A Hong Kong private company becomes dormant by passing a special resolution declaring it dormant and delivering it to the Companies Registry. It is dormant from the delivery date or any later date the resolution specifies. While dormant, it doesn't have to file annual returns, and it is exempt from preparing audited financial statements. The IRD accepts profits tax returns from dormant companies without audited accounts. The company still has to report changes to its registered office, directors and company secretary, and renew its business registration every year. It stops being dormant as soon as it has an accounting transaction.
How a company becomes dormant
- Under section 5 of the Companies Ordinance, a private company may pass a special resolution declaring that it will become dormant, and deliver it to the Registrar of Companies for registration. The Registry publishes specimen resolutions.
- The company is dormant from the date the resolution is delivered, or from any later date specified in the resolution.
- To end dormancy, the company delivers another special resolution declaring that it intends to enter into an accounting transaction. It also stops being dormant automatically on the date it has an accounting transaction.
What counts as an "accounting transaction"
Section 2 of the Companies Ordinance defines it as a transaction that section 373 requires to be entered in the company's accounting records, excluding payment of a fee the company must pay under an Ordinance. In practice that means paying government fees such as the business registration fee doesn't break dormancy, but receiving income, paying suppliers or earning bank interest may. The Registry recommends independent professional advice on whether a particular transaction counts.
What a dormant company doesn't have to do
- Annual return: section 663 disapplies the annual return requirement for a dormant company.
- Financial statements and audit: the requirements to prepare financial statements and have them audited don't apply to a dormant company (section 447). The Companies Registry notes that audit is otherwise required for all companies, including small ones under the reporting exemption.
- Audited accounts with the tax return: the IRD says it is prepared to accept profits tax returns filed by dormant companies (within the terms of the Companies Ordinance) without audited financial statements.
What it still has to do
- Report changes of registered office address, directors and company secretary, and their particulars. The section 447 exemptions don't cover these filings.
- Renew business registration every year. The IRD treats every Hong Kong-incorporated company, whether or not in operation, as carrying on business, so it must take out a business registration certificate annually until it is dissolved or deregistered.
- Deal with any tax return the IRD issues and file it by the due date. A dormant company doesn't need to attach audited accounts.
Timing: the annual return in the year you switch
| Situation | Annual return for that year? |
|---|---|
| Becomes dormant with effect after the 42nd day following the incorporation anniversary | Still required for that year |
| Becomes dormant on or before that 42nd day | Not required |
| Ceases to be dormant on or before the 42nd day following the anniversary | Required for that year |
Timing the resolution well can save one year's filing. See our annual return guide for the normal deadlines.
Dormant or deregister?
Dormancy keeps the company alive, with its name, registration and bank relationships, at the cost of the annual business registration fee and continuing change filings. Deregistration ends the company permanently and takes about 5 months. If you won't use the company again, compare the two in our guide to deregistering a Hong Kong company.
Related service: Accounting & Bookkeeping (From HK$1,000 / year). If your company isn't trading, we can help you decide between dormancy and deregistration and handle the filings that still apply. The first consultation is free.
Frequently asked questions
Does a dormant company need an audit in Hong Kong?
No. A company that has declared itself dormant by special resolution under section 5 of the Companies Ordinance is exempt from preparing audited financial statements (section 447), and the IRD accepts its profits tax return without them.
Does a dormant company still pay the business registration fee?
Yes. Every Hong Kong-incorporated company, whether or not it operates, must take out a business registration certificate each year until it is dissolved or deregistered.
Can a dormant company keep a bank account?
The rules turn on accounting transactions, not on having an account. But any transaction that must be recorded in the accounting records, such as receiving interest or paying a bank charge, may end dormancy. Payment of a fee required by an Ordinance is excluded. Take advice on your situation.
Does a dormant company file annual returns?
No, not while it is dormant. It must still file for the year it becomes dormant if the dormancy takes effect after the 42nd day following its incorporation anniversary.
Sources (official)
- Companies Registry FAQ: Dormant companies
- Companies Registry FAQ: Accounts and audit
- IRD FAQ: Completion of Profits Tax Returns (BIR51 & BIR52)
- IRD: Completion of Profits Tax Returns and Supplementary Forms
- IRD: Cancellation of Business Registration
- IRD FAQ: Request for a Notice of No Objection (NNO) to a company being deregistered
This guide is general information, not professional advice. Government fees and deadlines can change, so check the official sources linked above.