Analysis on the Process and Key Points of Hong Kong Company Liquidation

You Need to Know About the Process and Key Points of Hong Kong Company Liquidation

In Hong Kong, business operations may cease for various reasons, including business adjustments, financial difficulties, or strategic transformations. When a company decides to stop its operations, it must complete the company liquidation process in accordance with the relevant regulations of the Hong Kong Companies Registry. Although this process is complex, it is an important step to ensure that the company legally exits the market. This article will provide a detailed introduction to the basic procedures for Hong Kong company liquidation and the key points to note, along with relevant news information.

Firstly, before starting the liquidation procedure, the company must ensure that all its tax obligations have been fulfilled. According to the regulations of the Inland Revenue Department of Hong Kong, companies must submit their tax returns for the most recent year and obtain a tax clearance certificate from the tax authority before liquidation. This step is crucial because only after confirming that there are no outstanding tax payments will the tax authority issue a clearance letter. For example, at the beginning of 2025, a Hong Kong company's liquidation application was delayed for several months due to failure to handle tax issues in time. When preparing for liquidation, enterprises should communicate in advance with accountants or tax advisors to ensure that all tax documents are accurate and error-free.

Secondly, the company needs to convene a shareholders' meeting and obtain shareholder approval. At the meeting, directors need to explain the reasons and plans for liquidation to the shareholders and formally decide to dissolve the company through a special resolution. It is worth noting that this resolution must be supported by no less than 75% of the attending shareholders to take effect. The company also needs to publish a liquidation notice in the Hong Kong Gazette, with a two-month announcement period. During this period, any creditors or other stakeholders can raise objections. If there are no objections, the company can continue with the liquidation process. Recently, a large Hong Kong-funded enterprise successfully passed its liquidation resolution at its annual general meeting and became one of the first companies to complete liquidation this year.

Next, the company needs to submit a liquidation application and related documents to the Companies Registry. These documents typically include the liquidation application form, the tax clearance certificate, and the shareholders' meeting resolution. After receiving the application, the registry will review the materials. If they are complete and meet the requirements, the liquidation procedures are usually completed within six months. However, obstacles may arise during actual operations. For instance, some companies' bank accounts may be frozen due to historical legacy issues, which will directly affect the liquidation process. Therefore, it is recommended that enterprises actively communicate with banks before liquidation and properly resolve funding issues.

Besides the above basic procedures, there are some key points that require special attention. For example, companies must properly handle employee placement issues. According to the Hong Kong Labour Ordinance, employers must pay severance pay and long-service payments when terminating employment relationships. At the same time, companies also need to return leased properties and terminate contracts with suppliers and other partners. On this point, media reports indicate that some companies ignored the protection of employees' rights during the liquidation process, causing unnecessary legal disputes. It is recommended that enterprises formulate detailed plans before liquidation to ensure that all matters proceed orderly.

Finally, it is worth noting that liquidation is not the only exit option. For some enterprises hoping to retain brand value or redevelop in the future, applying for bankruptcy liquidation might be a more suitable choice. Bankruptcy liquidation not only alleviates debt burdens but also provides companies with a certain amount of buffer time. Statistics show that in 2025, over 200 companies in Hong Kong chose bankruptcy liquidation instead of direct liquidation, showing that this option is gaining increasing favor among enterprises.

In summary, Hong Kong company liquidation is a systematic project involving multiple fields such as taxation, law, and human resources. Regardless of the reason for deciding to liquidate, enterprises should fully understand the relevant regulations and actively respond to various challenges. At the same time, leveraging the strength of professional institutions is essential. Through reasonable planning and meticulous execution, enterprises can successfully complete the liquidation process and achieve a smooth exit from the market.