Deregistration / Liquidation
In Hong Kong, a solvent private company limited by shares may be closed by either deregistration or voluntary liquidation. Although both procedures result in the company being dissolved, they differ in their requirements, process, cost, timing, and legal effect.
Deregistration of a Company
Deregistration is a simplified and cost-effective method for dissolving a defunct solvent private company.
Key Requirements
The company must generally satisfy the following conditions:
- All members agree to the deregistration.
- The company has never commenced business or has ceased business for at least three months before the application.
- The company has no outstanding liabilities.
- The company is not involved in any legal proceedings.
- The company does not own immovable property in Hong Kong.
- If the company is a holding company, none of its subsidiaries own immovable property in Hong Kong.
- A “Notice of No Objection to a Company being Deregistered” has been obtained from the Inland Revenue Department.
Compliance Considerations
Until deregistration is completed, the company must continue to comply with its statutory obligations, including filing annual returns and maintaining corporate records. Any remaining assets, including bank balances, should be distributed or otherwise dealt with before dissolution, as undisposed property may vest in the Hong Kong Government as bona vacantia.
Liquidation of a Company
Liquidation (or winding up) is a formal process under which a company’s assets are realised, liabilities settled, and any surplus distributed before dissolution. Liquidation may be voluntary or ordered by the Court.
Voluntary Liquidation
Voluntary liquidation begins when shareholders pass a special resolution to wind up the company. A liquidator is appointed to administer the process, and the directors’ powers generally cease. The company should not continue normal business activities except where necessary for the winding-up process.
Members’ Voluntary Liquidation
This applies where:
- The company is solvent and able to pay its debts.
- Accounting records are complete and available.
- Shareholders approve the liquidation.
- A liquidator is appointed.
Creditors’ Voluntary Liquidation
This applies where:
- The company is insolvent.
- Accounting records are complete and available.
- Creditors appoint a suitably qualified liquidator, such as a CPA or solicitor.
Deregistration vs. Liquidation
| Comparison Item | Deregistration | Liquidation |
|---|---|---|
| Suitable for | Defunct solvent companies meeting statutory requirements | Companies requiring a formal process to settle assets and liabilities |
| Appointment of Liquidator | Not required | Required |
| Assets & Liabilities | Must be fully settled before application | Assets are realised and liabilities settled by the liquidator |
| Legal Process | Simplified procedure and cost effective | Formal legal process |
| Restoration after Dissolution | May be restored by the Court in certain circumstances | Generally final and irreversible after dissolution |
| Typical Timeframe*(Actual timeframes depend on the company's circumstances and the processing time of the relevant authorities.) | Approximately 6 to 9 months | Approximately 12 months |
| Note: | Relevant authorities should be duly notified throughout the closure process. | |
