Ways to Terminate a Hong Kong Company: Bankruptcy and Deregistration
Ways to terminate a Hong Kong company
As a Hong Kong company law solicitor, we often receive enquiries about bankruptcy and deregistration of Hong Kong companies. The two main ways to terminate a Hong Kong company are winding-up and deregistration. To terminate a company by winding-up, it is necessary to liquidate the company’s assets, pay off its debts in accordance with the statutory procedures, and then distribute the remaining assets, if any, to the shareholders. The termination of a company’s legal personality by way of deregistration does not require a liquidation of the company’s assets. However, if there is an external debt of the company, the external debt will not be extinguished just because the company has been deregistered; the creditors of the company have the right to apply to the High Court of Hong Kong for restoration and to carry out a bankruptcy liquidation in order to pay off the debt.
Winding-up of Hong Kong Companies
The more common ways to dissolve a Hong Kong company in bankruptcy include:
- The creditor applies for compulsory winding-up of the company. If the debtor fails to pay the debt on demand within 3 weeks after the debt is due, the creditors can apply to the court to put the debtor company into bankruptcy and winding-up.
- Voluntary winding-up of a company. A company may apply to the High Court for voluntary winding-up if a special resolution is made by the shareholders to wind up the company and the company’s board of directors issue a certificate certifying that the company’s assets are sufficient to pay its debts (for which the directors are liable).
- Voluntary winding-up of a company under the auspices of creditors. This procedure applies if the shareholders have made a special resolution for bankruptcy but the board of directors of the company is unable to produce a certificate that the assets of the company are sufficient to meet its liabilities.
Dissolution of Hong Kong Company
Another relatively simple way to terminate the status of a Hong Kong company is to apply for deregistration of the company. There are two types of Hong Kong company deregistration:
- Voluntary deregistration of a Hong Kong company: If a company has not carried out any business activities or has not carried out any business activities for three consecutive months, it can apply to the Inland Revenue Department for a certificate of no objection to deregistration, and then apply for deregistration of the company from the Companies Registry. In principle, a company must have no outstanding debts when applying for deregistration. However, the Companies Registry will not take the initiative to check the accuracy of the information submitted by the company.
- The Companies Registry also has the discretion to strike off a company if it has reason to believe that the company is not carrying on business (e.g. if the company has failed to file an annual report for a number of years and no one has responded to the letter). In addition, the court has the power to dissolve a company in statutory circumstances.
When a company is deregistered, the company’s bank account will also be cancelled. Before the account is cancelled, the bank will notify the company that it has a deadline to withdraw the funds from the account. Otherwise, the funds will be returned to the government as unclaimed property. If the shareholders of the company wish to recover the amount of money in the bank account that has been returned to the Government, they will need to apply to the High Court of Hong Kong for reinstatement of the company’s status as a body corporate.
In addition, after a company has been deregistered, if the creditors’ debts have not yet been settled, the creditors can still apply for bankruptcy and liquidation of the deregistered company, just as if the company had not been deregistered.
For more information about bankruptcy and deregistration of Hong Kong companies, please contact our lawyer Mr. Yan Bob.