Dormant Company

Dormant Company

 

Section 5 of the Companies Ordinance (Cap 622) provides that a private company becomes dormant if the shareholders pass a special resolution to the effect that the company shall become dormant from the date of delivery of the special resolution to the Registrar of the Companies Registry, and that the directors are authorized to deliver such special resolution to the Registrar for registration purposes.

 

Exemptions 

 

As per Section 447(1), if a company becomes dormant, the following provisions of the Companies Ordinance shall not apply:

(a)	367(4)	Directors must secure that the financial year of each subsidiary should coincide with that of the holding company;
(b)	Subdivisions 3 and 4 of division 4, Part 9	The requirement to prepare financial statements and the directors’ report;
(c)	Subdivisions 2 and 3 of division 5, Part 9	Company should appoint auditor, and auditor must prepare report on financial statements, which are prepared by directors and laid by directors at AGM (S429) or send it to each member (S430);
(d)	Section 411 and 412	Auditor’s right to attend the AGM and right to have access to information for audit purposes;
(e)	Subdivisions 6, 7 and 8 of division 5, Part 9	Termination of auditor’s appointment, outgoing auditor’s right, and outgoing auditor’s statement of circumstances;
(f)	Divisions 6 and 7, Part 9	Laying and publication of financial statements and summary financial report.

 

Excluded Companies

 

Subsection 7 of Section 5 provides that only qualified private companies are eligible to apply for dormancy. The following types of companies do not fall under the scope of qualified private companies:

(a)    an authorized institution as defined by section 2(1) of the Banking Ordinance (Cap 155);

(b)    an insurer as defined by section 2(1) and (2) of the Insurance Companies Ordinance (Cap 41);

(c)    a corporation licensed under Part V of the Securities and Futures Ordinance (Cap 571) to carry on a business in any regulated activity as defined by section 1 of Part 1 of Schedule 1 to that Ordinance;

(d)    an associated entity, within the meaning of Part VI of the Securities and Futures Ordinance (Cap 571), of a corporation mentioned in paragraph (c);

(e)    an approved trustee as defined by section 2(1) of the Mandatory Provident Fund Schemes Ordinance (Cap 485);

(f)    a company having a subsidiary that falls within paragraph (a), (b), (c), (d) or (e); or

(g)    a company that fell within paragraph (a), (b), (c), (d), (e) or (f) at any time during the 5 years immediately before the special resolution is passed.

(8)    The Financial Secretary may, by notice published in the Gazette, amend subsection (7) of section 447.

 

Cessation of dormant status

 

(2)     Subsection 2 of section 447 provides that if such a company enters into an accounting transaction—

(a)    subsection 1 of section 447 ceases to have effect on and after the date of the accounting transaction; and

(b)    a member of the company who knew or ought to have known about the accounting transaction, and every director of the company, are personally liable for any debt or liability of the company arising out of the accounting transaction.