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How to Close a Business in Hong Kong: A Simple Guide

Closing a business in Hong Kong involves a structured process called winding up. Here’s a straightforward guide to understanding the steps, legal implications, and consequences.

What Types of Businesses Can Be Wound Up?

Only limited companies can undergo winding-up. This process, similar to liquidation, involves selling the company's assets to repay its debts, leading to the company's closure.

A limited company in Hong Kong is registered under the Companies Ordinance (Cap. 622) and is a separate legal entity capable of taking legal actions and being sued.

Key Points to Consider

  • Shareholders' Liabilities: Shareholders are only liable up to the value of their shares or an agreed contribution.

  • Unlimited Companies: These operate more like sole proprietorships or partnerships where owners are fully liable for the business’s debts.

Directors’ Duties

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When a provisional liquidator is appointed or a winding-up order is issued, directors’ powers cease. However, they must still fulfill certain responsibilities, like keeping accurate financial records and preparing a statement of financial affairs. Failure to do so can lead to legal actions, including prosecutions and disqualification.

Winding-Up Modes

Voluntary Winding-Up:

This can be initiated by the company itself and includes:

  • Members' Voluntary Winding-Up: The company calls a general meeting and passes a special resolution. If needed, an application to the Court may follow.

  • Creditors' Voluntary Winding-Up: A creditors' meeting is convened, and a liquidator may be nominated.

Steps for Voluntary Winding-Up:

  1. Shareholders' Approval: A special resolution is passed.

  2. Public Notice: Publish the resolution in the Government Gazette within 14 days.

  3. Creditors' Meeting: Announce the meeting in the Government Gazette and newspapers.

  4. Financial Statement: Directors provide a detailed financial status report.

  5. Appoint a Liquidator: The liquidator manages the winding-up process.

  6. Final Meeting: Once affairs are settled, a final meeting is held to report on the process.

Compulsory Winding-Up

This is ordered by the High Court and can occur if:

  • The company owes HK$10,000 (US$1,200) or more.

  • The Court deems it just and equitable.

  • A special resolution is passed by the company.

  • A creditor, shareholder, or the company can file a winding-up petition. Legal aid may be available for eligible applicants.

Steps for Compulsory Winding-Up:

  • File Petition: A winding-up petition is filed with the Court.

  • Court Proceedings: The Court reviews the case.

  • Provisional Liquidator: The Official Receiver or a designated liquidator takes over the company’s affairs.

Effects of Winding-Up

  • Voluntary Winding-Up: The company stops all operations except those necessary for winding-up. The company’s legal status continues until dissolved. Any transfer of shares or changes in member status after the winding-up starts are void.

  • Compulsory Winding-Up: No legal action against the company can proceed without Court approval. The liquidator assumes control of the company’s assets and operations.

Company Deregistration

A private company or company limited by guarantee can apply for deregistration if:

  • All shareholders agree.

  • The company hasn’t operated for the past three months.

  • It has no liabilities, ongoing legal proceedings, or immovable property in Hong Kong.

Steps for Deregistration:

  • No Objection Notice: Obtain this from the Inland Revenue Department.

  • Apply for Deregistration: Submit the notice and pay the fee to the Companies Registry.

  • Publication: The deregistration is published online. If no objections are raised within three months, the company is deregistered.

Duration of Liquidation

The liquidation process can take 6 to 9 months, sometimes extending up to a year.


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