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Guide to Hong Kong Company Maintenance and Compliance
A Hong Kong private limited company is a legal entity separated from the individuals who own, manage, and support its operations. It is, in other words, a legal person in its own right, and therefore it is subject to the reporting requirements and compliance obligations as specified in the provisions of the Companies Ordinance.
Internal record keeping requirements
In order to maintain a Hong Kong company compliant with the law, the below three internal practices must be observed:
Maintain the following records and documents at all times: Incorporation Certificate, Incorporation Form (NNC1), 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).
Hold an Annual General Meeting (AGM) 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 must 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 directors’ report must be prepared in conjunction with the annual accounts. An AGM must be held even in the circumstances in which the business is not yet commenced or there are no accounts available for presentation in the meeting.
Maintain accurate and detailed accounting records to enable the assessable profits of the business to be readily ascertained. All records must be retained for seven years from the transaction date.
Failure to do so will attract a penalty. Since 1st January 2005, Hong Kong has adapted a Financial Reporting Standards (FRS) framework that has been modeled on International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB).
Moreover, a company’s business records must include:
- The books of accounts recording receipts and payments, or income and expenditure
- The underlying documentation necessary to verify the entries in the books of account, such as 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 received and expended by the business together with supporting details of the receipts or payments
External filings and reporting requirements
Both local and foreign companies in Hong Kong (such as incorporated subsidiaries or registered branches) are subject to annual filing requirements with the Companies Registry and the Inland Revenue Department (IRD).
Filing requirements with the Companies Registry
Any private limited company incorporated in Hong Kong under the Companies Ordinance is required to file an Annual Return signed by a director, company secretary, manager or authorized representative with the Companies Registry.
An Annual Return is a specified form containing the particulars of the company such as the address of the registered office, shareholders, directors, secretary, etc.
The Annual Return must be filed once in every calendar year (except in the year of its incorporation) within 42 days of the anniversary of the company’s incorporation date, at the standard registration fee of HKD105.
Even if the information contained in the last return has not changed since, the company still need to file an annual return before the due date. Late filing attracts higher registration fees which, depending on when the Annual Return is delivered.
Another fundamental obligation for the company and its officers is to notify the Companies Registry of any changes in the company’s registered particulars within a specified period of time, as follows:
- Change of Address of Registered Office – within 15 days
- Change of Company Secretary and Director (Appointment/Cessation) – within 15 days
- Change in Particulars of Company Secretary and Director – within 15 days
- Any allotment or issue of new shares – within 1 month
- Passing of a special resolution or certain other resolutions – within 15 days
- Relocation of the company’s statutory books from the company registered office – within 15 days
- Change of company name – filing of statutory form NNC2 within 15 days after the passing of the special resolution to change the company name
Filing requirements with the Inland Revenue Department (IRD)
Every HK limited company must, regardless of the status of its business (whether for instance the company has not yet commenced business, it has applied for the dormant status or even has started the deregistration procedure), renew the Business Registration one month before expiry on an annual basis. The Business Registration Certificate must be displayed at all times at the principal place of business for the company.
The IRD issues tax return filing notifications to companies (also called Profits Tax Return in Hong Kong) on the first working day of April every year.
For the newly incorporated companies, the notification is generally sent on the 18th month of the incorporation date. Companies must file their tax return within one month from the date of notification (they may request for an extension if needed) or late filing penalties will occur.
When filing the Profit Tax Return, the company’s audited financial statements relating to the basis period and a tax computation indicating how the amount of assessable of profits (or adjusted losses) has been arrived at, must be attached.
Finally, an Employer’s Return for each year of assessment will be issued by the IRD to all employers on the first working day of April on a yearly basis. A complete set of Employer’s Returns of Remuneration and Pensions (Form BIR56A), together with the form IR56B for each relevant employee, must be filed with the IRD within one month from the date of issue (filing extension may be requested).
Even in the event that there is no employee or pensioner chargeable to Salaries Tax, the Employer’s Return form must be filed with the IRD as “NIL”.
Need support?
Talk to Hawksford for more information and assistance for annual filing and tax compliance.