Companies Ordinance (Cap 622)

 

Effective Date

Financial Year

Primary Accounting Reference Date

Accounting and Financial Reporting

Presenting financial statements at Annual General Meeting

Directors' Report

Annual General Meeting

Exemption from Holding Annual General Meeting

Circumstances in which a Company is not Required to Hold an Annual General Meeting 

Notice for General Meeting

Annual Return

Directors and Secretaries

Register of members (shareholders)

Register of directors / secretaries

Notification to Registrar of the Companies Registry

Removal of directors

Circumstances in which director must not be the company secretary

Avoidance of acts_done_by_person_in_dual_capacity as director and secretary

Company Statutory Records

Dormant Company

Deregistration

Comparison between de-registration and liquidation

 


 

Effective Date

 

The HK Companies Ordinance (Cap 622) came into effect on 3 March 2014.

The old Companies Ordinance (Cap 32) was renamed as Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) on the same date.


 

Accounting and Audit

 

Financial Year

 

The concept of Financial Year (section 367 of the C.O.) is built on the concept of "accounting reference period", which is in turn built on the concept of "primary accounting reference date".

 

The accounting reference period has a start date and a finish date.

 

(A) Old companies 

 

For exiting companies established before the commmencement date of the Companies Ordinance (3rd March 2014), the first accounting reference period begins on the date immediately following its primary accounting reference date (the PARD) and ends with the first anniversary of its PARD.

Example 1: if an existing company closes its books of accounts on 31st March each year, then the first accounting reference period begins on 1st April 2014 (the date that immediately follows the PARD), and ends with 31st March 2015.

Example 2: if an existing company closes its books of accounts on 31st December each year, then the first accounting reference period begins on 1st January 2015 and ends with 31st December 2015.

 

The PARD is the end date of the financial year that begins with the commencement date of the Companies Ordinance (Cap 622) and ends after the commencement date of the Companies Ordinance (Cap 622).

 

(B) New companies

 

For companies established on or after the commencement date of the Companies Ordinance (3rd March 2014), the first accounting reference period begins on its incorporation date and ends with its PARD, which refers to either (i) a date specified by the directors before the relevant date, or (ii) the anniversary of the incorporation date, in the absence of a specified date.

The above relevant date means the last day of the month in which the relevant anniversary of the company's incorporation falls.

Example 1: if a company is established on 21st April 2014, then the director can specify that the PARD is 31st December 2014.

Example 2: if a company is established on 21st April 2014 and the director does not specify the PARD, then the PARD is 30th April 2015. That is, the last day of the month in which the relevant anniversay (20th April 2015) of the company's incorporation falls.

 

Primary Accounting Reference Date (PARD)

An understanding of PARD is very important as it is the basic component for the concept of first accounting reference period,  by reference of which the financial year is determined for the companies incorporate before, and the companies incorporated on or after, the commencement date of the CO.

Please refer to the elaboration under the heading :

 


 

Obligations: Accounting and Financial Reporting

 

In respect of every financial year, the director of a company has the obligation for keeping the accounting records, the preparation of financial statements, and presenting the financial statements at the annual general meeting, and in the case that the company is exempt from holding the AGM, delivering the financial statements to every member of the company.

 

 

Legal requirements

Failure to comply  Wilful failure to comply 
S373 Company must keep accounting records. $300,000  $300,000 and 12 months' imprisonment
S377  Company must keep accounting records for 7 years after the end of financial year, to which the last entry made in the accounts relates. $300,000 $300,000 and 12 months' imprisonment 
S379 Directors must prepare financial statement for each financial year. $300,000 $300,000 and 12 months' imprisonment

 

Financial Statements (full set)

S387(1)(a) provides that directors need to pass resolution to approve the financial statement.

S387(1)(b) provides that the financial statement must be signed by 2 directors, or by 1 director in the case of a sole-director company.

 

Statement of Finanical Position

S387(2) provides that the name of person who signs the statement of financial position must be printed (stated) on the statement.

 

Non-compliance

S387(3) provides that if S387(1) is breached, the company and every responsible person commit an offence, and each is liable to a fine at level 4.

S387(4) provides that if S387(2) is breached, the company and every responsible person commit an office, and each is liable to a fine at level 4.

 

Section  Requirement Penalty Amount
S387(1)(a) Approval by directors Prosecution and/or fine $25,000 (level 4)
S387(1)(b)  Signing by director(s) Ditto Ditto
S387(2) State name of person signing Ditto Ditto

 

 

 

 

 

 

* It is noted that S387(2) and S387(4) are new requirements under the revised Companies Ordinance. That will take effect for accounting period ending 31st March 2015.

 

Obligations: Presenting financial statements at the annual general meeting (AGM) or to every member

 

  Legal requirement Failure to comply Wilful failure to comply
S429(3)  Company must send financial statements to members 21 days before holding of AGM as per S429(1). $300,000   
S429(4) Director(s) wilfully fail to take steps to comply with S429(1). $300,000 12 months' imprisonment

 

Note : A company not required to holding the AGM under section 612 need not comply with section 429(1). For the circumstances under which a company is not required to hold the AGM under section 612, please see {S612}. 

 


 

 

Directors' Report

 

Sections 388 to 391 and section 543(2) deal with directors' report.

 

388 Companies must prepare a directors' report for each financial year, including the requirement of a business review, and the provisions relating to the exemption for the preparation of the directors' report. 
389 Special circumstances under which a private company must prepare directors' report as per requirement under section 388 
390 The contents of the directors' report in general
543(2)   The directors' report must include the information of the management contract conclusion between the directors and the Company.

 

 

 

 

 

 

 

 

The following also deals with the directors' report:

 

1) Schedule 5 of the Companies Ordinance

 

Schedule 5 (S388(1)(a)) specificially provides for the business review that the directors's report must contain.

 

2) Companies (Directors' Report) Regulation (Cap 622D)

 

The Regulation (S388(1)(b)) summarizes the contents of the directors' report, as provided under section 390 and schedule 5 of the Companies Ordinance (Cap 622), and that includes additional items in the directors' report such as directors' interest, donation, recommended dividends, issue of capital, issue of debenture, equity-linked agreement, reasons for directors' resignation and permitted idemnity provision.

 

Section 388

 

It provides that

 

(1)    A company's directors must prepare for each financial year a report that—

 

(a)    complies with sections 390, 543(2) and Schedule 5;

(b)    contains the information prescribed by the Regulation; and

(c)    complies with other requirements prescribed by the Regulation.

 

(2)  The requirement under S388(1) applies to a holding company, for which the consolidated directors' report must be prepared.

 

(3)  Subsection (1) or (2) does not require the directors' report for a financial year to comply with Schedule 5 if—

(a)    the company falls within the reporting exemption for the financial year;

(b)    the company is a wholly owned subsidiary of another body corporate in the financial year; or

(c)    the company is a private company that does not fall within the reporting exemption for the financial year, and a special resolution is passed by the members to the effect that the company is not to prepare a business review required by that Schedule for the financial year.

 

(4)  A resolution for the purposes of subsection (3)(c)—

(a)  may be passed in relation to—

(i)  a financial year; or

(ii)  a financial year and every subsequent financial year;

(b)  must be passed at least 6 months before the end of the financial year to which the directors’ report relates; and

(c)  may only be revoked by a special resolution.

 

(5) Subsections (1), (2) and (3) have effect subject to section 389, which specifically provides for the conditions under which the company becomes a public company and consequently it must prepare directors' report as per section 388(1) or 388(2).

 

Non-compliance of S388

 

(6)    A director of a company who fails to take all reasonable steps to secure compliance with subsection (1) or (2) commits an offence and is liable to a fine of $150000.

(7)    A director of a company who wilfully fails to take all reasonable steps to secure compliance with subsection (1) or (2) commits an offence and is liable to a fine of $150000 and to imprisonment for 6 months.

 

Section 390 (Cap 622) and Regulation (Cap 622D)

 

Section 390 lays down the general requirements for the directors' report. The detailed requirements of a directors' report are laid down under the Companies (Directors' Report) Regulation (Cap 622D), which provides for the reporting reuqirements of the directors' report for the company that falls or that does not fall, within the scope of reporting exemption respectively.

 

Section 391

 

Requirements Fines for non-compliance
S391(1) A directors' report must be approved, and signed on their behalf by a director or the commpany secretary. If S391(1) is contravened, the company and every responsible person is subject to a fine at level 4 (HK$25,000).
S391(2) Every copy of a directors' report, laid before AGM or sent to members, must state the name of person who signed the report. If S391(2) is contravened, the company and every responsible person is subject to a fine at level 4 (HK$25,000).


 


 

 

Annual General Meeting

 

Section 610 provides that (1) subject to subsections (2) and (3), a company must, in respect of each financial year of the company, hold a general meeting as its annual general meeting within the following period (in addition to any other meetings held during the period)—

(a) in the case of a private company or a company limited by guarantee, 

9 months after the end of its accounting reference period by reference to which the financial year is to be determined; and 

(b) in the case of any other company,

6 months after the end of its accounting reference period by reference to which the financial year is to be determined.

 

 

 

 

 

 

 

(2) If the accounting reference period mentioned in subsection (1) is the first accounting reference period of the company and is longer than 12 months, the company must hold a general meeting as its annual general meeting within the following period—

(a)in the case of a private company or a company limited by guarantee, 

(i) 9 months after the anniversary of the company’s incorporation; or
(ii) 3 months after the end of that accounting reference period, whichever is the later; and

(b) in the case of any other company, 

(i) 6 months after the anniversary of the company's incorporation; or 

(ii) 3 months after the end of that accounting reference period, whichever is the later.

 

 

 

 

 

 

 

 

 

 

(3) If a company has by a directors’ resolution under section 371 or a notice delivered to the Registrar under that section, shortened an accounting reference period, the company must hold a general meeting as its annual general meeting within the following period—

(a) in the case of a private company or a company limited by guarantee, 

(i) 9 months after the end of the shortened accounting reference period; or

(ii) 3 months after the date of the directors’ resolution,

whichever is the later; and

(b) in the case of any other company, 

(i) 6 months after the end of the shortened accounting reference period; or
(ii) 3 months after the date of the directors’ resolution,

whichever is the later.

 

 

 

 

 

 

 

 

 

 

 

 

(4) A private company mentioned in subsections (1), (2) and (3) does not include a private company that is, at any time during the financial year, a subsidiary of a public company.

 

Non-compliance

If a company contravenes subsection (1), (2), or (3) as mentioned above, the company, and every responsible person of the company, commit an offence, and each is liable to a fine at level 5. 

As per Criminal Procedure Ordinance, a fine at level 5 amounts to HK$50,000.

 


 

Notice for General Meeting 

 

Notice required of general meetings (Sections 571 and 578)

 

(1) A company is required to give at least 21 days' notice for the annual general meeting. The notice shall be exclusive of the day on which it is served or deemed to be served and of the day for which it is given.

 

 

Type of general meetings and matters

Notice period

1.

Annual general meeting

21 days

2.

General meeting

14 days

3.

Resolutions requiring special notice

28 days (S578)

 

(2) If the company’s articles require a longer period of notice than that specified in subsection (1), a general meeting of a company (other than an adjourned meeting) must be called by notice of that longer period.
 

(3) A general meeting of a company is to be regarded, despite the fact that it is called by shorter notice than that specified in subsection (1) or in the company’s articles, as having been duly called if it is so agreed—

(a) in the case of an annual general meeting, by all the members entitled to attend and vote at the meeting; and
(b) in any other case, by a majority in number of the members having the right to attend and vote at the meeting, being a majority together representing at least 95% of the total voting rights at the meeting of all the members.

 

Notice to the auditor

 

Section 575 of the Companies Ordinance provides that, if the Company is reuqired to give the notice of general meeting or documents relating to the general meeting to the members, it must give the same to the auditor. If that notice requirement is not followed, the company and each responsible persion commits an offence, and each is liable to a fine at level 3 (HK$10,000).

 


 

Contents of Notice of General Meetings (Section 576)

 

(1) A company must ensure that the notice 

(a) specifies the date and time of the meeting;
(b) specifies the place of the meeting;
(c) states the general nature of the business to be dealt with at the meeting;
(d) in the case of a notice calling an annual general meeting, states that the meeting is an annual general meeting; and
(e) if a resolution is intended to be moved at the meeting—

(i) includes notice of the resolution; and
(ii) (where the company is not a wholly owned subsidiary) includes a statement containing the information and explanation, if any, that is reasonably necessary to indicate the purpose of the resolution.

(2) Subsection (1)(a), (b) and (c) has effect subject to any provision of the company's articles of association. 

 

(3) Subsection (1)(e) does not apply in relation to a resolution of which—

(a) notice has been included in the notice of meeting under section 567(3) or 568(2); or
(b) notice has been given under section 615.

 

Non-compliance

(4) If a company contravenes (1)(e), the company, and every responsible person commit an offence, and each is liable to a fine at level 3 (HK$10,000).

 


 

Exemption from Holding the Anuual General Meeting

 

Section 611 provides that

(1) Section 610 does not apply to a company that is a dormant company, as defined under section 5(1).
(2) If such a company enters into an accounting transaction, the exemption ceases to have effect on and after the date of the accounting transaction.

 


 

Circumstances in which company is not required to hold annual general meeting

 

Section 612 provides for the circumstances in which the company is not required to hold annual general meeting. 

(1) A company is not required to hold an annual general meeting if—

(a) everything that is required or intended to be done at the meeting (by resolution or otherwise) is done by a written resolution; and

(b) a copy of each document (i.e. the financial statement) that under this Ordinance would otherwise be required to be laid before the company at the meeting, is provided to each member, on or before the circulation date of the written resolution.

(2) A company is also not required to hold an annual general meeting if—

(a) the company has only one member; or
(b) all of the following are satisfied—

(i) the company has, with a resolution passed by all members, dispensed with the holding of the annual general meeting;
(ii) the company has not revoked the resolution, or the company has revoked the resolution but is not required to hold an annual general meeting (because the resolution ceases to have effect 9 months after the end of a financial year); and
(iii) no member of the company has required the holding of the annual general meeting.

 

[Comment: It is noted that sub-section 2 is a new provision in comparison with the predecessor ordinance.]

 


 

Annual Return

 

Section 622 provides that the annual return must be filed within the following period:

Sections applied   Company Type  Interval Required Filing date
662(1),(2)     Private    Every calendar year * within 42 days of the anniversary of incorporation date 
662(3),(4) Public Every financial year  within 42 days of the return date, which is 6 months after the end of accounting reference period 
662(3),(4) Limited by guarantee Every financial year  within 42 days of the return date, which is 9 months after the end of accounting reference period

* except for the year of incorporation

 

Filing fees

The normal filing fee for a private company, a company limited by guarantee (a guarantee company) and a public company is HK$105, HK$105, and HK140 respectively.

Late filing will result in prosecution and attract a late filing penalty, either singly or in combination. The late filing fees are listed below as per Schedule 1, Companies (Fees) Regulations (Cap 622K):

Annual return is delivered Private company    Guarantee company   Public company  
Within 42 days of return date 105 105 140
More than 42 days after but within 3 months of the return date 870 870 1200
More than 3 months after but within 6 months 1740 1740 2400
More than 6 months after but within 9 months  2610 2610 3600
More than 9 months after 3480 3480 4800

 

Contents

The annual return must comply with requirements under section 664.

 

Non-compliance

If section 662(1) or (3) is contravened, the company, and every responsible person of the company, commits an offence, and each is liable to a fine at leval 5 (HK$50,000) and, in the case of a continuing offence, to a further fine of HK$1,000 for each day during which the office continues.

 

Exemption

A dormant company, as defined under section 5(1), is exempt from the requirement to file an annual return to the Companies Registry.

 


 

Directors and Secretaries

 

Minimum number of directors

 

  Public Company Min. No. of director
1. Public company 2
2. Company limited by Guarantee 2
3. Private Company 1

 

Restriction on body corporate acting as a director

 

Section 456 provides that the following types of companies must not appoint a corporation (body corporate) as a director.

 

1.

A public company

2.

A company limited by guarantee

3.

A private company that is a member of a group of companies, of which a listed company is a member

 

Corporate director

 

Section 457 provides that

 

(1) a private company other than one that is a member of a group of companies, of which a listed company is a member, can appoint a corporate director.

(2) the company must have a least one director who is a natural person.

 

[Comment: it is noted that the C. O. distinguishes between the private company that belongs to a group of companies having a listed company as a member and the private company that does not.]

 

Direction requiring a company to appoint directors

 

Section 458 provides that the Companies Registrar may issue a direction to require the company to appoint a director or directors within a specified period if it appears to him that the provision for minimum number of directors has been contravened. The specified period must not be less than one month or more than 3 months after the date on the direction is given.

 

Non-compliance

 

In the case of non-compliance with section 458, the company and every responsible person of the company commit an offence, and each is liable to a fine at level 6 (HK$100,000) and, in the case of continuing offence, to a further fine of HK2,000 for each day during which the office continues.

 

Reserve director

 

S455 provides that if a private company has only one member and that member is the sole director of the company, the company may by a resolution passed at a general meeting, nominate a person as a reserve director to act in place of the sole director in the event of the sole director's death.

 


 

Register of shareholders (members)

 

Location

Scope

Contravention

Hong Kong Company must keep Register of members at the registered office (S627) or a prescribed place

A Company must keep a register of members per S627(1), with the required particulars (specified in S627(2) and (3)) of each person who is a member, per S627(4), within 2 months after receiving notice of such particulars.

Company, and every responsible person liable to a fine at level 4 (HK$25,000), in case of continuing offence, further fine of $700 of each day during the which the offence continues.

 

Register of directors /secretaries

 

Location

Scope

Contravention

Hong Kong Company must keep Register of directors at the registered office (S641(3)) or a prescribed place

A Company must keep a register of directors as per S641(1), with the required particulars (specified in S643) of each person who is a director or reserve director, per S641(2)

Company, and every responsible person liable to a fine at level 4 (HK$25,000), in case of continuing offence, further fine of $700 of each day during the which the offence continues.

 

 


 

Register of significant controllers (to be enacted soon)

 

 


 

Notification to Registrar of the Companies Registry:

 

Location of the register of directors

 

Section

Contents

Notification

Penalty for contravention

Responsible persons

S641(4)

A company must notify the Registrar of the place at which the register of directors is kept.

The notice must be in the specified form (NR2) and delivered to the Registrar for registration within 15 days after the register is first kept at that place.

A fine at level 4 ($25,000), in the case of a continuing offence, $700 for each day while the offence continues

The company and every responsible person of the company

S641(5)

A company must notify the Registrar of any change (other than a change of the address of the company's registered office) in the place at which the register of directors is kept.

The notice must be in the specified form (NR2) and delivered to the Registrar for registration within 15 days after the change.

As above

As above

S641(6)

 

No required for pre-existing company if it has kept the register at the registered office at commencement date of the C.O.

 

 

 

 

Appointment, Resignation and Change in Particulars of directors

 

The Company has a duty to notify the Registrar of the Companies Registry in respect of the following cases:

Director Secretary Type of change Report time  Specified form 
S645(1);S645(4)  S652(1);S652(2)  Appointment / cessation  within 15 days  ND2A 
S645(4) S652(2) Change in particulars  Ditto  ND2B 
S464(3) S477(3) Resignation  Ditto  ND4 
Reserve director   Type of change Report time  Specified form 
S645(2),(3) N/A Nomination / cessation within 15 days  ND5
S645(2),(3) N/A Change in particulars Ditto ND7
S464(3) N/A Resignation Ditto ND8

 

 

 

 

 

 

 

 

 

 

 

 

Resignation of director and secretary

 

Despite section 645(4), if a director resigning has reasonable grounds for believing that the company will not deliver the notice, the director resigning must deliver to the Registrar for registration a notice of the resignation. 

A director here includes a reserve director.

The same reason applies in the case of resignation by the company secretary.

 

Non-compliance

 

i) Director and Reserve director

If a company contravenes section 645(1), 645(2), 645(3) or 645(4), the company, and every responsible person of the company, commit an offence, and each is liable to a fine at level 4, and in the case of continuing offence, to a further fine of $700 for each day during which the offence continues.

ii) Secretary

If a company contravenes section 652(1) or 652(2), the company and every responsible person commit an offence, and each is liable to a fine at level 4, and in the case of a continuing offence, to a further fine at $700 for each day during which the offence continues.

iii) Level 4

As per Criminal Procedure Ordinance, a fine at level 4 is HK$25,000.

 


 

Removal of directors

 

Section 462 provides that a company may by an ordinary resolution passed at a general meeting remove a director before the end of the director's term of office, despite anything in its article or in any agreement between it and the director.

The preceding paragraph does not, if the company is a private company, authorize the removal of a director who has held office for life since 31 August 1984. 

 

Special notice is required of a resolution to remove a director; or to appoint somebody in place of a director so removed at the meeting at which the director is removed.

 

Section 578 provides that if, by any provision of the Companies Ordinance, special notice is required to be given of a resolution, the resolution is not effective unless notice of the intention to move it has been given to the company at least 28 days before the meeting at which it is moved.

 


Circumstances in which a director must NOT be the secretary of the company

 

As per section 475(1), a director of the company may also be a secretary of the company, except that

- the director of a private company having only one director, must not also be the company secretary of that company; [S475(2)] 

- No private company having a sole director may have, as the company secretary of the company, a body corporate the sole director of which is the sole director of the private company. [s475(3)

 

Avoidance of acts done by person in dual capacity as director and company secretary

 

S479(1) provides that a provision requiring or authorizing a thing to be done by or to, a director and a company secretary of a company is not satisfied by its being done by or to the same person who is acting 

(a) both as director and company secretary; or

(b) both as director and in place of the company secretary.

 

Comments: S475 applies to a private company having only one director, while S479 applies to the company having more than one director.


 

Company Statutory Records

 

Directors' register and company secretary's register 

 

Location

Scope

Contravention

Hong Kong Company must keep Register of directors at the registered office (S627) or a prescribed place

A Company must keep a register of directors per S627(1), with the required particulars (specified in S627(2) and (3)) of each person who is a member, per S627(4), within 2 months after receiving notice of such particulars.

Company, and every responsible person liable to a fine at level 4 (HK$25,000), in case of continuing offence, further fine of $700 of each day during the which the offence continues.

 

Members' register

 

Location

Scope

Contravention

Hong Kong Company must keep Register of directors at the registered office (S627) or a prescribed place

A Company must keep a register of directors per S627(1), with the required particulars (specified in S627(2) and (3)) of each person who is a member, per S627(4), within 2 months after receiving notice of such particulars.

Company, and every responsible person liable to a fine at level 4 (HK$25,000), in case of continuing offence, further fine of $700 of each day during the which the offence continues.

 

Section 654

 

Company record is meant any register, index, agreement, memorandum, minutes or other document required by this Ordinance to be kept by a company, but does not include accounting records.

 

Company records kept internally by Company

 

A HK Company or a registered non-HK company, as defined section 2, must keep statutory records, which is generated internally in the course of daily business activities.

The Companies Ordinance (Cap 622) requires that a Company must keep its records for a period of time at specified locations as prescribed under the Companies Ordinance (Cap 622). Some of the internal records must be made available to the public by filing at the Companies Registry. Non-compliance will result in fines, and in the case of continuing offence, a further fine each day while the offence continues.

 

  • Copies of instrument creating charges, and register of charges [Read]
  • Minutes of meetings held or resolutions signed by directors [Read]
  • Records of meetings held, and resolutions passed by members [Read]

 


 

Dormant Company

 

Section 5 of the Companies Ordinance (Cap 622) provides that a private company becomes dormant if the shareholders pass a special resolution to the effect that the company shall become dormant from the date of delivery of the special resolution to the Registrar of the Companies Registry, and that the directors are authorized to deliver such special resolution to the Registrar for registration purposes.

 

Exemptions 

 

As per Section 447(1), if a company becomes dormant, the following provisions of the Companies Ordinance shall not apply:

(a)

367(4)

Directors must secure that the financial year of each subsidiary should coincide with that of the holding company;

(b)

Subdivisions 3 and 4 of division 4, Part 9

The requirement to prepare financial statements and the directors’ report;

(c)

Subdivisions 2 and 3 of division 5, Part 9

Company should appoint auditor, and auditor must prepare report on financial statements, which are prepared by directors and laid by directors at AGM (S429) or send it to each member (S430);

(d)

Section 411 and 412

Auditor’s right to attend the AGM and right to have access to information for audit purposes;

(e)

Subdivisions 6, 7 and 8 of division 5, Part 9

Termination of auditor’s appointment, outgoing auditor’s right, and outgoing auditor’s statement of circumstances;

(f)

Divisions 6 and 7, Part 9

Laying and publication of financial statements and summary financial report.

 

Excluded Companies

 

Subsection 7 of Section 5 provides that only qualified private companies are eligible to apply for dormancy. The following types of companies do not fall under the scope of qualified private companies:

(a)    an authorized institution as defined by section 2(1) of the Banking Ordinance (Cap 155);

(b)    an insurer as defined by section 2(1) and (2) of the Insurance Companies Ordinance (Cap 41);

(c)    a corporation licensed under Part V of the Securities and Futures Ordinance (Cap 571) to carry on a business in any regulated activity as defined by section 1 of Part 1 of Schedule 1 to that Ordinance;

(d)    an associated entity, within the meaning of Part VI of the Securities and Futures Ordinance (Cap 571), of a corporation mentioned in paragraph (c);

(e)    an approved trustee as defined by section 2(1) of the Mandatory Provident Fund Schemes Ordinance (Cap 485);

(f)    a company having a subsidiary that falls within paragraph (a), (b), (c), (d) or (e); or

(g)    a company that fell within paragraph (a), (b), (c), (d), (e) or (f) at any time during the 5 years immediately before the special resolution is passed.

(8)    The Financial Secretary may, by notice published in the Gazette, amend subsection (7) of section 447.

 

Cessation of dormant status

 

(2)     Subsection 2 of section 447 provides that if such a company enters into an accounting transaction—

(a)    subsection 1 of section 447 ceases to have effect on and after the date of the accounting transaction; and

(b)    a member of the company who knew or ought to have known about the accounting transaction, and every director of the company, are personally liable for any debt or liability of the company arising out of the accounting transaction.

 


 

Dissolution by Deregistration

 

A company can be dissolved in two ways (i) by an application to the Registrar for a deregistration or (ii) by petition to the court for an order to commence a compulsory liquidation or by the commencement of a voluntary liquidation. A voluntary liquidation can be divided into a creditor's voluntary liquidation or a member's voluntary liquidation, depending on whether the company is solvent or not.

 

S750 Application for Deregistration

 

(1)    A company, or a director or member of a company, may apply to the Registrar for deregistration of the company.

(2)    An application must not be made unless, at the time of the application—

(a)    all the members agree to the deregistration;

(b)    the company has not commenced operation or business, or has not been in operation or carried on business during the 3 months immediately before the application;

(c)    the company has no outstanding liabilities;

(d)    the company is not a party to any legal proceedings;

(e)    the company’s assets do not consist of any immovable property situate in Hong Kong; and

(f)    if the company is a holding company, none of its subsidiary’s assets consist of any immovable property situate in Hong Kong.

(3)    An application—

(a)    must be in the specified form;

(b)    must be accompanied by the prescribed fee; and

(c)    must be accompanied by a letter of no objection which is issued by the Commission of the Inland Revenue Dept.

(4)    If the applicant is a company, it must nominate in the application a natural person to be given notice of the deregistration.

(5)    The applicant must give the Registrar any further information that the Registrar may request in connection with an application.

(6)    A person who, in connection with an application, knowingly or recklessly gives any information to the Registrar that is false or misleading in a material particular commits an offence and is liable—

(a)    on conviction on indictment to a fine of $300000 and to imprisonment for 2 years; or

(b)    on summary conviction to a fine at level 6 and to imprisonment for 6 months.

 

Companies to Which Deregistration does not Apply

 

The company for purposes under section 750 excludes (a) public company; and (b) a company specified below:

(a)    a bank, as defined under the Banking Ordinance (Cap 155);

(b)    an insurance company, as defined under the Insurance Companies Ordinance (Cap 41);

(c)    a corporation licensed under Part V of the Securities and Futures Ordinance (Cap 571) to carry on a business in any regulated activity as defined by section 1 of Part 1 of Schedule 1 to that Ordinance;

(d)    an associated entity, within the meaning of Part VI of the Securities and Futures Ordinance (Cap 571), of a corporation mentioned in paragraph (c);

(e)    an approved trustee as defined by section 2(1) of the Mandatory Provident Fund Schemes Ordinance (Cap 485);

(f)    a company registered as a trust company under Part VIII of the Trustee Ordinance (Cap 29);

(g)    a company having a subsidiary that falls within paragraph (a), (b), (c), (d), (e) or (f); or

(h)    a company that fell within paragraph (a), (b), (c), (d), (e), (f) or (g) at any time during the 5 years immediately before the application under section 750 is made.

 

Liabilities in Connection with the Dissolved Company

 

Section 756 provides that even though a company is dissolved under this Part, the liability (if any) of every director, manager and member of the company continues and may be enforced as if the company had not been dissolved.

 

Books and Paper of the Dissolved Company

 

Section 758 provides that if a company is dissolved by way of deregistration, every person who was a director of the company immediately before the dissolution must ensure that the company’s books and papers are kept for at least 6 years after the date of the dissolution. A person who contravenes subsection (1) commits an offence and is liable to a fine at level 3 (HK$10,000).

 

Restoration by Order of Court

 

Section 765(2) and section 766(1)(b) provide that where a company has been deregistered, and is dissolved, under section 291AA of the predecessor Ordinance, an application to the Court for the restoration of the company to the Companies Register may be made by a person who feels aggrieved by the deregistration, within 20 years of the deregistration.

 

Section 766(2) provides that an application under section 765 may be made at any time if the purpose of the application is to enable a person to bring proceedings against the company for damages for personal injury.

 


 

Comparison between de-registration and liquidation

 

There are advantages and disadvantages for choosing de-registration as a means to dissolving a company. The obvious advantage for de-registration is that it costs much less than that for liquidation. But there is disadvantage for using deregistration, as set out below: 

 

It is an untrue belief that de-registration can put an end to the business of the Company including its financial obligations towards creditors. In fact, it is not the intention of the law. As per section 756, the legal obligations for directors and members imposed under the Companies Ordinance, cannot be extinguished by way of the de-registration procedure. As per section 760, any aggrieved parties including the creditors can, within a period of 20 years of the deregistration, apply to the court for an order to restore the company to the position such that it is to continue as before.

 

To extinguish the financial obligations, one should dissolve the company by means of liquidation. De-registration and liquidations are different legal procedures, and each has different legal consequences in respect of the financial obligations for the shareholders and the non-financial obligaitons for the directors, including that under the Companies Ordinance (Cap 622) and the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32).

 

The difference between deregistration and liquidation can best be explained by using an analogy here: there are two ways of handling the human body after a person's death. Deregistraiton is like a burial and liquidation is like a cremation. One can re-examine the corpse after the burial, but one cannot re-examine the corpse after the cremation as it has been reduced into ashes. That is why many property developers, after the completing the sale of flats, will liquidate the company which was set up for the development project. They do this to protect themselves against any contract or tort claims in future.

 

In case that the directors or members make a decision on de-registration, then the directors must clear the tax liabilities by applying to the Inland Revenue Department for a no-objection letter. In case that the members decide to wind up the Company voluntarily, it is the liquidator who should clear the tax liabilities.