Dormant company explained Hong Kong

Dormant Company Explained

A dormant company under Hong Kong law is one that has no significant accounting transactions during a given period. The Companies Ordinance (Cap. 622) defines this status, allowing qualifying private companies to reduce their compliance burden.

What Is Hong Kong Dormant Company Status?

Hong Kong dormant company status is a formal declaration a private company makes to the Companies Registry when it has no significant accounting transactions. A significant accounting transaction is any transaction that would be recorded in the company's accounting records, other than one arising from the payment of fees or penalties by the Registrar, or from the company's own share capital transactions. A company that has never traded, or that has ceased trading and has no remaining business activity, may qualify.

Dormant Company Annual Return Exemption

A private company that has declared itself dormant is exempt from delivering an annual return on Form NAR1. This exemption applies for as long as the company remains dormant. The company must still deliver the annual return for the year in which it declares dormancy, if the declaration is made after the 42-day period following the return date has passed. The annual return exemption does not remove the requirement to maintain a registered office or appoint a company secretary.

What Is a Significant Accounting Transaction?

A significant accounting transaction is any transaction that the company would normally record in its financial statements. Examples include receiving income, incurring an expense, buying or selling assets, or borrowing money. Payments of statutory fees to the Companies Registry or the Inland Revenue Department are not significant accounting transactions. A company that has only such payments during a period may still be dormant.

Declaring a Company Dormant Hong Kong

Declaring a company dormant Hong Kong requires a resolution of the members. The company must pass a members' agreement to the effect that it will have no significant accounting transactions for the period. The company then notifies the Companies Registry by filing the appropriate form. The declaration takes effect from the date stated in the resolution. A dormant company may resume active status at any time by passing another resolution and notifying the Registry.

Key Compliance Obligations for a Dormant Company

Even with the annual return exemption, a dormant company must still comply with certain obligations. It must maintain its registered office in Hong Kong, keep a company secretary, and maintain its statutory registers including the Significant Controllers Register. The company must also file any changes to its directors, secretary or registered office using the relevant forms (ND2A, ND2B, NR1). The Business Registration Certificate must be renewed on time with the Inland Revenue Department.

Ending Dormancy and Business Cessation

A dormant company that begins trading again must notify the Companies Registry and resume filing annual returns. If the company has permanently ceased business, the directors may consider deregistration. Deregistration requires a notice of no objection from the Commissioner of Inland Revenue and is available only where the company has no outstanding liabilities. Alternatively, the company may be struck off by the Registrar if it fails to file returns, but this is not a substitute for proper closure. A struck-off company can be restored to the register, but restoration involves additional cost and procedure.