Q：
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What is “reporting exemption” in Companies Ordinance?
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A：
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“Reporting exemption" in Companies Ordinance means the exemptions available to private or guarantee companies (other than certain companies specifically excluded) that are qualified to prepare simplified accounts and directors’ reports.
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Q：
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What exemptions are granted to a company falls within the “reporting exemption” in Companies Ordinance?
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A：
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The exemptions are in respect of specific requirements relating to the preparation of financial statements, directors’ and auditor’s reports and they include:
(a)
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no requirement to disclose auditor’s remuneration in financial statements (section 380(3) and Schedule 4 Part 2);
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(b)
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no requirement for financial statements to give a "true and fair view" (section 380(7));
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(c)
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subsidiary undertakings may be excluded from consolidated financial statements in accordance with applicable accounting standards (section 381(2));
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(d)
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no requirement to disclose in the notes to financial statements the material interests of directors in transactions, arrangements or contracts of significance (section 23 of Cap. 622G);
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(e)
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no requirement for the auditor to express a "true and fair view" opinion on financial statements (section 406(1)(b));
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(f)
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financial statements may be prepared in compliance with the Small and Medium-Sized Entity Financial Reporting Standard and Financial Reporting Framework issued or specified by Hong Kong Institute of Certified Public Accountants; and
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(g)
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no requirement to disclose or include in the directors’ report:
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(i)
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a business review (section 388(3)(a));
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(ii)
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arrangements to enable directors to acquire benefits by the acquisition of shares or debentures (section 3(3A) of Companies (Directors’ Report) Regulation, Cap. 622D ("Cap. 622D"));
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(iii)
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donations (section 4(3) of Cap. 622D);
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(iv)
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directors’ reasons for resignation or refusal to stand for re-election (section 8(3) of Cap. 622D); and
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(v)
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material interests of directors in transactions, arrangements or contracts of significance entered into by a specified undertaking of the company (section 10(7) of Cap. 622D).
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Q：
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Are companies fall within the “reporting exemption” in Companies Ordinance required to have their financial statements audited?
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A：
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Yes, statutory audit is required to the financial statements of all companies including companies fall within the “reporting exemption" in Companies Ordinance.
Only dormant companies are exempted (section 447) to have their financial statements audited. A company is dormant if it passed a special resolution declaring that it would become dormant and delivered to the Registrar of Companies for registration (section 5).
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FAQ
