What accounting duties apply to a dormant company in Hong Kong?

How a company becomes dormant (s.5). A qualified private company passes a special resolution declaring that it will become dormant from a stated date, and the resolution is delivered to the Registrar. Banks, insurers, licensed securities firms and certain related companies cannot use it.

What the exemption covers (s.447). Once dormant, the company is relieved from the rules on financial statements and the directors' report, from the auditor provisions, and from the other Part 9 duties listed in that section. Companies Registry guidance confirms dormant companies are the exception to the rule that all companies must be audited.

What it does not remove. The duty to keep accounting records in section 373 is not in the exempted list. Dormant companies must also keep reporting changes of registered office, directors and company secretary, according to the Companies Registry FAQ.

When dormancy ends.

• If the company passes a special resolution that it intends to enter an accounting transaction, or
• if an accounting transaction actually takes place. In the second case, members who knew or ought to have known, and every director, are personally liable for debts or liabilities arising from that transaction (s.447(2)).

Tax and registration. The IRD accepts a profits tax return from a company that has delivered the s.5 resolution without audited financial statements, and the return itself is still filed when the IRD issues one. Business registration continues, and the fee and levy stay payable until the company is dissolved or deregistered.

This is general information, not legal advice or a substitute for your statutory audit.