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Q：
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What should be included in the contents of a directors’ report?
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A：
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A directors’ report should include the followings in general:
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the name of directors during the financial year and up till the date of the report (including the name of directors of the subsidiaries if preparing consolidated financial statements) (sections 390(1)(a), 390(3) to 390(6));
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the principal activities of the company on the course of the financial year (section 390(1)(b));
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particulars of matters that is material for the members’ appreciation of the state of the company’s affairs and in the directors’ opinion, the disclosure of which will not be harmful to the business of the company (section 390(2));
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in force of a permitted indemnity provision (section 470 and section 9 of Cap. 622D);
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disclosure of management contract, including a statement of the existence and duration of the contract; and the name of every director and shadow director interested in the contract and the nature and extent of the interest (section 543(2);
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business review (Schedule 5);
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directors’ interests (section 3 of Companies (Directors’ Report) Regulation, Cap. 622D ("Cap. 622D")) ;
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donations (section 4 of Cap. 622D);
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shares and debentures issued (sections 5 and 5A of Cap. 622D);
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equity-linked agreements (section 6 of Cap. 622D);
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recommended dividend (section 7 of Cap. 622D);
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reasons for resignation of directors (section 8 of Cap. 622D; and
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material interests in transaction, arrangement or contract (section 10 of Cap. 622D)
Listed companies have further requirements of disclosures under Main Board Listing Rules.
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Q：
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What should be included in the contents of business review?
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A：
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In accordance with Schedule 5 of the Companies Ordinance, business review should include the followings:
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a fair review of the company’s business;
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a description of the principal risks and uncertainties faced by the company;
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particulars of important events affecting the company that have occurred since the end of the financial year;
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an indication of likely future development in the company’s business;
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an analysis using financial key performance indicators;
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a discussion on the company’s environmental policies and performance; and the company’s compliance with the relevant laws and regulations that have a significant impact on the company; and
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an account of the company’s key relationships with its employees, customers and suppliers and others that have a significant impact on the company and on which the company’s success depends.
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Q：
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Could business review be exempted?
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A：
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Business review could be exempted (section 388(3)) from directors’ report if:
(a)
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the company falls within the reporting exemption for the financial year;
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(b)
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the company is a wholly owned subsidiary of another body corporate at the end of the financial year; or
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(c)
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the company is a private company that does not fall within the reporting exemption for the financial year, and a special resolution is passed by the members of that company to the effect that the company is not to prepare a business review for the financial year.
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The special resolution mentioned in above paragraph (c) (section 388(4)):
(a)
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may be passed in relation to
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(i)
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a financial year; or
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(ii)
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a financial year and every subsequent financial year.
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(b)
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must be passed at least 6 months before the end of the financial year to which the directors’ report relates; and
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(c)
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may only be revoked by a special resolution.
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The special resolution should be delivered to the Registrar of Companies for registration within 15 days after it is passed (sections 388(3)(c), 622(1) and 622(2)).
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