Companies formed and registered under the Companies Ordinance may be wound up either:

1. by the court

The Court of First Instance of the High Court has exclusive jurisdiction to wind up companies formed and registered under Cap. 622. The circumstances in which the company may be wound up by the court include, inter alia:

1. 1. on the petition of a creditor where the company is unable to pay its debts, i.e. a true insolvency situation (the company must be insolvent and the petitioner must not be adequately secured). There are two principal tests for insolvency, being the cash flow test (whether able to pay debts as they fall due) and the balance sheet test (whether liabilities exceed its realisable assets). The Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) (“Cap. 32”) avoids the necessity for strict proof of the petitioning creditor’s debt by setting out deeming provisions. Under those provisions, a company is deemed to be “unable to pay its debts” if:

1. 1. 1. the creditor is indebted a sum equal to or exceeding HK$10,000
      2. the creditor serves the company a demand requiring the company to pay the sum due by leaving the demand at the debtors registered office
      3. the debtor has for 3 weeks (excluding the date of service) thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor (NB: It should be noted however that, where there is a bona fide dispute as to the debt, the debtor company cannot be said to have neglected to pay the debt)

The petitioning creditor must prove to the civil standard of proof (on the balance of probabilities) the existence of the debt alleged, the validity of the written demand, the service of the demand and the non-payment.

1. 2. the company has by special resolution of its shareholders resolved that the company be wound up by the court (where the majority has not acted fraudulently or in bad faith in adopting the resolution)

1. 3. the court is of the opinion that it is just and equitable that the company should be wound up. Some conventional categories of circumstances include:
      1. loss of substratum of the company (i.e. impossible to achieve main objectives or such objects have been abandoned
      2. company formed to carry out fraud or illegal purpose
      3. court renders it just and equitable that the partnership be dissolved
      4. for the purpose of achieving justice or equity
      5. where it is proved that the affairs of the company have been conducted in a manner unfairly and prejudicial to the interest of some shareholders of the company (i.e. minor oppression)

1. 4. on application of the Companies Registrar, if it appears to the court that:
      1. the company is carried on for unlawful purpose
      2. the company fails to have sufficient directors or to pay annual registration fees or persistently breaches the Companies Ordinance

Further to the above grounds, there are two situations where a Hong Kong private company may be wound up by the court:

1. winding up by court by way of regulatory order: where there is a large number of creditors or contributories and the Official Receiver applies to the court for a regulatory order (such that the winding up be regulated specially by the court); or

ii. winding up by court by way of summary procedure: where the court is satisfied, or the Official Receiver or provisional liquidator reports to the court, that the property of the company is not likely to exceed HK$200,000 in value. In such case, the court will order that the company be wound up in a summary manner (without meeting of creditors and contributories or committee of inspection and with other modifications to prescribed requirements with the view to save expense and simplifying procedures).

b. winding up without a court order

There are a number of circumstances where a company may proceed with voluntary winding up without a court order, namely:

1. when the period fixed for the duration of the company has expired;
2. if the company resolves by special resolution that the company be wound up voluntarily (see below, members’ voluntary winding up);
3. if the directors of the company (or majority) resolves at a board meeting to deliver to the Registrar a winding-up statement (i.e. a statement that the company cannot continue its business and the company cannot be wound up by other provisions of the Cap. 32 (Special procedure for a members’ winding-up).

The most common form of voluntary winding up is a member’s voluntary winding up, which may occur in a non-insolvent situation (i.e. the company is able to pay its debts within 12 months of commencement of voluntary winding up). It requires a special resolution by the company in general meeting to wind up and a certificate of solvency by the directors expressing their opinion, after having made full enquiry, that the company will be able to pay its debts within such period not exceeding 12 months from the date of the resolution. Such voluntary winding up is useful for restructuring of the group business or to get the company off the companies’ register to avoid filing and registration requirements. The company being wound up ceases to carry on its business on commencement of the winding up.

If a certificate of solvency cannot be made or, if made, the liquidator is, at any time, of the opinion that the company will not be able to pay its debt in full within the specified period, the winding up becomes a creditors’ voluntary winding up (in which case, meetings of creditors are called for resolutions to be made for a voluntary winding up.

Special procedure for members’ winding-up

The directors of a company (or a majority of them), may pass a resolution that (i) they have formed the opinion that the company cannot by reason of its liabilities continue its business, (ii) they consider it necessary that the company be wound up and that the winding-up should be commenced under this section because it is not reasonably practicable for it to be commenced in any other manner and (ii) the meetings of the company and of its creditors will be summoned for a date not later than 28 days after the delivery of a winding-up statement to the Registrar.

The directors of the company will then need to cause a meeting of the company to be summoned for a date that is no later than 28 days after the delivery of a winding-up statement to the Registrar. The directors must also appoint a provisional liquidator in the winding-up of the company with effect from the commencement of the winding-up.

Under this special procedure, the winding-up of the company commences on delivery of the winding-up statement to the Registrar.

Within 15 days of the commencement of the winding-up of the company, the directors shall give notice in the Government Gazette of (i) the commencement of the winding-up of the company and (ii) the appointment of the provisional liquidator and his name and address.

The provisional liquidator shall unless a liquidator is sooner appointed, hold office until a meeting of the creditors of the company is summoned.

The provisions that are applicable to a creditor’s voluntary winding-up are also applicable here.