Continuous Compliance Obligation and Requirements for a Hong Kong Company
12 minute read
It is common knowledge that a company is a legal entity entirely separate from its founders, executives, and employees. However, the limited liability through operating as a limited company also brings various company obligations. The company has to comply with the various provisions in the Companies Ordinance (Chapter 622 of the Laws of Hong Kong).
These responsibilities include the timely disclosure and reporting of specified information regarding the company, its officers and shareholders, as well as any changes in such information to the Registrar of Companies so that members of the public can have ready access to the latest information of the company kept by the Registrar of Companies.
If you are interested in finding out more about the compliance obligation and all the important requirements, keep reading.
If one is interested in starting a private limited company in Hong Kong, there is a set of requirements that need to be considered.
- A local registered address has to be maintained (PO Box is not allowed)!
- A local resident company secretary has to be maintained (an individual or body corporate).
- There needs to be at least one director in person (a local or foreigner, above 18 years of age).
- An appointed auditor has to be maintained unless it is a company deemed as ‘dormant’ under the Companies Ordinance (in other words, a company that has no relevant accounting transactions during a financial year).
- The Companies Registry has to be notified of any changes in the company’s registered particulars including registered address, particulars of shareholders, directors, company secretary, changes in share capital, and so on as follows:
- Address change of registered office – within 15 days after the date of the change.
- Secretary and director change (Appointment/Cessation) – within 15 days from the date of appointment or ceasing to act.
- Company name change – filing of statutory form NNC2 within 15 days after the passing of the special resolution to change the company name.
- Special resolution or certain other resolutions passing – within 15 days after the resolution passing.
- Any relocation of the company’s statutory books from the company’s registered office – within 15 days after the change.
- Any allotment or issue of new shares – within one month after the allotment or issue.
- The business registration needs to be renewed one month before expiry on an annual basis or once every three years, depending on whether your Certificate is valid for one year or three years. The Business Registration Certificate has to be displayed at all times at the principal place of business for the company.
- An Annual General Meeting (AGM) has to be held within 18 months from the date of incorporation; subsequent AGMs must be held every calendar year, with the interval between each AGM not exceeding 15 months.
The directors have to table the company’s financial accounts (i.e Profit and Loss Account and Balance Sheet) in compliance with Hong Kong’s Financial Reporting Standards (FRS) framework. A director’s report needs to be prepared in conjunction with the annual accounts.
- The company has to comply with annual accounts filing deadlines and requirements of Hong Kong’s Companies Registry and Tax Authority.
- It is necessary to maintain the following records and documents at all times: Incorporation Certificate, Business Registration Certificate, Articles of Association, minutes of all meetings of directors and members, updated financial records, company seal, share certificates, registers (including members register, directors register and share register).
- It is necessary to maintain business licenses, as applicable.
- It is also required to maintain accurate and detailed accounting records to enable the assessable profits of the business to be readily ascertained. All records need to be retained for 7 years from the transaction date. Failure to do this results in a penalty.
If the accounting records are kept outside Hong Kong, the returns must be kept in Hong Kong. Since 1st January 2005, Hong Kong has adopted a Financial Reporting Standards (FRS) framework. This framework is modeled on the International Financial Reporting Standards (IFRS), which is issued by the International Accounting Standards Board (IASB).
Now let’s take a look at the necessary parts of a company’s business records:
- The books of accounts showing receipts and payments, as well as income and expenditure.
- The underlying documentation verifying the entries in the books of account, like vouchers, bank statements, invoices, receipts, and other relevant papers
- A record of the assets and liabilities of the business.
- A daily record of all money that is received and expended by the business together with supporting details of the receipts or payments.
Keeping business records
Bear in mind that the Inland Revenue Ordinance, HK IRD, has given authority to require each registered business entity to keep the following records.
- Books of accounts recording receipts and payments, or income and expenditure.
- Invoices, receipts, bank statements, vouchers.
- Banking records (checkbooks, bank deposit slips, etc.)
- Income records (receipts, invoices, etc.)
- Purchases and expenses records (receipts obtained for payments made and invoices received)
- Records of the assets and liabilities of the person in relation to the given trade, profession or business (invoices received, receipts obtained for payments made, and contract of purchase and sales).
- All entry records from day to day of all sums of money received and expended in relation to that trade, profession or business.
- Where that trade, profession or business involves dealing in goods, you must maintain records relating to your purchases and sales:
- Full particulars of all purchased goods and sold goods.
- Invoices of the transactions must show goods, buyers, and sellers.
- Stock movement records.
- Financial statements of trading stock held by the person at the end of the accounting period and all records of stocktakings from which any such statement of trading stock has been prepared.
- Where the trade, business, or profession involves the provision of services, you must keep a record of all services provided in sufficient detail. For this, you will need all contracts and agreements.
Finally, be careful since the Ordinance requires that every company carrying out business in Hong Kong has to keep sufficient records in either English or Traditional Chinese language of its income and expenditure and thus enable the assessable profits to be readily ascertained.
Those records need to be retained for a period of no less than 7 years. If a company fails to comply with the Ordinance without reasonable excuse, there is a risk of suffering a maximum fine of HKD 100,000!
How a corporate secretary can help
All of this may seem too complicated to you. If that is the case, a corporate secretary can help by assisting clients to manage and mitigate risks of corporate non-compliance. That is why using secretarial services where a company has access to great methods coupled with years of experience is a sure way to succeed. With this kind of help, administrative burdens will never be as bothersome as they used to be.
Additionally, it is definitely worth considering an online company secretary for your Hong Kong business. Sleek offers hassle-free online secretary services in Hong Kong. All documents are stored on the cloud and it is possible to access them from all corners of the world.
On top of that, Sleek is known for the super-fast processing times, so you won’t have to wait too long for anything to get done!
If you want to keep your Hong Kong business running smoothly and in accordance with the law, do not hesitate to contact Sleek and inquire about corporate secretary services.