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Dormant Companies


Dormant Companies | Bestar
Dormant Companies | Bestar

Dormant Companies


In Hong Kong, a dormant company is a registered business that's legally inactive and not conducting any trading activities. It's essentially a way to put your company on hold while preserving its legal status for future use.


Here's a quick rundown of dormant companies in Hong Kong:


Benefits:


  • Reduced costs: Dormant companies are exempt from some filing requirements like annual returns and audits, leading to lower administrative and compliance fees.

  • Preserves legal entity:  The company remains a registered entity, allowing you to easily resume operations later.


Requirements and Obligations:


  • No business activity: There must be no trading or financial transactions during the dormant period (except mandatory fees).

  • Official declaration: The company needs to formally declare dormancy through a shareholder resolution.

  • Ongoing obligations: Dormant companies still need to:

    • Maintain a registered office address.

    • File an annual business registration fee.

    • File a tax return if requested by the Inland Revenue Department.

    • Maintain basic accounting records (even if there's no activity).


What is an Accounting Transaction


According to section 5 of the Companies Ordinance, a dormant company will cease to be dormant:


  1. if the company enters into an accounting transaction; OR

  2. if there is an accounting transaction in relation to the company.


According to section 2 of the Companies Ordinance, "accounting transaction (會計交易)", in relation to a company, means a transaction that is required by section 373 to be entered in the company’s accounting records, excluding a transaction arising from the payment of any fee that the company is required by an Ordinance to pay.


Please seek independent professional advice on whether a transaction falls within the definition of "accounting transaction" in section 2 of the Companies Ordinance.


How Bestar can Help


Bestar can assist you in determining whether a transaction qualifies as an accounting transaction under the Companies Ordinance (Section 2) in Hong Kong. Here's how we can help:


  • Understanding the transaction's nature: We possess expertise in accounting principles and can analyze the specific transaction to determine if it requires recording based on Section 373 of the Ordinance. Our knowledge goes beyond the basic definition in Section 2 and dives into the specifics of what needs recording according to Hong Kong accounting regulations.

  • Knowledge of Hong Kong regulations: We are familiar with the intricacies of Hong Kong accounting regulations and can interpret Section 2's definition of 'accounting transaction' in that context. We can ensure you're complying with the latest interpretations and requirements set forth by the Companies Ordinance and the Inland Revenue Department.

  • Guidance on record-keeping: We can advise on the proper way to record the transaction in the company's accounting records if it qualifies as an accounting transaction. This includes following the specific formatting and procedures outlined in Section 373 (if applicable).


By consulting Bestar, you gain peace of mind knowing you're adhering to Hong Kong's accounting regulations and maintaining accurate financial records for your dormant company. This can help you avoid any potential penalties or issues in the future, especially if you decide to resume business operations.









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