There are very specific guidelines and filing requirements that private limited companies must adhere to according to Hong Kong law.
Once a business has been incorporated, the laws don’t just stop there.
There are also ongoing company compliance in Hong Kong obligations that companies must follow and fulfill.
Here, we will cover the annual filing and statutory compliance requirements for private limited companies in Hong Kong.
Table of Contents
What is Corporate Compliance?
Compliance refers to the act of following and abiding by a set of rules or guidelines.
When it comes to the corporate world, it’s a process to ensure that a company and its employees are following all regulations, laws, and ethical practices that apply to your industry.
It encompasses internal policies and procedures as well as state and federal laws.
Why is Company Compliance in Hong Kong Important?
Company compliance consists of laws and regulations, both internal and external, that companies in Hong Kong are required to abide by.
These laws, limits, and framework ensure that companies are actively operating in a legal manner.
The official document that details these legal limits is known as the Hong Kong Companies Ordinance.
Following compliance requirements ensures that a company is not violating any laws, rules, or guidelines.
This protects the business from any fines or lawsuits and consumers from interacting with businesses that are operating illegally.
Who Establishes the Regulations for Hong Kong Companies?
The Company Registry establishes the regulations for companies in Hong Kong. They oversee the incorporation of businesses and the registration process.
They provide a registry for the public so that they can find information on companies.
The Companies Registry also ensures the compliance of companies.
They even advise the government on issues regarding company law and legislation.
The Hong Kong Company Registry was formerly known as the Treasure & Finance Bureau of the Hong Kong government.
What is the Hong Kong Companies Ordinance?
All companies in Hong Kong must operate their business within certain legal parameters.
The Hong Kong Companies Ordinance is the official document that details the legal limits of businesses in Hong Kong.
Who in the Company is Responsible for Ensuring That These Requirements Are Met?
The company directors are responsible for making sure that the ongoing compliance requirements are met.
This is extremely important because non-compliance can result in fines and even prosecution.
What is a Private Limited Company?
The private limited company is the business structure that is most widely used by locals and foreigners when setting up small to medium-sized businesses in Hong Kong.
These companies are privately held.
During 2021, 110,840 companies incorporated throughout the year.
Out of 110,840 incorporated companies, 109,745 were private companies.
Limited Liability
A Hong Kong private company business structure has a separate legal identity from its owners, meaning that if a company were to go bankrupt, it would not affect the owner’s or shareholder’s personal finances, hence the limited liability of private companies.
In this scenario, they would only lose their share of the capital invested in the business.
Shareholders
With the private companies business structure, the number of shareholders are limited to fifty. These shareholders are restricted from trading any of their shares publicly.
Board of Directors
The shareholders of a private company limited also appoint a board of directors to run the business and this board makes all of the business decisions.
Shareholders can also serve as directors.
Annual Hong Kong Company Compliance Requirements
Hong Kong company compliance can be broken down into general annual compliance and annual filing requirements.
Annual compliance requirements consist of the general maintenance of a business, notifications of any changes, renewals of licenses, and the holding of specific meetings.
General Maintenance
The following are general maintenance items that a private company must uphold annually in order to meet the compliance requirements:
- A local registered address must exist and remain updated. It needs to be a physical address and not a p. o. box. This is so notices and communication can be directly delivered by Hong Kong authorities.
- The company secretary must be a local Hong Kong resident who is either a body corporate or an individual.
- There must be at least one director who is a local or foreign natural person over the age of 18.
- There also must be at least one shareholder who is either a body corporate or an individual, a foreigner or local, and over 18 years of age.
- There needs to be an appointed auditor from the list of Hong Kong registered auditors. The one exception to this is if the company is dormant and there hasn’t been any accounting transactions during the financial year.
- Records and documents that should always be on file include the incorporation certificate, business registration certificate, articles of association, minutes of all minutes, updated annual financial statements, company seal, share certificates, registers including transaction date, and business licenses.
- Maintain accurate and detailed accounting records including the transaction date should be on hand such as receipts & payments including daily records, a paper trail to back up transactions such as accounts recording receipts & bank statements, and assets & liabilities. The assessable profits should always be available.
Notifications
The following are notifications that need to be made with the Companies Registry if any changes occur in order to remain compliant:
- If the company’s registered office address changes, then notification must be made within 15 days.
- If there is an appointment or cessation of a company secretary or director, then notification must be made within 15 days.
- If there is any change of information with the company secretary or director, then notification must occur within 15 days.
- If the company name changes, then a statutory Form NNC2 must be filed within 15 days of passing the special resolution to change the company name.
- The passing of any special resolution must be reported within 15 days.
- If the company’s statutory books are relocated from the registered office, then notification must be made within 15 days.
- If there has been any issuance or allotment of new shares, the notification must be made within one month.
Renewals
The following is a renewal that must take place in order for the company to remain compliant:
- The Hong Kong business registration must be renewed one month before the expiration date which will either be annually or every 3 years.
- A current business registration certificate must be on display at all times at the principal business location.
- Registration fees are paid to the Hong Kong government.
Annual General Meeting
There is one meeting that is required to be held every year.
- The annual general meeting must be held within 18 months of the business’s incorporation date and every calendar year following within no more than 15 months of each other and within 9 months after the company’s accounting reference period.
A directors report and annual accounts must be presented at this annual general meeting.
Annual Filing Requirements For a Hong Kong Company
Local companies and foreign companies in Hong Kong must meet the annual filing requirements of the Inland Revenue Department and the Companies Registry.
Filing an Annual Return For Hong Kong Companies With Companies Registry
The Companies Ordinance requires that private limited companies that are incorporated in Hong Kong file annual returns with the signature of the corporate secretary, a director, authorized representative, or manager.
This ensures that the company will remain active and legal.
There is one exception. Dormant companies are exempt from the annual filing.
What Is An Annual Return?
The Annual Return filed on Form NAR1 includes specific information about a company. This information includes the following:
- Company name
- Registered office address
- Directors
- Shareholders
- Company secretary
- Period of financial statements
- Share capital
- Company records
The company’s financial accounts are not filed with the Companies Registry.
What Is The Deadline For An Annual Return
The deadline for filing annual returns depends on the type of business structure you have.
For private limited companies, the due date is within 42 days of the anniversary date of the company’s incorporation.
The company’s return date is the anniversary date of the Hong Kong’s company incorporation.
Filing Late or Failure to File
There are penalties, fees, and possible prosecution for filing past the due date or for not filing an annual return at all in Hong Kong based on the annual filing requirements.
Filing an Annual Tax Return With the Inland Revenue Department IRD
According to Hong Kong company law, every company must file an annual Profit Tax Return including audited accounts on an annual basis.
This tax filing is submitted to the Inland Revenue Department IRD.
Filing Notification
For newly incorporated companies in Hong Kong, a filing notification is sent out on the 18th month of the incorporation date.
The rest of the companies are sent a filing notification on April 1st of every financial year.
Required Supporting Documents
Not only do you need to submit the Profit Tax Return in Hong Kong but there are also some supporting documents that need to be attached.
These include the company’s balance sheet, profit and loss account, and auditor’s report.
Also attached should be the tax computation indicating how the profits or losses were determined.
Deadline
Hong Kong companies are required to file their annual tax return or profits tax return within one month of the notification date.
It’s important to note that extensions can be requested for the specified financial year.
Late Filings or Failure to File
If you fail to submit a Profits Tax Return or if it is filed late in Hong Kong, then there are repercussions. You may incur a penalty or prosecution, so it’s very important to file on time.
FAQ
Who establishes the regulations for companies in Hong Kong?
The government agency that regulates companies is known as the Hong Kong Companies Registry. The Hong Kong Company Registry was formerly known as the Treasure & Finance Bureau of the Hong Kong government.
Are all companies required to be audited in Hong Kong?
Yes. The Hong Kong Companies Law requires that every company registered in Hong Kong be audited annually by a Hong Kong registered auditor and these accounting records and annual accounts must align with the Hong Kong accounting standards.
What is the Hong Kong Companies Ordinance?
The Companies Ordinance establishes the limits from which a company can operate within Hong Kong. Compliance obligations are specified in the Companies Ordinance.
What is the penalty for filing an annual return late in Hong Kong or not filing at all?
Failing to file an annual return on time for a Hong Kong company leads to higher registration fees and charges.
Not only will you pay higher registration fees but it can even lead to a possible prosecution.
Why is Hong Kong company compliance essential?
It provides a legal framework for the Hong Kong company to operate which is extremely important since Hong Kong is an important international business hub.
Who in a Hong Kong company is responsible for seeing that the compliance requirements are initiated and met?
The Hong Kong company directors and company officers are responsible for making sure that the ongoing compliance requirements are met.
Are Annual Tax Returns and an Annual Return the same thing?
No. Annual returns have nothing to do with the financial aspect of a company. These returns just provide the particulars of a company. Annual tax returns are heavily based on the financial aspect of the business.
Do all companies have to file annual returns?
Yes. In general, all companies do have to file annual returns. All companies with the exception of a dormant company has to file an annual return.
