Maximum is Both individuals and companies can own shares. You can pick another currency and invest 1 euro, 1 yuan, etc. It needs at least 1 director. No local director is needed, unlike, for example, in Singapore, Malaysia, or Indonesia. You, as the business owner, can be the only shareholder and the only director.
It needs a Company Secretary. This can be either a Hong-Kong based individual or a business organization with an office here and legal right to do this. It needs to keep an eye on the significant controllers register SCR. For details, see the official guide. It needs to pay tax. The Profits tax, to be more specific. It is counted through the two-tiered rate system introduced in under it, you pay 8. Send it to us and get advice from a real expert in your mailbox.
You'll receive a verification email you'll have to open and confirm the subscription. Good business record keeping is crucial for managing costs, or regulatory reasons. If you are just starting up your business, it might not be the first thing that comes to your mind, but it can help you build a strong foundation.
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However, with a variety of options out there, choosing the best one can be confusing. You should deliver in respect of every year an annual return in the specified form Form NAR1 for registration. The annual return contains the particulars of the company such as the address of the registered office, shareholders, directors, company secretary, etc. A local private company must in respect of every year deliver its annual return to the Registrar of Companies for registration within 42 days after the anniversary of the date of the company's incorporation in that year the prescribed time period.
If you are not sure when your annual return is due for delivery, you may use the Annual Return Filing Calculator to calculate the due date. Deliver the annual return with the correct annual registration fee either by post or in person to :. Deliver the annual return with correct annual registration fee electronically through our hour portal "e-Registry". Please visit e-Registry for details. Download the bilingual specified form - Form NAR1.
Annual returns which have not been properly signed or not accompanied by the correct fee will be considered as unsatisfactory documents which will be rejected by the Companies Registry. The documents will not be regarded as having been delivered to the Registrar of Companies in satisfaction of the provisions of the Companies Ordinance.
The annual registration fee payable will be calculated according to the date of re-delivery of the annual return and this may result in a higher fee being payable. If the annual return is delivered by post, the annual return will not be regarded as having been delivered to the Registrar of Companies in satisfaction of the filing requirements if it has not been received by the Registrar. You should deliver other forms reporting changes of information relating to directors, company secretary, etc.
For details of the general filing requirements, please refer to the information pamphlet 'Filing Requirements of a Local Limited Company after Incorporation' pdf Format. A shareholders' general meeting GM can only pass resolutions on matters covered by the notice convening the GM. However, at the GM, minor amendments can be made to resolutions in the notice, in order to correct clerical errors. Can a shareholder challenge a resolution passed at a general meeting? Is a certain shareholding level required to do this?
What is the time limit and procedure to challenge a general meeting resolution? Generally, a validly passed resolution adopted by the shareholders' general meeting GM is binding on minority shareholders. However, there are a number of protections afforded to minorities, as follows. The application must be made within 28 days of the special resolution approving the change.
The variation can then only have effect if confirmed by the court. The court will only allow the application if satisfied that the variation would unfairly prejudice the shareholders of the relevant class. The application must be made within 28 days of the passing of the resolution. Redemption or buy-back of shares Where a resolution has been passed by a private company to approve a redemption or buy-back of shares out of capital, a shareholder who did not vote in favour of the resolution can apply to court for its cancellation.
On hearing the application, the court can make an order as it deems fit, including:. Cancelling or confirming the resolution. Adjourning the proceedings, to arrange for the purchase of the dissentient shareholders' interests or the protection of the dissentient shareholders' interests. The shareholder must apply to the court within five weeks of the resolution being passed.
Company affairs prejudicial to shareholders Any shareholder may petition for a court order on the ground that the affairs of the company are being conducted actual or proposed act or omission in a manner which is unfairly prejudicial to the shareholders or part of the shareholders.
Courts have broad jurisdiction to make an order, but will not make an order if it is apparent that the appropriate resolution is a sale of shares and that there is a mechanism for determining a fair price. Courts will also strike down a petition if a reasonable offer for the petitioner's shares is made and the petitioner declines the offer. If a court decides to grant the petition, it may make such orders as it deems fit including orders regulating the affairs of the company, providing that certain shareholders or the company buy back shares held by other shareholders, or restraining the company from doing or continuing a particular act.
Derivative actions A shareholder can bring a statutory or common law derivative action for any of the following:. An order authorising proceedings to be brought on behalf of the company against such persons as the court deems fit.
An order appointing a receiver or manager. An order requiring the payment of damages to persons who have been unfairly prejudiced. These actions can be brought by a shareholder on behalf of the company where the company is harmed by certain types of misconduct and the company does not pursue its rights.
The Companies Ordinance gives standing to members of associated companies to bring or intervene in proceedings on behalf of the corporation for misconduct committed against the company. Typically, the parties involved in the misconduct are in control of the company. In the action, the company is a defendant and the court will grant the remedy sought to the company.
Order for winding-up A shareholder can apply for an order for the winding-up of the company. There are a number of specific grounds for the making of a winding-up order together with a residual ground of it being just and equitable that the company should be wound up.
The grounds include:. Failure of the main objects where applicable. Carrying out a fraudulent or illegal business. Failure of mutual trust and understanding among the shareholders. Other reasons on the basis of which the court considers it to be just and equitable to wind up the company. Shareholders' rights against directors What is the procedure to appoint and remove a director? The first directors of the company are normally appointed by the company subscriber.
Thereafter, the procedure for their appointment and removal is as set out in the articles. The best practice is for directors to retire by rotation and then offer themselves for re-election, but many private companies do not provide for such re-election by the shareholders on a regular basis. The articles also normally provide that the board of directors can fill a casual vacancy or appoint an additional director until the next annual general meeting AGM and the shareholders can choose to refuse the re-appointment of such director at that AGM.
For listed companies, the Listing Rules provide that every director must be subject to retirement by rotation at least once every three years. Can shareholders challenge a resolution of the board of directors? Is there a minimum shareholding required to do this? The articles normally vest the broad authority to run the day-to-day business of the company in the directors, and courts are reluctant to interfere in the day-to-day business of the company.
In addition to the matters reserved to the shareholders' general meeting GM see Question 9 and Question 14 , the GM can intervene in a number of limited situations by ordinary resolution:. Where the board is unwilling or unable to act. Where the board seeks approval for acts beyond its powers. Where the board seeks ratification of a breach of fiduciary duty see Question Any shareholder may also bring unfair prejudice and derivative actions see Question Briefly set out the main directors' duties to the company and its shareholders.
What is the potential liability of directors to the shareholders? Can their liability be limited or excluded? On what grounds can shareholders bring legal action against the directors? General duties The company's directors have a duty to exercise care, skill and diligence, which is codified under the Companies Ordinance Chapter , Laws of Hong Kong. The consequences for breaching this duty or threatening a breach are civil penalties derived from common law and equitable principles.
A mixed test applies regarding this duty:. An objective test applies to ensure the director was required to attain a minimum standard of care that cannot be adjusted down. A subjective test applies to place a higher standard on the director if he was appointed due to some special knowledge, skill or experience as such, a director under the test cannot limit or exclude his liability. Actions for the breach of a director's duty of care must be brought under the Companies Ordinance instead of the common law or equitable duty of care.
Fiduciary duties Other fiduciary duties of directors remain in case law and are not codified under the Companies Ordinance. These duties include the directors' duty to:. Act in good faith and for the benefit of the company. Exercise powers for a proper purpose and for the benefit of the shareholders as a whole. Not delegate powers except with proper authorisation.
Avoid conflicts between personal interests and interests of the company. Not enter into transactions in which the directors have an interest, except in compliance with the requirements of the law.
Not gain advantage from the position as a director. Not make unauthorised use of the company's property or information. See Question 18 and Question A shareholder who wishes to bring a legal action against the directors would probably need to do so through a derivative action enforcing the rights of the company against the particular director see Question 18, Derivative actions.
The principal circumstance that could prompt such an action is a breach of fiduciary duties. Authorise conduct by a director in advance, to avoid the conduct being regarded as a breach of duty.
Ratify a breach of duty that has already occurred, to relieve the director from liability to the company. The votes of a shareholder who is a director in respect of whose conduct ratification is sought. The votes of an entity connected with that director in respect of whose conduct ratification is sought, or a shareholder holding shares in trust for that director or entity.
Are directors subject to specific rules when they have a conflict of interest relating to the company? Are there restrictions on particular transactions between a company and its directors? Do shareholders have specific rights to bring an action against directors if they breach these rules?
In addition, the company's articles typically provide for more detailed provisions regarding declarations of directors' interests, for example:. Whether or not the interested director can vote on a matter. If the interest director does vote: whether his vote will be counted, and whether he may be counted in a quorum. Hong Kong law also restricts loans, guarantees, quasi-loans and credit transactions between a company and its directors and their associates. For listed companies, the requirement for directors to declare their interest is widened to include material interest of entities connected with the relevant director.
Under the Listing Rules, the articles of a listed company must provide subject to certain exceptions that a director:. Must not vote on any resolution approving any contract or arrangement in which he or any of his associates has a material interest. Must not be counted in the quorum present at the board meeting. In addition, if any such transaction requires shareholder approval, any shareholders with a material interest in the transaction must abstain from voting Listing Rules.
Does the board have to include a certain number of non-executive, supervisory or independent directors? Private companies and companies limited by guarantee For private companies and companies limited by guarantee, there is no requirement for the board to include a certain number of non-executive, supervisory or independent directors. There is also no requirement to include a certain quota of diverse directors for example, based on race or gender , or that the board must include a certain quota of resident directors.
Listed companies The Listing Rules contain specific requirements for a listed company. Non-executive directors. For a listed company, the board of directors must include at least three independent non-executive directors.
At least one of the independent non-executive directors must have appropriate professional qualifications or accounting or related financial management expertise.
A listed company must appoint independent non-executive directors representing at least one-third of the board. Audit committee.
Every listed company must establish an audit committee comprising non-executive directors only. The audit committee must comprise a minimum of three members, at least one of whom is an independent non-executive director with appropriate professional qualifications or accounting or related financial management expertise as required under the Listing Rules.
The majority of the audit committee members must be independent non-executive directors of the listed company. The audit committee must be chaired by an independent non-executive director. Remuneration committee. A listed company must establish a remuneration committee chaired by an independent non-executive director and comprising a majority of independent non-executive directors.
Nomination committee. A listed company must establish a nomination committee which is chaired by the chairman of the board or an independent non-executive director and comprises a majority of independent non-executive directors. Other committees. Other supervisory board committees can be formed with specific written terms of reference which deal clearly with the authorities and duties of the relevant directors who are members of such committee.
Do directors' remuneration and service contracts have to be disclosed? Is shareholder approval of directors' remuneration required? Remuneration Private companies. Under the Companies Ordinance Chapter , Laws of Hong Kong , the directors' remuneration must be disclosed in the company's financial statements. Subject to any limitation in the articles, the directors of private companies are free to set their own remunerations. Listed companies. Under the Listing Rules, the directors' remuneration must be disclosed in the company's financial statements.
In addition, all listed companies in Hong Kong must disclose such details in its financial statements on a named basis. All listed companies in Hong Kong are required to set up remuneration committees to formulate remuneration policy for the board's approval.
Service contracts A company must receive prior written approval from the shareholders before it can agree to grant a director a service contract employing the director for a term exceeding three years. A memorandum setting out the proposed service contract including the term must be sent to every shareholder. For a listed company, disinterested shareholders' approval is required and the votes of the director or any person holding shares on trust for him must be disregarded.
Shareholders' rights against a company's auditors What is the procedure to appoint and remove the company's auditors? What restrictions and requirements apply to who can be the company's auditors? The company's auditor is normally appointed and removed at the annual general meeting AGM.
However, the first auditor can be appointed by the directors at any time before the first AGM, or by the members in a shareholders' general meeting GM. The auditor will hold office until the AGM following his appointment has concluded. The appointed auditor can be nominated for reappointment at the next AGM.
The following procedure applies to the removal of the auditor:. The auditor can be removed from office by ordinary resolution at a GM of which special notice has been given at least 28 days before the GM. A copy of the special notice must be given to the auditor proposed to be removed. Special notice and notice of the GM should be given to shareholders at the same time and in the same manner.
If this not practicable, the company must give the special notice to shareholders at least 14 days before the GM by advertisement in a newspaper circulating generally in Hong Kong or in any other manner allowed by the articles.
The auditor is allowed to make written representations to the company and can request the company to give a copy to every shareholder to whom notice of GM is sent alternatively the auditor can require that such representation be read out in the GM. Once the ordinary resolution is passed, the company must lodge a specified form at the Hong Kong Companies Registry Companies Registry.
A person must meet the requirements set out in the Professional Accountants Ordinance Chapter 50, Laws of Hong Kong to be qualified for the appointment as a company's auditor for example, one requirement is that the person must be a certified public accountant, holding a practising certificate.
A firm of certified public accountants can also be appointed as auditor under the firm name. The following persons cannot be an auditor of the company:. The company's own officers or employees.
A person who has been disqualified from the appointment as the auditor of a company that is a subsidiary undertaking or a parent undertaking of the company or a subsidiary undertaking of that parent undertaking. What is the potential liability of auditors to the company and its shareholders if the audited accounts are inaccurate? An auditor commits a criminal offence if he both:.
Holds the opinion that adequate accounting records have not been kept. Knowingly or recklessly omits the necessary statement required to be included in the auditor's report. The criminal provision only has a narrow scope of operation.
Where the auditor fails to comply with its statutory duties, the company has a cause of action against the auditor under common law for his breach of duty. There is no provision for civil liability in relation to the auditor's breach under the Companies Ordinance Chapter , Laws of Hong Kong. Disclosure of information to shareholders What financial or other information about the company do the directors have to provide and disclose to its shareholders?
What information and documents are shareholders entitled to receive? Generally, directors must provide and disclose the following information to the shareholders:. Notices of shareholders' general meetings GMs. The directors' report, the auditor's report and the annual accounts of the company on an annual basis. For listed companies, the interim accounts of the company after the six-month period in a financial year. For listed companies only, circulars and other documents required to be provided to shareholders under the Listing Rules.
These documents normally include information regarding:. All shareholders are entitled to the above information, regardless of the number of shares owned by them. Shareholders are not otherwise entitled to receive written information about the meeting agenda before, during, or after the GM. In addition, listed companies must ensure equal dissemination of information to the market and are not allowed to selectively disclose price sensitive information to particular shareholders.
There is no general requirement to provide a shareholder with a copy of the GM's minutes however, see Question What information about the company do the directors have to disclose under securities laws where applicable?
For listed companies, Hong Kong's inside information provisions impose statutory obligations on listed companies and directors to disclose material price sensitive information that is, inside information as soon as reasonably practicable after it has come to the listed company's knowledge. The Securities and Futures Commission is responsible for enforcing those obligations. Is there a corporate governance code in your jurisdiction?
Do directors have to explain to shareholders in the company's annual report if they have not complied with it comply or explain approach? There is only a corporate governance code for listed companies. The principles of the code have two levels of recommendations:.
Code provisions. Listed companies are expected to comply with the code provisions but can choose to deviate from them. Listed companies must state whether they have complied with the code provisions for the relevant accounting period in their interim reports and annual reports and give considered reasons for any deviation.
Recommended best practices. These are for guidance only. Listed companies are encouraged but not required to state whether they have complied with recommended best practices and give considered reasons for any deviation. What information can shareholders request from the board about the company?
On what grounds can disclosure of company information be refused? Are shareholders entitled to inspect the company's books and similar company documents? Shareholders have limited rights to inspect company documents. The shareholders are entitled to receive the directors' report, the auditor's report and the company's annual financial statements see Question In addition, any shareholder can request to inspect the following without charge however, the request must be in the prescribed manner and a fee is charged for copies of the document s :.
Register of debenture holders. Copy of any management contract by which a person undertakes the management and administration of the whole or any substantial part of any business of the company or a written memorandum of its terms if the contract is not in writing. This can be obtained during the period that the management contract is in force and also during the period of one year after the date of its termination or expiry.
The shareholders can also inspect the public record of registerable charges at the Companies Registry. Shareholders holding 2. The inspection can be conducted by the persons applying to the court or someone on their behalf.
However, the court will only make this order if satisfied the application is in good faith and the inspection being applied for is for a proper purpose. Finally, public companies are required to file their directors' reports, auditor's reports and annual financial statements at the Companies Registry.
Once filed, these documents will be available for public inspection.
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