A dormant company is considered to be a company which does not trade and has no significant transactions throughout a given timeframe. This should not be confused with the colloquial term “non-trading companies” as they are substantially different.

A non-trading company means it is currently carrying out no business, but it does not mean it is lacking transactions since its accounting transactions are still recorded and therefore it is not dormant since a dormant company must not have any accounting transactions except for the ones allowed  by the relevant local law.

Hong Kong Dormant Companies

In Hong Kong a company can file for a formal dormant status with the Hong Kong Company Registrar (the ‘Registrar’) as long its members agree that the company will temporarily cease its business activities.

It is therefore important, as mentioned above, not to confuse an official registered Hong Kong dormant company with a Hong Kong company that is a non-trading company with no or hardly no transactions or that has no bank account.

Note as well that a dormant company shall not enter into any significant account transactions other than those that are allowed by under the Hong Kong Companies Ordinance (Cap.622) (the ‘Ordinance’).

What are the Benefits of a Hong Kong Dormant Company?

• Retention of your company and brand
• Retention of your company for future use
• Can be used for assets holding purposes to preserve certain assets and intellectual properties
• Creating costs efficiency by being temporarily exempted from complying with certain legal requirements, such as the filing of an annual return, holding of an annual general meeting of shareholders and the preparation of financials and audited statements

Any downsides to a Hong Kong Dormant Company?

While a dormant company results into retaining your business at low maintenance costs, it remains a legal entity and therefore there are still some requirements and provisions under the Ordinance to be fulfilled such as:

1. There must be a registered office and at least 1 director, 1 shareholder, and a company secretary
2. The Registrar must be advised of any changes in the company’s officers such as directors and company secretary as well as the particulars of registered office
3. The business registration certificate shall be renewed
4. There is an annual business registration payable to the Hong Kong government
5. There may be a need to file a tax return when required by the Inland Revenue Department.

Finally, in case a Hong Kong dormant company, with a history of trading activities in the past, decides to resume its trading activities again, therefore effectively ending its dormant status, it would still need to do management accounts/bookkeeping and audit for the period that it was dormant.

How to File for Dormant Status

In order to apply for a dormant status, it is required that there should have been “no relevant accounting transaction” since the date of its incorporation or any date that is specified. Additionally, to process such dormant status, one should:

• have at least 75% of the shareholders’ vote
• prepare and submit to the Registrar a statutory declaration
• There is an annual business registration payable to the Hong Kong government
• The Profit Tax Return shall be filed had one be issued by the Inland Revenue Department

Can any Company Claim to be Dormant?

Not every company in Hong Kong can become a dormant company. There regards the following type of companies:

• A financial institution as per the Banking Ordinance (Cap.155)
• An insurer as per the Insurance Companies Ordinance (Cap. 41)
• A trustee under the Mandatory Provident Fund Schemes Ordinance (Cap. 485)
• A corporation licensed under the Securities and Futures Ordinance (Cap. 571)
• A dealer registered under the Commodities Trading Ordinance (Cap. 250)
• A Hong Kong company or a registered non-Hong Kong company, which is in a controlling entity relationship with a company which is an intermediary (i.e. licensed corporation or registered instruction) or receives or holds in Hong Kong client assets of the intermediary as defined in the Securities and Futures Ordinance
• A licensed leveraged foreign exchange trader
• A company subsidiary falling under any of the above categories at any time during the preceding five years

Documents Required in Cessation of a Dormant Status

A company that wishes to cease its dormant status and continue its business activities may do so by delivering to the Registrar a special resolution declaring that the company intends to enter into a transaction to resume its business activities.

After ceasing to be dormant, it will resume to run as an active company, hence its obligation to file for an annual return, hold its annual general meeting of shareholders and also prepare audited financial statements for the years during which the company was in dormant status.

HKWJ Tax Law, together with our sister company Triple Eight Limited, can help you to do your business registration and application for dormant status as well as related work to make sure your dormant company will be legally compliant and fully achieve the purposes for which it was created.