Related Articles:
What to Do When a Company is Insolvent? Voluntary vs. Compulsory Liquidation
Table of Contents |
Some businesses wish to temporarily cease operations but still want to retain the legal identity of the company for future resumption. In this case, a Dormant Company becomes an ideal solution. A Dormant Company helps save operational costs and is suitable for businesses with no activity in the short term. However, businesses must understand the relevant legal responsibilities and application procedures when applying for dormant status to ensure compliance.
This guide will detail the definition of a Dormant Company, application conditions, procedures, legal responsibilities, and frequently asked questions to help business owners make informed decisions.
1. What is a Dormant Company?
A Dormant Company is defined as "a company that has not carried out any accounting transactions during a specific period." In other words, a Dormant Company has no business operations, including income, expenditure, or transactions, and must formally declare its dormant status to the Hong Kong Companies Registry.
The legal framework for dormant companies in Hong Kong provides a legitimate way to temporarily suspend business activities while retaining company registration, thus avoiding unnecessary operating costs.
Cost Savings: Reduced Audit Costs
Once registered as a Dormant Company, businesses are exempt from the requirement of audit reports and preparing financial statements. This significantly reduces operational expenses for companies with no business activity.
Maintain Company Existence: Retain Company Name and Legal Identity
A Dormant Company still exists legally. This is a way to protect brand assets for businesses with long-term plans.
Simplified Administration: Reduced Compliance Burden
A Dormant Company is not required to submit comprehensive financial reports, and statutory compliance requirements are relatively low, making company management simpler.
2. Conditions for Applying as a Dormant Company
According to Hong Kong legislation, the following types of companies can apply to be recognized as Dormant Companies:
- No accounting transactions
- No asset purchases, sales, or financial activities
- No receivables or payables
- No bank account transactions (it is recommended to close the bank account to qualify)
Application Procedure for a Dormant Company
Step 1: Pass a special resolution to declare the company as dormant
Step 2: Submit the Dormant Notification (NAR1) to the Hong Kong Companies Registry
Step 3: After approval from the Companies Registry, the company will be officially recognized as dormant
3. Legal Responsibilities of a Dormant Company
Even if a company is in dormant status, it still has certain statutory responsibilities, including:
Basic Requirements: At least one individual director, one shareholder, one company secretary, and a business registration address must be appointed
Data Updates: Any changes to company information such as directors, company secretaries, and shareholders must still be reported to the Companies Registry
Renew Business Registration Certificate: Timely renewal of the Business Registration (BR) certificate
Timely Tax Filing: Timely submission of the profits tax return issued by the Inland Revenue Department (if received)
Resuming Company Business
Just like registering as a Dormant Company, resuming business requires another special resolution declaring the company's intention to conduct an accounting transaction, and the special resolution must be submitted to the Companies Registry. After registration is completed, the company will revert to general status.
4. Conclusion
A Dormant Company is an ideal choice for businesses that temporarily have no activity but wish to retain their legal identity, allowing for cost savings and simplified compliance burdens. However, businesses should carefully assess their needs before applying and ensure they fulfill all statutory responsibilities. If there are any questions, it is recommended to seek advice from professional company consultants to ensure compliance.
OneStart Business Center offers professional company secretary services to assist you in easily applying to become a Dormant Company. If you do not wish to become a Dormant Company, please note that "zero reporting" no longer applies to general Hong Kong companies, so you will need accounting, auditing, and tax filing services! For any inquiries about Dormant Companies, feel free to call 3575 6888, or WhatsApp OneStart Business Consultants to learn more!
Contact us via WhatsApp now:
Learn more about our related services:
 |
 |
 |
