Understanding Liquidation (Voluntary)
Liquidation (Voluntary) is a crucial process in the corporate world, allowing companies to wind up their operations in an orderly manner. In Hong Kong, voluntary liquidation can be broadly categorised into Voluntary Liquidation by Shareholders and Voluntary Liquidation by Creditors.
Voluntary Liquidation by Shareholders
The company’s shareholders initiate this type of liquidation, and is subject to specific conditions:
Complete Account Books
The company must maintain comprehensive and up-to-date accounting records.
Shareholder Consent
Majority consent from the shareholders through an extraordinary resolution passed at meetings is essential to proceed with voluntary liquidation.
Solvent Company
The company must be solvent, indicating that it can pay off its debts as they come due during the liquidation process.
Liquidator Appointment
A liquidator, often a certified public accountant or solicitor, is appointed to oversee and manage the entire liquidation process.
Voluntary Liquidation by Creditors
In contrast, voluntary liquidation by creditors is initiated when the company is insolvent and unable to continue its operations. Key conditions include:
Complete Account Books
Like in shareholder-initiated liquidation, maintaining complete accounting records is crucial.
Insolvency
The company must be insolvent, signifying its inability to meet its financial obligations.
Creditor-Appointed Liquidator
Creditors appoint a liquidator, who is typically required to be a certified public accountant or solicitor, to handle the liquidation process.
In both cases, voluntary liquidation is governed by the Companies Ordinance (Cap. 32) of Hong Kong. The deregistration process also involves several conditions, including unanimous shareholder consent, no outstanding debts or legal proceedings, and obtaining a Written Notice of No Objection from the Commissioner of Inland Revenue.
It’s important to note that in case of objections, interested parties can apply for re-registration within 20 years from the deregistration date, leading to the resumption of the company’s business under court order. Voluntary liquidation in Hong Kong is a well-regulated process that provides a clear and legal path for businesses to wind up their operations.
