Hong Kong Company Director: All you need to know

July 23, 2020

Like any other jurisdiction in the world, Hong Kong private companies operate with company directors. These directors are not only responsible for carrying out the company’s operations, but are also required to follow the general law and the rules stated in the company’s Articles of Association.

In order to act as a Hong Kong company director, it’s important to understand all the requirements that go along with it and how to restructure the company’s directors, in case of any changes.

Hong Kong Company Director

As per the Companies Ordinance (CO) in Hong Kong, any person, whether they are a foreigner or local, can be appointed as the director of the firm. But they should be above the age of 18. The director would be responsible for acting on behalf of the company by controlling and managing the company and its concerned members.

Hong Kong Company Director Requirements

In Hong Kong, every private company limited by shares is required to have at least one director. However, for Hong Kong public companies and companies limited by guarantee, companies need to have at least 2 directors. No matter which type of company you are operating, except sole proprietorships, business firms would need to appoint directors. The director must also be at least 18 years old.

There are no residency or nationality requirements for having a director unless your firm’s Articles of Association require soo. Moreover, there is no specific obligation for the directors to be shareholders of the company. A corporation can also act as a director of the company, however all Hong Kong companies are required to have at least one individual director sitting on the company’s Board.

However, a private or a public company can’t appoint a corporation as its director if the firm is a member of a group of companies and listed on the Stock Exchange of Hong Kong. Likewise, a corporation cannot be a director of a company limited by guarantee.

Hong Kong Company Director Duties and Responsibilities

Generally, the Hong Kong company director’s duties and responsibilities derive from various sources, such as the CO, case law, status law and the constitution of the company.

If a person fails to do so as a director, they may be liable for civil or criminal proceedings. Moreover, they may also get disqualified from acting as a director. Below are some general principles of a director that should be included while performing their functions and exercising their powers:

Duty to act in good faith

The first principle that should be followed by the director is the duty to act in good faith for the betterment of the company as a whole. It explicitly means that the directors are liable to act according to the shareholder’s interests over the life of the company. While serving as a Hong Kong company director, they should strive to achieve company outcomes that are fair between all stakeholders.

Duty to exercise care, skill, and diligence

A director is also required to exercise reasonable care, diligence, and skill as per the company’s requirements. A reasonably director would exercise these key functions with:

As per the directors’ general knowledge, skill, and experience; and
The general knowledge, skill, and experience that may reasonably be expected of a person carrying out the functions for the company.

Duty not to enter into company’s transactions as their interests

A director must act following the Articles of Association. According to Hong Kong Law, directors are required to disclose the nature of any interest (personal) concerning any transactions. A director should not be involved in a transaction in which they have any material interest, to which the company may be a party. Moreover, a director cannot enter into company transactions unless they have complied with the requirements of the law.

Duty to observe the company’s memorandum and Articles of Association and resolutions

Hong Kong company directors are also required to act according to the constitution of the company. They are also liable to comply with all the resolutions set by the company’s constitution.

Duty to keep proper books of account

The company’s director is also responsible for keeping a proper track of the books of the account. These books of accounts should present an accurate and fair view of the company while elaborating its transactions. According to Hong Kong law, The records of the firm need to be retained for a period of 7 years to show the operative activities of the business. Thus it is important that the director keep meticulous records of the company’s activities.

Appointment and Removal of a Hong Kong Company Director

Many Hong Kong companies undergo significant changes in their business structure for the betterment of the firm. This may also require changing the director as per the business needs. As soon as you have decided that you need to change the structure of the company, you can do that in two basic ways:

Appointment of new directors
Resignation of old directors

For any of these options, you would need a prior decision and have to follow the proper processes along with reporting them to the government. The change in company structure needs to be updated in the company’s record and would be used for official reports in the future.

Below are some situations where a director can be changed:

When the company choose a new person to become director
When the director is not responsible for their director duties, and is to be removed
Company appoints a non-executive director (nominee director)
If a director has passed away
The shareholders choose to remove a director

Remember that with the change in the company structure, the company would also be required to inform other relevant parties such as a bank, about the current directors for them to update their records. Whether you are looking for appointing the directors for your firm or removing appointed director, this section will help you:

How to appoint a new director?

Hong Kong companies can appoint a person or any corporation by passing an ordinary resolution. The director information that would be required is:

The date of change of director
The new director’s name, as it appears on their passport
The new individual’s permanent address
Signed director’s resolution

Once all the documents and information is ready, Startupr can help appoint the new directors for your Hong Kong company.

How to resign an old director?

There might be times that directors and the company face disputes. Before resigning as director, they need to sign a resolution document. The resolution of the director consists of the consent or the confirmation of all other the directors whether the director should resign or not.

It needs to be prepared and signed by all current directors of the company. Once the document has been signed, Startupr will process the company documents to the Hong Kong Government for the change of directors. After that, the government will update all the records with the provided documents. This change of directors will also show up for the company on the next Annual Return.

How can Startupr help you?

After reading this article, you may have a better understanding about Hong Kong’s company directors and their liabilities and duties for the business. If you want to start a business in Hong Kong, you need to appoint directors and shareholders.

Startupr can help with it. We will help you in incorporating the business, and complying with all the laws associated with operating the business and managing the company directors.