Closing a Company in Hong Kong: How to Shut Down and Retain Key Talent

Introduction: Why Companies Close Entities (But Keep Talent)

As global business environments shift rapidly, mid-sized companies are reassessing their footprint in Asia. For many Singapore-headquartered firms with operations in Hong Kong, closing a legal entity may be driven by cost-cutting measures, market exits, post-pandemic restructuring, or M&A realignments.

Yet even when an entity is shuttered, the value of your local Hong Kong team doesn’t diminish. On the contrary—retaining experienced employees, client-facing staff, or technical teams can be critical to ensuring business continuity across the region.

This guide outlines how to navigate closing a company in Hong Kong while keeping your key talent in place through an Employer of Record (EOR) model. You’ll learn your legal obligations, the risks of losing talent, and how AYP’s proven EOR solution helps you retain employees without an entity in a compliant, timely, and cost-efficient way.

What Happens When You Close a Company in Hong Kong

Legal and Compliance Obligations

The process of company deregistration in Hong Kong is governed by the Companies Ordinance (Cap. 622). Businesses must fulfill several legal requirements before they can shut down operations:

• Board Resolution: Pass a resolution to close the business. 
• Clear Outstanding Liabilities: Settle all debts, taxes, and employee obligations. 
• Apply for Deregistration: Submit an application to the Companies Registry along with a Notice of No Objection from the Inland Revenue Department (IRD). 
• Final Tax Clearance: File audited accounts, complete Employer’s Return, and obtain tax clearance from IRD. 
• Close MPF & Payroll Accounts: Finalize Mandatory Provident Fund (MPF) contributions and complete last payroll. 

You can refer to the official Companies Registry guide for full deregistration procedures.

Typical Timeline

A full closure typically takes 6 to 9 months, depending on how quickly the company clears its tax and employment obligations. The IRD must be satisfied that all liabilities are settled before deregistration can be approved.

Employee Obligations

Hong Kong’s Employment Ordinance mandates the following during entity closure:

• Minimum Notice or payment in lieu of notice 
• Severance Pay, if applicable (for continuous employment over 24 months) 
• Final Wages, unused annual leave pay, and long service payments 
• MPF Termination Notices 

Failure to comply can lead to penalties, claims, or delays in deregistration. Learn more from the Hong Kong Labour Department.

Risks of Talent Loss During Entity Closure

Shutting down your legal entity without a talent transition plan creates immediate and long-term risks:

Operational Disruption

Your Hong Kong team may be integral to:

• Local customer relationships
• Market insights and cultural fluency
• Ongoing projects or product knowledge
• Regional sales or service delivery

Losing these capabilities could derail operations across Asia.

Intellectual Property and Confidentiality

Departing employees may join competitors or take proprietary knowledge with them. This can impact your competitive edge, especially in sales, tech, or service delivery roles.

Future Re-Entry Costs

If you plan to return to the Hong Kong market, you'll face high re-hiring costs and longer ramp-up periods due to the loss of trained, experienced staff.

Retaining Employees Without a Legal Entity: What Are Your Options?

When you close your entity, you lose the legal structure to directly employ staff. Here are your main options:

1. Hire as Freelancers or Contractors

While tempting for speed, this option is risky:

• Misclassification risk: Hong Kong law distinguishes employees from contractors; mislabeling could lead to legal liabilities. 
• Lack of statutory benefits: No MPF, paid leave, or job security, which impacts retention and morale. 
• Compliance risks: No employment protections or contracts under local law. 

2. Set Up a New Entity

This may be necessary if you plan to scale in Hong Kong again. But:

• Takes 3–6 months to set up 
• High initial and ongoing costs 
• Requires local directors, office address, and more 

3. Best Practice: Use an Employer of Record (EOR)

An EOR in Hong Kong acts as the legal employer on your behalf. Your employees remain fully compliant, with local contracts, benefits, and protections—without requiring you to operate a legal entity.

👉 Learn how AYP’s Employer of Record service simplifies your exit while keeping your team intact.

How EOR Helps You Retain Employees in Hong Kong

What is an EOR?

An Employer of Record (EOR) is a third-party service provider that hires employees on your behalf, handling:

• Employment contracts under Hong Kong law 
• Payroll, MPF contributions, and tax filings 
• Statutory leave, benefits, and compliance
• Local employee support and HR administration

You retain full control over the employee’s day-to-day work, while the EOR ensures legal employment in Hong Kong.

How EOR Works During Entity Closure

Here’s how the process typically unfolds:

1. EOR Planning: Before initiating closure, identify employees you wish to retain. 
2. Contract Termination & Rehire: Issue termination letters, then AYP signs new employment contracts with each employee. 
3. Seamless Onboarding: AYP handles MPF transfers, benefits continuity, and onboarding. 
4. Business Continuity: Your employees continue working with zero downtime or disruption. 

This allows you to hire in Hong Kong without an entity, maintain your team, and stay compliant throughout.

Why Use AYP for Your Hong Kong EOR?

• Speed: Onboard staff in as fast as 3–5 working days 
• Compliance: Local HR, tax, and legal expertise 
• Trust: AYP is ISO-certified and works with thousands of businesses across Asia 

Explore our full EOR Hong Kong solution.

Case Study: How a Mid-Sized Company Retained Its Team Post-Closure

Company: Singapore-based SaaS provider

Size: 80 employees, 12 in Hong Kong

Challenge: Closing the Hong Kong entity due to post-pandemic cost restructuring, but wanted to keep key staff supporting regional clients.

Solution: Partnered with AYP for EOR services to retain all 12 employees.

Outcome:

• 100% talent retention
• No disruption to client relationships
• Fully compliant transition with MPF continuity and new local contracts
• Closure completed in under 6 months

“AYP helped us retain our best people in Hong Kong without needing a new entity. The transition was smooth, and we didn’t lose a single client or employee.” — Head of APAC Ops

Key Considerations Before You Close an Entity

1. Timing is Everything

Start your EOR transition before you initiate final terminations. This ensures no employment gaps or compliance risks.

2. Watch Out for Compliance Traps

Improper transition (e.g., overlapping contracts or unfiled terminations) can result in:

• MPF penalties
• Employee claims
• Tax filing delays

Always consult a partner familiar with employee transfer after entity closure.

3. Communicate with Employees

Change can create uncertainty. AYP recommends:

• Early notice and transparent communication
• Assurance on contract continuity, benefits, and protections
• Coordinated onboarding for smooth transition

Conclusion: Shut Down with Confidence, Keep Your Team Intact

Closing your Hong Kong company doesn’t have to mean walking away from your team. With a strategic approach—and the right partner—you can:

• Reduce costs and compliance burden
• Maintain your workforce and operations
• Retain market presence without physical infrastructure

Using an Employer of Record in Hong Kong allows you to retain employees without an entity—ensuring business continuity, compliance, and talent retention.

Whether you're restructuring, pivoting, or simply consolidating your operations, AYP gives you the speed, security, and support to succeed.

Call to Action: Speak to AYP’s Local Experts

Ready to shut down your Hong Kong entity while keeping your top performers?

✅ Get a free consultation on EOR and entity closure

✅ Access our complimentary cost simulation

✅ Discover how to keep your team intact with zero disruption

Retain Your Team Without a Local Entity →