Mr. Wang from Shenzhen owns three Hong Kong companies, two of which have not been operational for two or three years—they have neither bank accounts nor business transactions.

He kept agonizing over whether to leave it alone and let it go into "hibernation" naturally, or just cancel it altogether.

In 2026, the Hong Kong Companies Registry and the Inland Revenue Department both revised their policies regarding “dormant” and “dissolved” companies.The consequences of these two actions are completely different....Making the wrong choice could be more troublesome than doing nothing at all.

01

Determination and Maintenance of “Dormant Companies”

The Hong Kong Companies Registry’s criteria for determining a dormant company in 2026: no business activities for three consecutive years or more; no bank accounts or transaction records; and no changes in assets or liabilities.

Dormant companies must do two things each year: first, file the Annual Return (NAR1) with the Companies Registry; and second, apply to the Inland Revenue Department to renew their Business Registration Certificate.

Inactivity does not mean a “zero return.”Although dormant companies can opt for an inactive registration (without an operational audit), they are still required to file tax returns on time; otherwise, they will be subject to fines.

Dormant companies cannot be “left to fend for themselves.” If they fail to file tax returns on time, undergo audits, or complete annual reviews, the company’s legal status will gradually deteriorate—resulting in government fines, lawsuits, and delisting—and ultimately, the directors will be held jointly and severally liable.

Comparison of Decisions: Hibernation vs. Deactivation

02

Conditions and Procedures for “Deregistration”

There will be changes to Hong Kong’s company deregistration policy in 2026. Hong Kong companies applying for deregistration must meet the following requirements:

1. No outstanding debts, lawsuits, or late tax filings or annual reviews in the past three years

2. All shareholders and directors must sign a document consenting to the dissolution (a single shareholder may not apply for dissolution on their own).

3. The company must first settle all outstanding taxes, Business Registration Certificate fees, and fines.

The deregistration process typically takes 2–3 months and includes the following steps: submitting a deregistration application → settling all tax obligations with the tax authority → a 3-month public notice period at the Registry → formal removal from the registry.

Benefits of deregistration:This completely eliminates the costs associated with annual reviews, tax filings, and audits, and relieves directors of their corporate liabilities.

The Cost of Deregistration:Once a company name is permanently released, it cannot be reinstated. If you wish to register under that name again in the future, you must wait six months after the original name has been released before reapplying.

03

Suspension vs. Deregistration: A Four-Step Decision-Making Approach

Decision 1: Assess whether you will continue to use this company over the next 2–3 years.

If you still plan to engage in cross-border business in the future, need to retain the brand, or may use it for an overseas IPO—we recommend keeping the brand dormant, with annual maintenance costs of approximately 3,000–5,000 HKD.

If you are certain you will not use it again within the next three years, we recommend that you proactively cancel it; the one-time cost is approximately 5,000–8,000 HKD.

Decision 2: Verify the company's compliance status.

If the company has a history of non-compliance—such as late tax filings, fines for failing annual audits, or frozen bank accounts—it must settle all outstanding obligations before deregistration; otherwise, the deregistration application will be rejected.

If the company has always maintained compliance, it can go through the expedited dissolution process.

Decision 3: Consider the individual directors' joint and several liability.

Although dormant companies have low maintenance costs, if the tax authorities discover compliance issues during a random audit,Individual directors may face fines or even prosecution.. In 2026, the tax authority significantly increased the rate of random audits of dormant companies.

Decision 4: Assess the company’s assets and liabilities.

If the company still has bank account balances, accounts receivable, or intellectual property, these must be liquidated and transferred before the company is dissolved. If “hidden assets” are discovered after dissolution, the cost of reinstating the company will be extremely high.

04

The Two Most Common Scenarios for Failure in 2026

Mistake #1: Thinking that “hibernation = ignoring it completely.”

Many business owners believe that since there’s no business activity anyway, they don’t need to worry about anything. As a result, their dormant companies end up accumulating fines totaling tens of thousands of Hong Kong dollars, which affects the directors’ personal credit records, and the cost of restoring the company’s status is 5 to 10 times the cost of normal maintenance.

Mistake #2: Assuming that “deactivation = exemption from liability.”

Some business owners rush to dissolve their companies, thinking they’ll be free of any future concerns. However, the tax authority’s policy for 2026 clearly states:Dissolution has never been a legitimate means for businesses to evade taxes.The

There is a case in Shandong: Between 2023 and 2024, an online store concealed 207 million yuan in business revenue and then evaded its tax obligations by canceling its business registration, resulting in 5.4472 million yuan in underpaid taxes. Even after the cancellation, the business was retroactively penalized, and the operator was placed on the tax anomaly list.

In a nutshell: Dormant accounts require regular maintenance, and when closing an account, make sure to settle all accounts.

The corporate compliance landscape in Hong Kong in 2026 will leave no room for complacency.

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