[1] HK COMPANIES ORDINANCE (GENERAL)
[2] HK COMPANIES ORDINANCE (SPECIAL MATTERS) [read]
[3] LEGAL TEXTS [read]
HK Companies Ordinance (General)
Primary Accounting Reference Date
Accounting and Financial Reporting
Presenting financial statements at Annual General Meeting
Annual General Meeting | determining the AGM date [read] |
Exemption from Holding Annual General Meeting
Circumstances in which a Company is not Required to Hold an Annual General Meeting
Register of Members (Shareholders)
Register of Directors / Secretaries
Register of significant controllers register
Notification to Registrar of the Companies Registry
Circumstances in which director must not be the company secretary
Avoidance of acts_done_by_person_in_dual_capacity as director and secretary
Requirement to Appoint Company Secretary
Dissolution of Hong Kong Companies
Comparison between de-registration and liquidation
[1] COMPANIES ORDINANCE (CAP 622) [full legal text; read]
[2] COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE (CAP 32) [read]
[3] COMPARISON BETWEEN OLD AND NEW ORDINANCE [from Cap 32 to Cap 622 || from Cap 622 to Cap 32]
Effective Date
The HK Companies Ordinance (Cap 622) came into effect on 3 March 2014; provisions for significant controller register, on 1 March 2018.
The predecessor Companies Ordinance (Cap 32) was renamed as Companies (Winding-Up and Miscellaneous Provisions) Ordinance (Cap 32) on the same date.
Accounting and Audit
Financial Year
The concept of Financial Year (section 367 of the C.O.) is built on the concept of "accounting reference period", which is in turn built on the concept of "primary accounting reference date".
The accounting reference period has a start date and a finish date.
(A) Old companies
For exiting companies established before the commencement date of the Companies Ordinance (3rd March 2014), the first accounting reference period begins on the date immediately following its primary accounting reference date (the PARD) and ends with the first anniversary of its PARD.
Example 1: if an existing company closes its books of accounts on 31st March each year, then the first accounting reference period begins on 1st April 2014 (the date that immediately follows the PARD), and ends with 31st March 2015.
Example 2: if an existing company closes its books of accounts on 31st December each year, then the first accounting reference period begins on 1st January 2015 and ends with 31st December 2015.
The PARD is the end date of the financial year that begins with the commencement date of the Companies Ordinance (Cap 622) and ends after the commencement date of the Companies Ordinance (Cap 622).
(B) New companies
For companies established on or after the commencement date of the Companies Ordinance (3rd March 2014), the first accounting reference period begins on its incorporation date and ends with its PARD, which refers to either (i) a date specified by the directors before the relevant date, or (ii) the anniversary of the incorporation date, in the absence of a specified date.
The above relevant date means the last day of the month in which the relevant anniversary of the company's incorporation falls.
Example 1: if a company is established on 21st April 2014, then the director can specify that the PARD is 31st December 2014.
Example 2: if a company is established on 21st April 2014 and the director does not specify the PARD, then the PARD is 30th April 2015. That is, the last day of the month in which the relevant anniversary (20th April 2015) of the company's incorporation falls.
Primary Accounting Reference Date (PARD)
An understanding of PARD is very important as it is the basic component for the concept of first accounting reference period, by reference of which the financial year is determined for the companies incorporated before, and the companies incorporated on or after, the commencement date of the CO.
Please refer to the elaboration under the heading :
Obligations: Accounting and Financial Reporting
In respect of every financial year, the director of a company has the obligation for keeping the accounting records, the preparation of financial statements, and presenting the financial statements at the annual general meeting, and in the case that the company is exempt from holding the AGM, delivering the financial statements to every member of the company.
|
Section |
Legal requirements |
Penalty for failure to comply with S379(4) |
Penalty for willful failure to comply with S379(5) |
|
S373 |
Company must keep accounting records. |
$300,000 |
$300,000; and 12 months' imprisonment |
|
S377 |
Company must keep accounting records for 7 years after the end of financial year, to which the last entry made in the accounts relates. |
$300,000 |
$300,000; and 12 months' imprisonment |
|
S379 |
S379(1) Directors must prepare financial statements for each financial year. |
$300,000 |
$300,000; and 12 months' imprisonment |
|
S379(2) Unless the exemption under S379(3A) applies, the directors of a holding company must prepare consolidated financial statements (CFS) for each financial year. |
|||
|
S379(3) to S379(6) |
See elaboration below. |
|
|
S379(3) provides that the company is not required to prepare the CFS each financial year if one of the following conditions under S379(3A) applies:
S379(4) provides that "If, as respects any financial statements a copy of which is laid before a company in general meeting under section 429, or sent to a member under section 430 or otherwise circulated, published or issued by the company, a director of the company fails to take all reasonable steps to secure compliance with subsection (1), (2) or (3A), the director commits an offence and is liable to a fine of $300,000."
S379(5) If, as respects any financial statements a copy of which is laid before a company in general meeting under section 429, or sent to a member under section 430 or otherwise circulated, published or issued by the company, a director of the company wilfully fails to take all reasonable steps to secure compliance with subsection (1), (2) or (3A), the director commits an offence and is liable to a fine of $300,000 and to imprisonment for 12 months.
S379(6) provides that "If a person is charged with an offence under subsection (4) as above, it is a defence to establish that the person had reasonable grounds to believe, and did believe, that a competent and reliable person—
(a) was charged with the duty of ensuring that subsection (1), (2) or (3A) (as the case may be) was complied with; and
(b) was in a position to discharge that duty."
Financial Statements (full set)
S387(1)(a) provides that directors need to pass a resolution to approve the financial statement.
S387(1)(b) provides that the financial statement must be signed by 2 directors, or by 1 director in the case of a sole-director company.
Statement of Finanical Position
S387(2) provides that the name of person who signs the statement of financial position must be printed (stated) on the statement.
Non-compliance
S387(3) provides that if S387(1) is breached, the company and every responsible person commit an offence, and each is liable to a fine at level 4.
S387(4) provides that if S387(2) is breached, the company and every responsible person commit an office, and each is liable to a fine at level 4.
| Section | Requirement | Penalty | Amount |
| S387(1)(a) | Approval by directors | Prosecution and/or fine | $25,000 (level 4) |
| S387(1)(b) | Signing by director(s) | Ditto | Ditto |
| S387(2) | State name of person signing | Ditto | Ditto |
* It is noted that S387(2) and S387(4) are new requirements under the revised Companies Ordinance. That will take effect for accounting period ending 31st March 2015.
Obligations: Presenting financial statements at the annual general meeting (AGM) or to every member
(1) A company's directors must, in respect of each financial year, lay before the company in annual general meeting, or in any other general meeting directed by the Court, a copy of the reporting documents for the financial year within the period specified in section 431.
(2) Subsection (1) does not apply in relation to a financial year in respect of which an annual general meeting is not required to be held under section 612.
(3) A director of a company who fails to take all reasonable steps to secure compliance with subsection (1) commits an offence and is liable to a fine of $300,000.
(4) A director of a company who wilfully fails to take all reasonable steps to secure compliance with subsection (1) commits an offence and is liable to a fine of $300,000 and to imprisonment for 12 months.
(5) If a person is charged with an offence under subsection (3)—
(a)it is a defence to establish that the person had reasonable grounds to believe, and did believe, that a competent and reliable person—
(i)was charged with the duty of ensuring that subsection (1) was complied with; and
(ii)was in a position to discharge that duty; and
(b)it is not a defence to establish that the financial statements or report was not in fact prepared as required by this Ordinance.
| Legal requirement | Failure to comply | Wilful failure to comply | |
| S429(3) | Company must send financial statements to members 21 days before holding of AGM as per S429(1). | $300,000 | |
| S429(4) | Director(s) wilfully fail to take steps to comply with S429(1). | $300,000 | 12 months' imprisonment |
Note: A company not required to holding the AGM under section 612 need not comply with section 429(1). For the circumstances under which a company is not required to hold the AGM under section 612, please see {S612}.
Directors' Report
Sections 388 to 391 and section 543(2) deal with directors' report.
| 388 | Companies must prepare a directors' report for each financial year, including the requirement of a business review, and the provisions relating to the exemption for the preparation of the directors' report. |
| 389 | Special circumstances under which a private company must prepare directors' report as per requirement under section 388 |
| 390 | The contents of the directors' report in general |
| 543(2) | The directors' report must include the information of the management contract conclusion between the directors and the Company. |
The following also deals with the directors' report:
1) Schedule 5 of the Companies Ordinance
Schedule 5 (S388(1)(a)) specificially provides for the business review that the directors's report must contain.
2) Companies (Directors' Report) Regulation (Cap 622D)
The Regulation (S388(1)(b)) summarizes the contents of the directors' report, as provided under section 390 and schedule 5 of the Companies Ordinance (Cap 622), and that includes additional items in the directors' report such as directors' interest, donation, recommended dividends, issue of capital, issue of debenture, equity-linked agreement, reasons for directors' resignation and permitted idemnity provision.
Section 388
It provides that
(1) A company's directors must prepare for each financial year a report that—
(a) complies with sections 390, 543(2) and Schedule 5;
(b) contains the information prescribed by the Regulation; and
(c) complies with other requirements prescribed by the Regulation.
(2) The requirement under S388(1) applies to a holding company, for which the consolidated directors' report must be prepared.
(3) Subsection (1) or (2) does not require the directors' report for a financial year to comply with Schedule 5 if—
(a) the company falls within the reporting exemption for the financial year;
(b) the company is a wholly owned subsidiary of another body corporate in the financial year; or
(c) the company is a private company that does not fall within the reporting exemption for the financial year, and a special resolution is passed by the members to the effect that the company is not to prepare a business review required by that Schedule for the financial year.
(4) A resolution for the purposes of subsection (3)(c)—
(a) may be passed in relation to—
(i) a financial year; or
(ii) a financial year and every subsequent financial year;
(b) must be passed at least 6 months before the end of the financial year to which the directors’ report relates; and
(c) may only be revoked by a special resolution.
(5) Subsections (1), (2) and (3) have effect subject to section 389, which specifically provides for the conditions under which the company becomes a public company and consequently it must prepare directors' report as per section 388(1) or 388(2).
Non-compliance of S388
(6) A director of a company who fails to take all reasonable steps to secure compliance with subsection (1) or (2) commits an offence and is liable to a fine of $150000.
(7) A director of a company who wilfully fails to take all reasonable steps to secure compliance with subsection (1) or (2) commits an offence and is liable to a fine of $150000 and to imprisonment for 6 months.
Section 390 (Cap 622) and Regulation (Cap 622D)
Section 390 lays down the general requirements for the directors' report. The detailed requirements of a directors' report are laid down under the Companies (Directors' Report) Regulation (Cap 622D), which provides for the reporting reuqirements of the directors' report for the company that falls or that does not fall, within the scope of reporting exemption respectively.
Section 391
| Requirements | Fines for non-compliance |
| S391(1) A directors' report must be approved, and signed on their behalf by a director or the commpany secretary. | If S391(1) is contravened, the company and every responsible person is subject to a fine at level 4 (HK$25,000). |
| S391(2) Every copy of a directors' report, laid before AGM or sent to members, must state the name of the person who signed the report. | If S391(2) is contravened, the company and every responsible person is subject to a fine at level 4 (HK$25,000). |
Annual General Meeting
Section 610 provides that (1) subject to subsections (2) and (3), a company must, in respect of each financial year of the company, hold a general meeting as its annual general meeting within the following period (in addition to any other meetings held during the period)—
| (a) in the case of a private company or a company limited by guarantee, |
9 months after the end of its accounting reference period by reference to which the financial year is to be determined; and |
| (b) in the case of any other company, |
6 months after the end of its accounting reference period by reference to which the financial year is to be determined. |
(2) If the accounting reference period mentioned in subsection (1) is the first accounting reference period of the company and is longer than 12 months, the company must hold a general meeting as its annual general meeting within the following period—
|
(a)in the case of a private company or a company limited by guarantee, |
(i) 9 months after the anniversary of the company’s incorporation; or |
| (b) in the case of any other company, |
(i) 6 months after the anniversary of the company's incorporation; or (ii) 3 months after the end of that accounting reference period, whichever is the later. |
(3) If a company has by a directors' resolution under section 371 or a notice delivered to the Registrar under that section, shortened an accounting reference period, the company must hold a general meeting as its annual general meeting within the following period—
| (a) in the case of a private company or a company limited by guarantee, |
(i) 9 months after the end of the shortened accounting reference period; or (ii) 3 months after the date of the directors’ resolution, whichever is the later; and |
|
(b) in the case of any other company, |
(i) 6 months after the end of the shortened accounting reference period; or whichever is the later. |
(4) A private company mentioned in subsections (1), (2) and (3) does not include a private company that is, at any time during the financial year, a subsidiary of a public company.
Non-compliance
If a company contravenes subsection (1), (2), or (3) as mentioned above, the company, and every responsible person of the company, commit an offence, and each is liable to a fine at level 5.
As per Criminal Procedure Ordinance, a fine at level 5 amounts to HK$50,000.
Notice for General Meeting
Notice required of general meetings (Sections 571 and 578)
(1) A company is required to give at least 21 days' notice for the annual general meeting. The notice shall be exclusive of the day on which it is served or deemed to be served and of the day for which it is given.
|
|
Type of general meetings and matters |
Notice period |
|
1. |
Annual general meeting |
21 days |
|
2. |
General meeting |
14 days |
|
3. |
Resolutions requiring special notice |
28 days (S578) |
(2) If the company’s articles require a longer period of notice than that specified in subsection (1), a general meeting of a company (other than an adjourned meeting) must be called by notice of that longer period.
(3) A general meeting of a company is to be regarded, despite the fact that it is called by shorter notice than that specified in subsection (1) or in the company’s articles, as having been duly called if it is so agreed—
(a) in the case of an annual general meeting, by all the members entitled to attend and vote at the meeting; and
(b) in any other case, by a majority in number of the members having the right to attend and vote at the meeting, being a majority together representing at least 95% of the total voting rights at the meeting of all the members.
Notice to the auditor
Section 575 of the Companies Ordinance provides that, if the Company is reuqired to give the notice of general meeting or documents relating to the general meeting to the members, it must give the same to the auditor. If that notice requirement is not followed, the company and each responsible persion commits an offence, and each is liable to a fine at level 3 (HK$10,000).
Contents of Notice of General Meetings (Section 576)
(1) A company must ensure that the notice
(a) specifies the date and time of the meeting;
(b) specifies the place of the meeting;
(c) states the general nature of the business to be dealt with at the meeting;
(d) in the case of a notice calling an annual general meeting, states that the meeting is an annual general meeting; and
(e) if a resolution is intended to be moved at the meeting—
(i) includes notice of the resolution; and
(ii) (where the company is not a wholly owned subsidiary) includes a statement containing the information and explanation, if any, that is reasonably necessary to indicate the purpose of the resolution.
(2) Subsection (1)(a), (b) and (c) has effect subject to any provision of the company's articles of association.
(3) Subsection (1)(e) does not apply in relation to a resolution of which—
(a) notice has been included in the notice of meeting under section 567(3) or 568(2); or
(b) notice has been given under section 615.
Non-compliance
(4) If a company contravenes (1)(e), the company, and every responsible person commit an offence, and each is liable to a fine at level 3 (HK$10,000).
Exemption from Holding the Anuual General Meeting
Section 611 provides that
(1) Section 610 does not apply to a company that is a dormant company, as defined under section 5(1).
(2) If such a company enters into an accounting transaction, the exemption ceases to have effect on and after the date of the accounting transaction.
Circumstances in which company is not required to hold annual general meeting
Section 612 provides for the circumstances in which the company is not required to hold annual general meeting.
(1) A company is not required to hold an annual general meeting if—
(a) everything that is required or intended to be done at the meeting (by resolution or otherwise) is done by a written resolution; and
(b) a copy of each document (i.e. the financial statement) that under this Ordinance would otherwise be required to be laid before the company at the meeting, is provided to each member, on or before the circulation date of the written resolution.
(2) A company is also not required to hold an annual general meeting if—
(a) the company has only one member; or
(b) all of the following are satisfied—
(i) the company has, with a resolution passed by all members, dispensed with the holding of the annual general meeting;
(ii) the company has not revoked the resolution, or the company has revoked the resolution but is not required to hold an annual general meeting (because the resolution ceases to have effect 9 months after the end of a financial year); and
(iii) no member of the company has required the holding of the annual general meeting.
[Comment: It is noted that sub-section 2 is a new provision in comparison with the predecessor ordinance.]
See the illustrated examples on determining the AGM date here. [read]
Annual Return
Section 622 provides that the annual return must be filed within the following period:
| Sections applied | Company Type | Interval Required | Filing date |
| 662(1),(2) | Private | Every calendar year * | within 42 days of the anniversary of incorporation date |
| 662(3),(4) | Public | Every financial year | within 42 days of the return date, which is 6 months after the end of accounting reference period |
| 662(3),(4) | Limited by guarantee | Every financial year | within 42 days of the return date, which is 9 months after the end of accounting reference period |
* except for the year of incorporation
Filing fees
The normal filing fee for a private company, a company limited by guarantee (a guarantee company) and a public company is HK$105, HK$105, and HK140 respectively.
Late filing will result in prosecution and attract a late filing penalty, either singly or in combination. The late filing fees are listed below as per Schedule 1, Companies (Fees) Regulations (Cap 622K):
| Annual return is delivered | Private company | Guarantee company | Public company |
| Within 42 days of return date | 105 | 105 | 140 |
| More than 42 days after but within 3 months of the return date | 870 | 870 | 1200 |
| More than 3 months after but within 6 months | 1740 | 1740 | 2400 |
| More than 6 months after but within 9 months | 2610 | 2610 | 3600 |
| More than 9 months after | 3480 | 3480 | 4800 |
Contents
The annual return must comply with requirements under section 664.
Non-compliance
If section 662(1) or (3) is contravened, the company, and every responsible person of the company, commits an offence, and each is liable to a fine at leval 5 (HK$50,000) and, in the case of a continuing offence, to a further fine of HK$1,000 for each day during which the office continues.
Exemption
A dormant company, as defined under section 5(1), is exempt from the requirement to file an annual return to the Companies Registry.
Directors and Secretaries
Minimum number of directors
| Public Company | Min. No. of director | |
| 1. | Public company | 2 |
| 2. | Company limited by Guarantee | 2 |
| 3. | Private Company | 1 |
Restriction on body corporate acting as a director
Section 456 provides that the following types of companies must not appoint a corporation (body corporate) as a director.
|
1. |
A public company |
|
2. |
A company limited by guarantee |
|
3. |
A private company that is a member of a group of companies, of which a listed company is a member |
Corporate director
Section 457 provides that
(1) a private company other than one that is a member of a group of companies, of which a listed company is a member, can appoint a corporate director.
(2) the company must have a least one director who is a natural person.
[Comment: it is noted that the C. O. distinguishes between the private company that belongs to a group of companies having a listed company as a member and the private company that does not.]
Direction requiring a company to appoint directors
Section 458 provides that the Companies Registrar may issue a direction to require the company to appoint a director or directors within a specified period if it appears to him that the provision for a minimum number of directors has been contravened. The specified period must not be less than one month or more than 3 months after the date on the direction is given.
Non-compliance
In the case of non-compliance with section 458, the company and every responsible person of the company commit an offence, and each is liable to a fine at level 6 (HK$100,000) and, in the case of continuing offence, to a further fine of HK2,000 for each day during which the office continues.
Reserve director
S455 provides that if a private company has only one member and that member is the sole director of the company, the company may by a resolution passed at a general meeting, nominate a person as a reserve director to act in place of the sole director in the event of the sole director's death.
Register of shareholders (members)
|
Location |
Scope |
Contravention |
|
Hong Kong Company must keep Register of members at the registered office (S627) or a prescribed place |
A Company must keep a register of members per S627(1), with the required particulars (specified in S627(2) and (3)) of each person who is a member, per S627(4), within 2 months after receiving notice of such particulars. |
Company, and every responsible person liable to a fine at level 4 (HK$25,000), in case of continuing offence, a further fine of $700 of each day during the which the offence continues. |
Register of directors /secretaries
|
Location |
Scope |
Contravention |
|
Hong Kong Company must keep Register of directors at the registered office (S641(3)) or a prescribed place |
A Company must keep a register of directors as per S641(1), with the required particulars (specified in S643) of each person who is a director or reserve director, per S641(2) |
Company, and every responsible person liable to a fine at level 4 (HK$25,000), in case of continuing offence, further fine of $700 of each day during the which the offence continues. |
Register of significant controllers [read]
Notification to Registrar of the Companies Registry:
(a) Location of the register of directors
|
Section |
Contents |
Notification |
Penalty for contravention |
Responsible persons |
|
S641(4) |
A company must notify the Registrar of the place at which the register of directors is kept. |
The notice must be in the specified form (NR2) and delivered to the Registrar for registration within 15 days after the register is first kept at that place. |
A fine at level 4 ($25,000), in the case of a continuing offence, $700 for each day while the offence continues |
The company and every responsible person of the company |
|
S641(5) |
A company must notify the Registrar of any change (other than a change of the address of the company's registered office) in the place at which the register of directors is kept. |
The notice must be in the specified form (NR2) and delivered to the Registrar for registration within 15 days after the change. |
As above |
As above |
|
S641(6) |
|
No required if the Company has kept the register at the registered office at commencement date of the C.O. (Cap. 622) and thereafter. |
|
|
(b) Appointment, Resignation and Change in Particulars of directors
The Company has a duty to notify the Registrar of the Companies Registry in respect of the following cases:
| Director | Secretary | Type of change | Report time | Specified form |
| S645(1);S645(4) | S652(1); S652(2) | Appointment / cessation | within 15 days | ND2A |
| S645(4) | S652(2) | Change in particulars | Ditto | ND2B |
| S464(3) | S477(3) | Resignation | Ditto | ND4 |
| Reserve director | Type of change | Report time | Specified form | |
| S645(2),(3) | N/A | Nomination / cessation | within 15 days | ND5 |
| S645(2),(3) | N/A | Change in particulars | Ditto | ND7 |
| S464(3) | N/A | Resignation | Ditto | ND8 |
(c) Resignation of director and secretary
Despite section 645(4), if a director resigning has reasonable grounds for believing that the company will not deliver the notice, the director resigning must deliver to the Registrar for registration a notice of the resignation.
A director here includes a reserve director.
The same reason applies in the case of resignation by the company secretary.
(d) Non-compliance
i) Director and Reserve director
If a company contravenes section 645(1), 645(2), 645(3) or 645(4), the company, and every responsible person of the company, commit an offence, and each is liable to a fine at level 4, and in the case of continuing offence, to a further fine of $700 for each day during which the offence continues.
ii) Secretary
If a company contravenes section 652(1) or 652(2), the company and every responsible person commit an offence, and each is liable to a fine at level 4, and in the case of a continuing offence, to a further fine at $700 for each day during which the offence continues.
iii) Level 4
As per Criminal Procedure Ordinance, a fine at level 4 is HK$25,000.
Section 462 provides that a company may, by an ordinary resolution passed at a general meeting, remove a director before the end of the director's term of office, despite anything in its article or in any agreement between it and the director.
The preceding paragraph does not, if the company is a private company, authorize the removal of a director who has held office for life since 31 August 1984.
Special notice is required of a resolution to remove a director; or to appoint somebody in place of a director so removed at the meeting at which the director is removed.
Section 578 provides that if, by any provision of the Companies Ordinance, special notice is required to be given of a resolution, the resolution is not effective unless notice of the intention to move it has been given to the company at least 28 days before the meeting at which it is moved.
Note: written resolution under section 548
The members of a Company cannot remove a director (or the auditor for whom the term of appointment has not expired) by a written resolution under Section 548(6). A director (or the auditor) can only be removed by a resolution passed in a general meeting, in respect of which a 28-day special notice must be given before the meeting.
Circumstances in which a director must NOT be the secretary of the company
As per section 475(1), a director of the company may also be a secretary of the company, except that
- the director of a private company having only one director, must not also be the company secretary of that company; [S475(2)]
- No private company having a sole director may have, as the company secretary of the company, a body corporate the sole director of which is the sole director of the private company. [s475(3)
Avoidance of acts done by person in dual capacity as director and company secretary
S479(1) provides that a provision requiring or authorizing a thing to be done by or to, a director and a company secretary of a company is not satisfied by its being done by or to the same person who is acting
(a) both as director and company secretary; or
(b) both as director and in place of the company secretary.
Comments: S475 applies to a private company having only one director, while S479 applies to the company having more than one director.
Directors' register and company secretary's register
|
Location |
Scope |
Contravention |
|
Hong Kong Company must keep Register of directors at the registered office (S627) or a prescribed place |
A Company must keep a register of directors per S627(1), with the required particulars (specified in S627(2) and (3)) of each person who is a member, per S627(4), within 2 months after receiving notice of such particulars. |
Company, and every responsible person liable to a fine at level 4 (HK$25,000), in case of continuing offence, a further fine of $700 of each day during the which the offence continues. |
Members' register
|
Location |
Scope |
Contravention |
|
Hong Kong Company must keep Register of directors at the registered office (S627) or a prescribed place |
A Company must keep a register of directors per S627(1), with the required particulars (specified in S627(2) and (3)) of each person who is a member, per S627(4), within 2 months after receiving notice of such particulars. |
Company, and every responsible person liable to a fine at level 4 (HK$25,000), in case of continuing offence, further fine of $700 of each day during the which the offence continues. |
Section 654
Company record is meant any register, index, agreement, memorandum, minutes or other document required by this Ordinance to be kept by a company, but does not include accounting records.
Company records kept internally by Company
A HK Company or a registered non-HK company, as defined section 2, must keep statutory records, which is generated internally in the course of daily business activities.
The Companies Ordinance (Cap 622) requires that a Company must keep its records for a period of time at specified locations as prescribed under the Companies Ordinance (Cap 622). Some of the internal records must be made available to the public by filing at the Companies Registry. Non-compliance will result in fines, and in the case of continuing offence, a further fine each day while the offence continues.
Dormant Company
Section 5 of the Companies Ordinance (Cap 622) provides that a private company becomes dormant if the shareholders pass a special resolution to the effect that the company shall become dormant from the date of delivery of the special resolution to the Registrar of the Companies Registry, and that the directors are authorized to deliver such special resolution to the Registrar for registration purposes.
[a] Exemption from legal obligations
As per Section 447(1), if a company becomes dormant, the following provisions of the Companies Ordinance shall not apply:
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(a) |
367(4) |
Directors must secure that the financial year of each subsidiary should coincide with that of the holding company; |
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(b) |
Subdivisions 3 and 4 of division 4, Part 9 |
The requirement to prepare financial statements and the directors' report; |
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(c) |
Subdivisions 2 and 3 of division 5, Part 9 |
Company should appoint auditor, and auditor must prepare report on financial statements, which are prepared by directors and laid by directors at AGM (S429) or send it to each member (S430); |
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(d) |
Section 411 and 412 |
Auditor's right to attend the AGM and right to have access to information for audit purposes; |
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(e) |
Subdivisions 6, 7 and 8 of division 5, Part 9 |
Termination of auditor's appointment, outgoing auditor's right, and outgoing auditor's statement of circumstances; |
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(f) |
Divisions 6 and 7, Part 9 |
Laying and publication of financial statements and summary financial report. |
[2] Excluded Companies
Subsection 7 of Section 5 provides that only qualified private companies are eligible to apply for dormancy. The following types of companies do not fall under the scope of qualified private companies:
(a) an authorized institution as defined by section 2(1) of the Banking Ordinance (Cap 155);
(b) an insurer as defined by section 2(1) and (2) of the Insurance Companies Ordinance (Cap 41);
(c) a corporation licensed under Part V of the Securities and Futures Ordinance (Cap 571) to carry on a business in any regulated activity as defined by section 1 of Part 1 of Schedule 1 to that Ordinance;
(d) an associated entity, within the meaning of Part VI of the Securities and Futures Ordinance (Cap 571), of a corporation mentioned in paragraph (c);
(e) an approved trustee as defined by section 2(1) of the Mandatory Provident Fund Schemes Ordinance (Cap 485);
(f) a company having a subsidiary that falls within paragraph (a), (b), (c), (d) or (e); or
(g) a company that fell within paragraph (a), (b), (c), (d), (e) or (f) at any time during the 5 years immediately before the special resolution is passed.
(8) The Financial Secretary may, by notice published in the Gazette, amend subsection (7) of section 447.
[3] Cessation of dormant status
Subsection 2 of section 447 provides that if such a company enters into an accounting transaction—
(a) subsection 1 of section 447 ceases to have an effect on and after the date of the accounting transaction; and
(b) a member of the company who knew or ought to have known about the accounting transaction, and every director of the company, are personally liable for any debt or liability of the company arising out of the accounting transaction.
[4] The term "accounting transaction" is defined under section 2 (Interpretation) of the Companies Ordinance.
Dissolution by Deregistration or Winding-Up
A company can be dissolved in the following ways
(i) by an application to the Registrar for deregistration, or
(ii) by petition to the court for an order to commence a compulsory liquidation or by the commencement of a voluntary liquidation.
Note: a company can also be dissolved after its name has been stricken off the register of companies by the Companies Registrar.
Deregistration
S750 Application for Deregistration
(1) A company, or a director or member of a company, may apply to the Registrar for deregistration of the company.
(2) An application must not be made unless, at the time of the application—
(a) all the members agree to the deregistration;
(b) the company has not commenced operation or business, or has not been in operation or carried on business during the 3 months immediately before the application;
(c) the company has no outstanding liabilities;
(d) the company is not a party to any legal proceedings;
(e) the company’s assets do not consist of any immovable property situate in Hong Kong; and
(f) if the company is a holding company, none of its subsidiary's assets consist of any immovable property situate in Hong Kong.
(3) An application—
(a) must be in the specified form;
(b) must be accompanied by the prescribed fee; and
(c) must be accompanied by a letter of no objection which is issued by the Commission of the Inland Revenue Dept.
(4) If the applicant is a company, it must nominate in the application a natural person to be given notice of the deregistration.
(5) The applicant must give the Registrar any further information that the Registrar may request in connection with an application.
(6) A person who, in connection with an application, knowingly or recklessly gives any information to the Registrar that is false or misleading in a material particular commits an offence and is liable—
(a) on conviction on indictment to a fine of $300,000 and to imprisonment for 2 years; or
(b) on summary conviction to a fine at level 6 and to imprisonment for 6 months.
Companies to Which Deregistration does not Apply
The company for purposes under section 750 excludes (a) public company; and (b) a company specified below:
(a) a bank, as defined under the Banking Ordinance (Cap 155);
(b) an insurance company, as defined under the Insurance Companies Ordinance (Cap 41);
(c) a corporation licensed under Part V of the Securities and Futures Ordinance (Cap 571) to carry on a business in any regulated activity as defined by section 1 of Part 1 of Schedule 1 to that Ordinance;
(d) an associated entity, within the meaning of Part VI of the Securities and Futures Ordinance (Cap 571), of a corporation mentioned in paragraph (c);
(e) an approved trustee as defined by section 2(1) of the Mandatory Provident Fund Schemes Ordinance (Cap 485);
(f) a company registered as a trust company under Part VIII of the Trustee Ordinance (Cap 29);
(g) a company having a subsidiary that falls within paragraph (a), (b), (c), (d), (e) or (f); or
(h) a company that fell within paragraph (a), (b), (c), (d), (e), (f) or (g) at any time during the 5 years immediately before the application under section 750 is made.
Liabilities in Connection with the Dissolved Company
Section 756 provides that even though a company is dissolved under this Part, the liability (if any) of every director, manager and member of the company continues and may be enforced as if the company had not been dissolved.
Please see further information comparing between a deregistration and a winding up [here].
Books and Paper of the Dissolved Company
Section 758 provides that if a company is dissolved by way of deregistration, every person who was a director of the company immediately before the dissolution must ensure that the company’s books and papers are kept for at least 6 years after the date of the dissolution. A person who contravenes subsection (1) commits an offence and is liable to a fine at level 3 (HK$10,000).
Restoration
Section 765(2) and section 766(1)(b) provide that where a company has been deregistered and is dissolved, under section 291AA of the predecessor Ordinance, an application to the Court for the restoration of the company to the Companies Register may be made by a person who feels aggrieved by the deregistration, within 20 years of the deregistration.
Section 766(2) provides that an application under section 765 may be made at any time if the purpose of the application is to enable a person to bring proceedings against the company for damages for personal injury.
Retoration of Company Whose Name Having Been Striking off
Section 760
(1) This section applies to
(a) a company whose name
(i) has been struck off the Companies Register under section 746 or 747; or
(ii) has been struck off the register under section 291 of the predecessor Ordinance; and
(b) the company is dissolved under that section.
(2) A person who was a director or member of the company may apply to the Registrar for the restoration of the company to the Companies Register.
(3) An application must be made within 20 years after the date of the dissolution. For this purpose, an application is made when it is received by the Registrar.
(4) An application must be accompanied by a statement—
(a) that the applicant was a director or member of the company; and
(b) that the conditions specified in section 761(2) are met.
(5) The Registrar may accept the statement as sufficient evidence of the matters mentioned in subsection (4)(a) and (b).
Section 761
(1) The Registrar must not grant an application made under section 760 unless all the conditions specified in subsection (2), and any other conditions that the Registrar thinks fit, are met.
(2) The conditions are—
(3) For the purposes of subsection (2)(b), the costs for obtaining the Government’s confirmation include the Government's costs, expenses and liabilities in dealing with the property or right during the period of dissolution, or in connection with the proceedings on the application, that may be demanded as a condition of giving the confirmation.
Guidance notes
For further information about administrative restoration (action to be taken by the Companies Registrar of the Companies Registry, see FAQ at the Companies Registry. [Read]
A comparison among striking off, de-registration and liquidation
| Striking off | De-registration | Liquidation | |
| Sections | Apply under s746 * | Apply under s750 | |
| Restoration? | Yes, under s760 | Yes, under s765 | N/A # |
| Type of restoration | Administrative restoration | Judicial restoration | N/A |
| Who restores? | Companies Registrar | Court order | N/A |
* The Companies Registrar may strike off the company under section 747 if the following conditions are applicable:
# The court may at any time within 2 years of the date of the dissolution by winding up procedures, on an application being made for the purpose by the liquidator of the company or by any other person who appears to the court to be interested, make an order, upon such terms as the court thinks fit, declaring the dissolution to have been void, as provided under section 290 of the Companies (Winding-Up and Miscellaneous Provisions) Ordinance. See the relevant legal texts here.
Comparison between de-registration and Winding-Up
There are advantages and disadvantages of choosing de-registration as a means to dissolving a company. The obvious advantage for de-registration is that it costs much less than that for liquidation. But there is disadvantage for using deregistration, as set out below:
It is an untrue belief that de-registration can put an end to the business of the Company including its financial obligations towards creditors. In fact, it is not the intention of the law. As per the Companies Ordinance, the legal obligations for directors and members imposed under the Companies Ordinance, cannot be extinguished by way of the de-registration procedure.
To extinguish the financial obligations, one should dissolve the company by means of winding-up. De-registration and winding-up are different legal procedures, and each has different legal consequences in respect of the financial obligations for the shareholders and the non-financial obligations for the directors, including that under the Companies Ordinance (Cap 622) and the Companies (Winding-Up and Miscellaneous Provisions) Ordinance (Cap 32).
The difference between deregistration and winding-up can best be explained by using an analogy here: there are two ways of handling the human body after a person's death. Deregistraiton is like a burial and liquidation is like a cremation. One can re-examine the corpse after the burial, but one cannot re-examine the corpse after the cremation as it has been reduced into ashes. That is why many property developers, after the completion the sale of flats, will liquidate the company which was set up for the development project. They do this to protect themselves against any contract or tort claims in future.
In case that the directors or members make a decision on de-registration, then the directors must clear the tax liabilities by applying to the Inland Revenue Department for a no-objection letter. In case that the members decide to wind up the Company voluntarily, it is the liquidator who should clear the tax liabilities.
Winding-Up vs Liquidation
The term "winding-up" embraces liquiation. Liquidation involves the disposal of the company's asset with a view to discharging the company's liabilities after the commencement of a winding-up. Liquidation is a subset of winding up. Winding-up involves the preparation of legal documents including but not limited to, the holding of members' general meeting, and the creditors' general meetings (if applicable) with the agenda to appoint the liquidator(s), the public notices given to the creditors to prove their debts, the filing of required documents to the Companies Registry, obtaining tax clearances, the disposal of books and records, etc.
For further information about the dissolution of a company by deregistration, see Companies Ordinance - Special Matters. [read]
Companies (Winding Up and Miscellaneous Provisions) Ordinance
The HK Government published in the Gazette today (December 9, 2016) the Companies (Winding Up and Miscellaneous Provisions) (Amendment) Ordinance 2016.
The Companies (Winding Up and Miscellaneous Provisions) (Amendment) Ordinance 2016, which was passed by the Legislative Council on May 27, seeks to improve and modernise Hong Kong's corporate winding-up regime by providing measures to increase protection of creditors as well as streamline and further enhance the integrity of the winding-up process.
A spokesman for the Financial Services and the Treasury Bureau said, "The Amendment Ordinance will help further align our corporate winding-up regime with the latest international developments, and enhance Hong Kong's business environment with increased confidence to investors and creditors."
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