Laying financial statements Hong Kong company annual compliance Cap. 622

Laying Financial Statements Hong Kong Company Annual Compliance

Section 429 of the Companies Ordinance (Cap. 622) imposes the primary obligation. A company’s directors must lay before the company at an annual general meeting copies of the financial statements for the financial year, the directors’ report for that year, and the auditor’s report on those financial statements. Every Hong Kong incorporated company, private, public, and unlimited, carries this duty. The financial statements must be prepared in accordance with Hong Kong Financial Reporting Standards (HKFRS) or, for eligible small private companies, the SME-FRF and SME-FRS framework under the reporting exemption in section 359.

The Statutory Duty Under Cap. 622 Section 429

The traditional method is the AGM. For a private company, the AGM must be held within nine months after the end of the financial year. For a public company, the period is six months. At the AGM, the members receive the financial statements, the directors’ report, and the auditor’s report. They then ask questions about the company’s financial position and approve or reject the accounts. The company secretary ensures the AGM is properly convened and that the statutory registers, including the significant controllers register, are available for inspection.

Hong Kong Company Financial Statements Filing: The AGM Route

Before the AGM can take place, the company must circulate the financial statements to every member. Section 430 of Cap. 622 requires a copy of the financial statements, the directors’ report, and the auditor’s report to be sent to each member at least 21 days before the date of the AGM. This 21-day period is a minimum. The company may send the documents earlier. It cannot send them later. If the company fails to meet the 21-day circulation rule, the AGM may still be valid, but the directors risk a fine for non-compliance. The documents must be sent to the registered office address of each member or to any other address the member has provided for service.

Cap. 622 Laying Financial Statements Deadline: The 21-Day Circulation Rule

A private company may dispense with holding an AGM altogether. Section 444 of Cap. 622 allows a private company to pass a written resolution instead of holding a meeting. The written resolution must be signed by members holding at least 75% of the voting rights, or such higher percentage as the company’s articles specify. When a company uses the written resolution route, the directors must still lay the financial statements before the members. The procedure is:

1. The directors prepare the financial statements, directors’ report, and auditor’s report.
2. The company circulates these documents to all members.
3. The members sign a written resolution approving the accounts.

The 21-day circulation rule still applies. The company must give members at least 21 days to consider the documents before the written resolution is deemed passed.

Hong Kong Annual General Meeting Financial Statements: Written Resolution as an Alternative

The auditor’s report is a mandatory component. The auditor, who must be a practising certified public accountant registered with the HKICPA, examines the financial statements and expresses an opinion on whether they give a true and fair view of the company’s financial position. The auditor’s report must be laid before the members together with the financial statements. If the auditor qualifies the report, for example, by stating that the accounts do not comply with HKFRS, the directors must explain the qualification to the members. The company secretary should ensure that the auditor’s report is signed and dated before the circulation deadline.

Hong Kong Company Accounts Approval Procedure: The Role of the Auditor

A dormant company is not exempt. The Companies Registry guidance confirms that a company that has declared itself dormant must still lay financial statements for the financial year in which it declares dormancy. If the declaration is made after the 42-day period for filing the annual return has passed, the company must deliver the annual return (Form NAR1) for that year. The laying procedure for a dormant company is the same as for an active company. The directors must prepare financial statements, obtain an auditor’s report (unless the company qualifies for the audit exemption under section 359), and lay them before the members. The financial statements may be simpler because the company has had no transactions during the year.

Dormant Company and the Laying Requirement

Failure to lay financial statements within the statutory period is an offence under Cap. 622. Every director who is in default commits an offence and is liable to a fine. The Companies Registry may also take action to strike off the company if it fails to comply with its annual filing obligations. The practical consequence is that the company cannot file its annual return (Form NAR1) until the financial statements have been laid and approved. The annual return must be delivered to the Companies Registry within 42 days after the return date, the anniversary of incorporation. If the financial statements are not ready, the company will miss the annual return deadline and incur late filing fees.

Consequences of Non-Compliance

To ensure compliance, the company secretary should:

1. Confirm the financial year end date and calculate the AGM deadline (nine months for private companies, six months for public companies).
2. Instruct the auditor to complete the audit in time for the 21-day circulation period.
3. Prepare the directors’ report and the financial statements.
4. Circulate the documents to all members at least 21 days before the AGM or the written resolution deadline.
5. Hold the AGM or pass the written resolution.
6. File the annual return (Form NAR1) with the Companies Registry within 42 days after the return date.

The registered office should maintain a record of the circulation date and the date of the AGM or written resolution. This record is important if the Companies Registry or a member challenges the company’s compliance.

Practical Steps for Compliance

The laying of financial statements is a procedural requirement that cannot be skipped. Even a company that is dormant or that qualifies for the reporting exemption under section 359 must follow the steps set out in Cap. 622. The company secretary and the directors should work together to ensure that the financial statements are prepared, audited, and laid before the members within the statutory period.

Summary of Key Deadlines