KNOWLEDGE|
(1) |
A small private company or small guarantee company; |
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(2) |
The company is a private company which does not have any subsidiaries and is not a subsidiary of another Hong Kong incorporated company and has full shareholder support every financial year (section 359(1)(b)); |
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(3) |
The company is an eligible private company (or a group of eligible private companies) and gaining sufficient shareholder support (section 359(1)(c) and section 359(2)(c)(ii)). |
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(1) |
companies that are authorized under the Banking Ordinance to carry out banking business; |
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(2) |
companies that accept, by way of trade or business (other than banking business), loans of money at interest or repayable at a premium, other than on terms involving the issue of debentures or other securities; |
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(3) |
companies that are licensed under Part V of the Securities and Futures Ordinance to carry on a regulated business; or |
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(4) |
companies that carry on any insurance business, other than solely as an agent, and money lending business. |
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(1) |
Eligible private company The private company must not exceed any two of the following: (a) Total annual revenue of HKD100 million (b) Total assets of HKD100 million at the end of the reporting period (c) 100 employees Where a private company does not meet the criteria listed above but meets any two of the following conditions, it is still eligible to prepare its financial statements in accordance with SME-FRF and SME-FRS with approval from members: (a) Total annual revenue not more than HKD200 million (b) Total assets of not more than HKD200 million at the end of the reporting period (c) 200 employees In that case, at least 75% of the voting rights must pass a resolution at a general meeting that the company is to fall within the reporting exemption for the financial year, with none objecting either at the meeting or otherwise in writing. The resolution is defeated if any member objects either at the meeting or at any time by giving notice in writing to the company, provided that written notice is given at least 6 months before the end of the financial year to which the objection relates. Alternatively, the company may pass a written resolution under section 548(1), which can be passed without a meeting and without any previous notice being required, for falling within the reporting exemption. A written resolution is passed when all eligible members have signified their agreement to it (section 556(a)). |
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(2) |
Group of eligible private companies (a) Each company in the group must meet either the size test of small private company or larger "eligible" private company; and (b) The aggregate amounts for the group in total must not exceed 2 out of 3 of the size tests for larger "eligible" private companies. All the companies in the group individually, as well as the parent of the group, must have obtained the necessary shareholder approval (except for those subsidiaries within the group that fall within the "small private company" category). |
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(3) |
Eligible guarantee companies The total annual revenue of the small company limited by guarantee must not exceed HKD25 million. Where it is a group: (a) Each company in the group must qualify as a small company limited by guarantee; and (b) The aggregate annual revenue of the group must not exceed HK$25 million. Approval from members is not required under the Companies Ordinance. |
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Criteria |
Small private company or group |
Small guarantee company or group |
Larger private company or group |
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Total Revenue
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Not more than HKD100 million |
Not more than HKD25 million |
Not more than HKD200 million |
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Total Assets |
Not more than HKD100 million |
N/A
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Not more than HKD200 million |
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Number of Employees |
Not more than 100 |
N/A |
Not more than 200 |
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Shareholder Approval |
Not required |
Not required |
Required (75%, with no objections) |
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(1) |
Groups which include non-Hong Kong body corporates are eligible for the reporting exemption, and hence the use of Small and Medium-sized Entity Financial Reporting Framework and Financial Reporting Standard for financial reporting if they meet the qualifying criteria for the reporting exemption; and |
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(2) |
A partially owned subsidiary of an entity can now be exempted from preparing consolidated financial statements if all members agree in writing before the end of the financial year. |
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(1) |
no requirement to disclose in the directors’ report the following: (a) business review (Section 388(3)(a)) (b) directors’ interests in arrangements to enable directors to acquire benefits by the acquisition of shares or debentures (Section 3(3A) of Companies (Directors’ Report) Regulation. (c) donations (Section 4(3) of Companies (Directors’ Report) Regulation. (d) directors’ reasons for resignation or refusal to stand for re-election (Section 8(3) of Companies (Directors’ Report) Regulation. (e) material interests of directors in transactions, arrangements or contracts of significance entered into by a specified undertaking of the company (Section 10(7) of Companies (Directors’ Report) Regulation. |
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(2) |
no requirement for financial statements to give a “true and fair view” (Section 380(7)) |
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(3) |
no requirement for auditor to express a “true and fair view” opinion on the financial statements (Section 406(1)(b)) |
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(4) |
no requirement to disclose auditor’s remuneration in financial statements (Section 380(3) and Schedule 4 Part 2) |
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(5) |
subsidiary undertakings may be excluded from consolidated financial statements in accordance with applicable accounting standards (Section 381(2)) |
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(6) |
no requirement to disclose in the notes to financial statements the material interests of directors in transactions, arrangements or contracts of significance entered into by the company (Section 23 of Companies (Disclosure of Information about Benefits of Directors) Regulation. |
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Sec. |
Provision |
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367 |
Financial year |
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(1) A company’s first financial year after the coming into operation of this section begins on the first day of its first accounting reference period and ends on— (Amended 35 of 2018 s. 39) (a) subject to paragraph (b), the last day of that period; or (b) another date, within 7 days before, or after, the end of that period, as specified by the directors. (Amended 35 of 2018 s. 39) (2) Every subsequent financial year of a company begins on the date immediately following the end of the previous financial year and ends on— (Amended 35 of 2018 s. 39) (a) subject to paragraph (b), the last day of the accounting reference period immediately following the one by reference to which the previous financial year is determined; or (b) another date, within 7 days before, or after, the end of that period, as specified by the directors. (Amended 35 of 2018 s. 39) (3) If an undertaking is not a company, a reference in this Ordinance to its financial year is a reference to a period in respect of which a profit and loss account of the undertaking is required, by its constitution or by the law under which it is established, to be made up, whether or not the period is a year. (4) A company’s directors must secure that the financial year of each of its subsidiary undertakings coincides with the company’s financial year unless, in the directors’ opinion, there are good reasons against those financial years coinciding with each other. (5) In this section— undertaking (企業) means— (a) a body corporate; (b) a partnership; or (c) an unincorporated association carrying on a trade or business, whether for profit or not.
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373 |
Company must keep accounting records |
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(1) A company must keep accounting records that comply with subsections (2) and (3). (2) The accounting records must be sufficient— (a) to show and explain the company’s transactions; (b) to disclose with reasonable accuracy, at any time, the company’s financial position and financial performance; and (c) to enable the directors to ensure that the financial statements comply with this Ordinance. (3) In particular, the accounting records must contain— (a) daily entries of all sums of money received and expended by the company, and the matters in respect of which the receipt and expenditure takes place; and (b) a record of the company’s assets and liabilities.
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373 |
Company must keep accounting records-cont’d |
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(4) If subsection (1) does not apply in relation to a subsidiary undertaking of a company, the company must take all reasonable steps to secure that the subsidiary undertaking keeps accounting records that are sufficient to enable the company’s directors to ensure that any financial statements required to be prepared under Subdivision 3 of Division 4 comply with this Ordinance. (5) A director of a company who fails to take all reasonable steps to secure compliance with subsection (1) or (4) commits an offence and is liable to a fine of $300,000. (6) A director of a company who wilfully fails to take all reasonable steps to secure compliance with subsection (1) or (4) commits an offence and is liable to a fine of $300,000 and to imprisonment for 12 months. (7) If a person is charged with an offence under subsection (5), it is a defence to establish that the person had reasonable grounds to believe, and did believe, that a competent and reliable person— (a) was charged with the duty of ensuring that subsection (1) or (4) (as the case may be) was complied with; and (b) was in a position to discharge that duty. |
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379 |
Directors must prepare financial statements |
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(1) Subject to subsection (2), a company’s directors must prepare for each financial year statements that comply with sections 380 and 383. (2) Subject to subsection (3A), if the company is a holding company at the end of the financial year, the directors must instead prepare for the financial year consolidated statements that comply with sections 380, 381 and 383. (3) Subsection (3A) applies— (Amended 35 of 2018 s. 42) (a) if the company is a wholly owned subsidiary of another body corporate at the end of the financial year; (b) if— (i) the company is a partially owned subsidiary of another body corporate at the end of the financial year; (ii) at least 6 months before the end of the financial year, the directors notify the members in writing of the directors’ intention not to prepare consolidated statements for the financial year, and the notification does not relate to any other financial year; and (iii) as at a date falling 3 months before the end of the financial year, no member has responded to the notification by giving the directors a written request for the preparation of consolidated statements for the financial year; or (c) if— (i) the company is a partially owned subsidiary of another body corporate at the end of the financial year; and
(ii) all members agree in writing before the end
of the financial year that consolidated statements will not be prepared for
the financial year, and the (3A) If this subsection applies because of— (a) subsection (3)(a)—the directors must prepare for the financial year— (i) statements that comply with sections 380 and 383; or (ii) consolidated statements that comply with sections 380, 381 and 383; or |
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379 |
Directors must prepare financial statements-cont’d |
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(b) subsection (3)(b) or (c)—the directors must prepare for the financial year statements that comply with sections 380 and 383. (Added 35 of 2018 s. 42) (4) If, as respects any financial statements a copy of which is laid before a company in general meeting under section 429, or sent to a member under section 430 or otherwise circulated, published or issued by the company, a director of the company fails to take all reasonable steps to secure compliance with subsection (1), (2) or (3A), the director commits an offence and is liable to a fine of $300,000. (5) If, as respects any financial statements a copy of which is laid before a company in general meeting under section 429, or sent to a member under section 430 or otherwise circulated, published or issued by the company, a director of the company wilfully fails to take all reasonable steps to secure compliance with subsection (1), (2) or (3A), the director commits an offence and is liable to a fine of $300,000 and to imprisonment for 12 months. (6) If a person is charged with an offence under subsection (4), it is a defence to establish that the person had reasonable grounds to believe, and did believe, that a competent and reliable person— (a) was charged with the duty of ensuring that subsection (1), (2) or (3A) (as the case may be) was complied with; and (b) was in a position to discharge that duty. (Amended 35 of 2018 s. 42)
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394 |
Auditor must be appointed for each financial year |
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(1) An auditor must be appointed for each financial year of a company. (2) An auditor may be appointed only under this Subdivision.
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395 |
Appointment of first auditor by directors |
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(1) This section applies to— (a) a company formed and registered under this Ordinance; and (b) a company formed and registered under a provision of the predecessor Ordinance having a continuing effect under Schedule 11 or by virtue of section 23 of the Interpretation and General Clauses Ordinance (Cap. 1). (2) If the company is required to hold an annual general meeting in accordance with section 610 in respect of its first financial year, the directors may appoint the auditor of the company for that first financial year at any time before the annual general meeting. (3) If, by virtue of section 612(1) or (2), the company is not required to hold an annual general meeting in accordance with section 610 in respect of its first financial year, the directors may appoint the auditor of the company for that first financial year at any time before the appointment period in relation to the next financial year.
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405 |
Auditor’s duty to report |
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A company’s
auditor must prepare a report for the members on any financial statements
prepared by the directors, a copy of which is laid before the company in
general meeting under section 429, or is sent to a member under section 430
or otherwise circulated,
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No. |
(III) Financial Statement and Report |
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11 |
What are the general requirements for financial statement under the new CO? |
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The general requirements are – • a company’s directors must prepare for each financial year financial statements that comply with sections 380 and 383 (section 379(1)); • if the company is a holding company at the end of the financial year, consolidated financial statements must be prepared instead unless the company is a partially owned subsidiary where no member requests for the preparation of consolidated financial statements or all members agree in writing that consolidated financial statements will not be prepared (sections 379(2), 379(3)(b) and (c) and 379(3A)(b)); • if the company is a partially owned subsidiary where no member requests for the preparation of consolidated financial statements or all members agree in writing that consolidated financial statements will not be prepared, company level financial statements must be prepared (section 379(1), 379(3)(b) and (c) and 379(3A)(b)); • if the company is a wholly owned subsidiary, either company level financial statements or consolidated financial statements must be prepared (section 379(3)(a) and 379(3A)(a)); • subject to permitted exclusions, the consolidated financial statements must include all the subsidiary undertakings of the company (section 381); • unless the company falls within the reporting exemption, the financial statements must give a true and fair view of the financial position and financial performance of the company (sections 380(1), (2) and (7)); • the financial statements must comply with – o the accounting disclosure requirement in Schedule 4 (section 380(3)); o applicable accounting standards issued or specified by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) (sections 357(1), 380(4) and the Companies (Accounting Standards (Prescribed Body) Regulation, Cap. 622C); • the notes to financial statements must contain the information prescribed by the Companies (Disclosure of Information about Benefits of Directors) Regulation, Cap. 622G ("Cap. 622G") (section 383); and • the financial statements must be audited (section 405).
Other requirements are in relation to the laying, sending, publication (sections 429 to 432 and 436) and voluntary revision of financial statements (section 449 and the Companies (Revision of Financial Statements and Reports) Regulation, Cap. 622F).
The above requirements do not apply to a company that is dormant (section 447).
Companies Registry - FAQ - Companies Ordinance - Accounts and Audit (cr.gov.hk) |
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