Dormant Company Status in Hong Kong

In Hong Kong’s fast-paced business environment, many entrepreneurs and corporations establish multiple entities to facilitate growth, investment, or future expansion. However, not all companies remain active at all times. When business operations temporarily pause, or a company is no longer trading but not yet ready for deregistration, placing it into dormant status can be a practical and cost-effective solution.

This article explains what a dormant company is, how to declare one in Hong Kong, and what compliance responsibilities still apply.

What Is a Dormant Company?

A dormant company in Hong Kong is one that has officially declared it is not carrying on any business or generating income. The Companies Ordinance (Cap. 622) allows a private company limited by shares to apply for dormant status if it wishes to remain incorporated but inactive.

Once declared dormant, the company is exempt from certain annual statutory obligations, including the preparation and auditing of financial statements. However, it must remain in good standing and comply with limited ongoing filing requirements.

Dormancy is often used by:

• Businesses temporarily suspending operations.

• Holding companies that are not yet trading.

• Entities formed for future projects or investments.

• Companies awaiting restructuring, sale, or dissolution.

Eligibility and Legal Definition

Under Section 5 of the Companies Ordinance, a company is regarded as dormant if:

1. It has no accounting transactions during the financial year; and

2. It has filed a special resolution declaring its intent to become dormant with the Companies Registry.

An “accounting transaction” refers to any transaction that needs to be recorded in accounting records, excluding certain permissible fees such as the payment of government filing fees or penalties.

How to Declare Dormant Status in Hong Kong

To become dormant, a company must follow a formal process:

1. Pass a Special Resolution The shareholders must pass a special resolution stating the company will become dormant under Section 5 of the Companies Ordinance.
   

2. File with the Companies Registry A copy of the resolution must be filed with the Companies Registry within 15 days. The company officially becomes dormant from the date the resolution is delivered to the Registry.
   

3. Maintain Proper Records Even as a dormant company, statutory records such as the register of directors, shareholders, and company secretary must remain up to date.
   

4. Reactivation A dormant company may resume business at any time by passing another special resolution declaring that it will cease to be dormant and resume operations. This must also be filed with the Companies Registry.
   

Compliance Obligations for Dormant Companies

Although dormant companies benefit from reduced compliance requirements, they are not entirely exempt from Hong Kong’s corporate regulations.

Dormant companies must still:

• Maintain a registered office address in Hong Kong.

• Retain a company secretary and at least one director.

• File annual returns when required (certain exemptions may apply depending on activity).

• Keep basic company records and registers up to date.

• Ensure business registration remains valid (renewal may still be required by the Inland Revenue Department).

They are exempt from:

• Preparing and filing audited financial statements during the dormant period.

• Submitting profit tax returns, provided no business has been conducted and no income generated.

However, if the company becomes active again, it must resume full compliance immediately, including the preparation of accounts and submission of tax filings.

Advantages of Keeping a Dormant Company

1. Cost Efficiency – Reduces accounting and audit expenses while maintaining legal existence.

2. Name Protection – Retains control over the company name and branding for future use.

3. Future Flexibility – Allows a company to resume operations without re-incorporation.

4. Simplified Compliance – Significantly reduces administrative work compared to an active entity.

When to Consider Deregistration Instead

If there are no plans to use the company in the future, full deregistration may be more appropriate. Deregistration permanently removes the company from the Companies Register and eliminates all future obligations.

However, dormancy is often preferred when there is a possibility of reactivation, or when the company holds assets, licenses, or intellectual property that must be preserved.

How Woodburn Can Support You

At Woodburn Accountants & Advisors, we provide expert guidance on all aspects of corporate compliance and entity management in Hong Kong. Our team assists clients in:

• Preparing and filing dormant company resolutions.

• Ensuring statutory registers and company records remain compliant.

• Managing reactivation or deregistration processes.

• Advising on tax implications and ongoing compliance under the Companies Ordinance.

Whether you’re pausing operations temporarily or restructuring for long-term efficiency, Woodburn offers clear, compliant solutions tailored to your corporate needs in Hong Kong.

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Woodburn Accountants & Advisors is one of China and Hong Kong’s most trusted business setup advisory firms.

Woodburn Accountants & Advisors is specialized in inbound investment to China and Hong Kong. We focus on eliminating the complexities of corporate services and compliance administration. We help clients with services ranging from trademark registration and company incorporation to the full outsourcing solution for accounting, tax, and human resource services. Our advisory services can be tailor-made based on the companies’ objectives, goals and needs which vary depending on the stage they are at on their journey.

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