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Company Insolvency: Voluntary vs Forced Liquidation

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With increasing market competition and recent economic shifts, some businesses face challenges that may lead them to close. Whether due to meeting company goals, mergers, or other reasons, properly handling the process of "winding up" a business is essential. Today's closure could pave the way for a better future and new achievements.

There are two primary ways to close a business:

• Deregistration: Suitable for solvent companies with stable finances.
• Liquidation: Applicable to companies needing to sell assets to repay debts.

The deregistration process is simpler and more cost-effective, making it the preferred choice for most companies closing operations. Are you considering deregistering your company? Below are the key steps to help you close your business legally and smoothly.

1. Hold a Shareholders Meeting to Pass a Resolution and Apply for a Notice of No Objection for Company Deregistration

To deregister a company, a resolution must first be passed at an shareholders' meeting. According to Hong Kong's Companies Ordinance (Cap. 622), all directors and shareholders must unanimously agree to cease business operations.

Meeting Requirements:

• All directors and shareholders must attend.
• A unanimous resolution must be reached.
• Complete minutes of the meeting must be prepared.

Apply for a "Notice of No Objection to a Company being Deregistered"

To successfully apply for company deregistration, an IR1263 form must be submitted to obtain a "Notice of No Objection to a Company being Deregistered".

2. Submit the Deregistration Application

Within three months from the date of issuance of the Notice of No Objection, submit the deregistration application (Form NDR1) either electronically or in person at the Queensway Government Offices. Attach the "Notice of No Objection to Deregistration."

According to Section 750 of the Companies Ordinance, companies applying for deregistration must meet the relevant conditions. For more details, refer to: "Closing a Hong Kong Company: Cancelling Business Registration and Deregistration."

According to Section 750 of the Companies Ordinance, companies applying for deregistration must meet the relevant conditions. For more details, refer to: "Closing a Hong Kong Company: Cancelling Business Registration and Deregistration."

3. Update Business Registration Details and Cancel Business Registration

When facing late tax return issues, seeking help from a professional accountant is one of the best solutions. Professional accountants can assist in clarifying the reasons for the delay, ensuring the accuracy of documents, and providing comprehensive assistance, including:

Update Business Registration Details

• Within one month after the business closes, the company must notify the Inland Revenue Department of changes to its business registration details. Failure to comply may result in a fine of up to HK$5,000 and one year of imprisonment

Reporting Procedures:

• Complete Form IRBR 193.
• Provide full closure details.
• Submit documents within the specified timeframe.

Notes:

• The Chinese business description (including symbols and spaces) must not exceed 30 characters.
• The English business description (including symbols and spaces) must not exceed 60 characters.
• The form must be signed by an authorized person.

Cancel Business Registration

After the company closes, submit Form IRC3113 within one month to the Business Registration Office to cancel the business registration. 

FAQs

Q1: How long does deregistration take?

Typically 6 to 9 months, depending on the case complexity and completeness of documentation.

Q2: Can a deregistered company be reinstated?

Yes, reinstatement can be applied for through the Court of First Instance.

Q3: What are the fees for deregistration?

Fees mainly include company secretary service fees and government charges. OneStart's professional team provides a one-stop "Deregistration, Accounting, and Audit" service to ensure a clear and streamlined deregistration process. We also offer a "Rise Again Vouchers"

With a 100% rebate on service fees for clients who deregister and wish to start a new company later!

4. Conclusion

Closing a company involves a multi-step process that must be handled carefully, from shareholder approval to updating business registration details and applying for deregistration, to ensure compliance with Hong Kong regulations and avoid unnecessary legal risks.

If a company is insolvent, liquidation will be necessary rather than simple deregistration. The next article, Company Insolvency: Voluntary vs Forced Liquidation, will explore the differences and risks between these types of liquidation, providing insights on the process and applicable situations.

OneStart Business Centre offers company deregistration services, overseeing the closure and deregistration process We also provide professional services in audit, share transfers, and liquidation arrangements. Our team can serve as your tax representative and provide expert advice. To learn more, call 3575 6888 contact a OneStart business consultant via WhatsApp.

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