its dormant status?
If a dormant company wishes to cease to be dormant, the directors of the company shall deliver to the Registrar a statutory declaration that the company intends to enter into a relevant accounting transaction. The company shall cease to be deemed as dormant upon delivery of the said declaration to the Registrar.
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