Modes of Liquidation
A company may be liquidated by the court or voluntarily.
· Voluntary Liquidation consists of:
1. members’ (shareholders’) voluntary liquidation; and
2. creditors’ voluntary liquidation.
· Compulsory liquidation by the High Court of the Hong Kong Special Administrative Region (“the Court”)
Compulsory Liquidation Petition
A limited company may be liquidated by the Court in the circumstances set out in the Companies (Winding Up and Miscellaneous Provisions) Ordinance. The more common ones are:
· the company is unable to pay a debt of $10,000 or above;
· the Court is of the opinion that it is just and equitable that the company should be wound up; or
· the company has by special resolution resolved that the company be wound up by the Court.
A creditor, a shareholder or the company itself can file a winding-up petition against the company. A solicitor is normally instructed by the petitioner to prepare and file the winding-up petition.
Any person (e.g. employee) who is qualified for receiving legal aid under the Legal Aid Ordinance and Rules may apply to the Legal Aid Department for assistance in filing a liquidation petition.
Director’s Duties in Compulsory Liquidation
On the appointment of a provisional liquidator or the making of the winding-up order, the powers of the directors of the company will cease but still they have certain duties to perform. If the directors fail to perform such duties, such as failure to keep proper books and records and failure to prepare a statement of affairs, the Official Receiver’s Office may take prosecution actions and disqualification actions against the directors.
Hong Kong Company Deregistration
Deregistration is a summary procedure to dissolve a defunct solvent private company. Compared with the liquidation procedure, deregistration is a convenient and inexpensive means to dissolve a private company. The company making the application should meet the following requirements:
· All the members of the company agree to deregistration.
· The company has never commenced business or operation, or has ceased to carry on business or ceased operation for more than 3 months immediately before the application.
· The company has no outstanding liabilities.
· It has obtained a written notice of no objection from the Commissioner of Inland Revenue.
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