Before Closing a Hong Kong Company: The Full Checklist

At a glance

Form numbers, deadlines and penalties are as most recently published by the Inland Revenue Department, the MPFA and the Labour Department.

What has to go first?

Staff. Not only because it is the decent thing to do, but because the statutory deadline is the tightest.

An employer must notify the Inland Revenue Department on Form IR56F (notice of an employee about to cease employment) one month before the employee’s employment ceases. That is advance notice, not something filed afterwards — the clock starts the moment you decide to close.

At the same time you have to deal with:

• The statutory notice period, or payment in lieu
• Settling untaken annual leave
• Severance payment or long service payment (where the employee qualifies)
• The final MPF contribution

One point worth knowing: severance payments and long service payments made under the Employment Ordinance are generally not part of the employee’s assessable income, and only the excess needs to be reported.

On the contribution and reporting detail, see the MPF employer guide.

How many years of tax have to be cleared?

This is the part most people underestimate.

To obtain the Notice of No Objection to deregistration from the IRD, the company’s tax position has to be clean — which means:

• Every year’s tax return filed (which requires the audit report behind it)
• All assessed tax paid
• No open assessments or objections

If the company has not filed for several years, that means going back to the earliest year and working forward, year by year. You cannot skip: each year’s opening balance has to follow on from the year before, so the sequence is locked.

Catching up on several years of audits usually costs more than having done them year by year at the time. That is another reason leaving it alone ends up more expensive.

Why does the bank account have to be closed last?

Because you are still using it while you close.

Paying suppliers, paying severance, collecting the last receivables, paying tax — all of it needs an account. Close it too early and you end up with payments you cannot make and money you cannot receive.

But watch the other extreme too: it cannot be left until after dissolution.

At the moment the company is formally dissolved, any property still belonging to it becomes bona vacantia and vests in the Government, including the balance in the account. Getting it back means applying to the court to restore the company — far more expensive than moving the money beforehand.

So the correct order is: settle what is owed → collect what is due → move the balance out → close the account → and only then apply to deregister.

What else gets missed?

Leases. Ending one early usually means a break payment or payment in lieu. Read what the lease actually says, and agree it with the landlord first.

Licences. If your business needs one (food, tutoring, import/export and so on), it has to be cancelled or surrendered to the issuing department. Leave it and you may still be treated as the licensee, with ongoing obligations.

Insurance. Employees’ compensation and commercial policies have to be notified and terminated, and unused premium may be refundable.

Subscriptions and direct debits. Domains, software, phone lines, cloud services — these keep charging until somebody remembers to cancel. Go through one statement before closing the account and you will usually find several things nobody uses that are still being charged.

Company secretary and registered office. Both have to be maintained until the company is formally dissolved, and cannot be stopped early — government correspondence still arrives in the meantime.

Apply only once it is all clear

With everything above cleared, then apply for the notice of no objection and go through the deregistration process.

If working through it reveals debts that cannot be paid, deregistration is not the route — liquidation has to be considered instead.

Not sure what you owe?

Most people ask “how do I close the company”, when what is really unclear is “how much do I owe right now, and to whom”. Establish that and every step after it becomes straightforward.

Want someone to take stock with you from the top? Talk to us.

The deadlines and penalties described here are as most recently published by the Inland Revenue Department, the MPFA and the Labour Department, and this does not constitute legal or tax advice. Where employee disputes or debts are involved, professional advice is recommended.