1. Annual accounts/directors’ report

A profit and loss account and a balance sheet for the company must be audited by Hong Kong registered auditors and laid before the shareholders in general meeting within 18 months of incorporation and then at least once in every calendar year. There are lengthy and detailed provisions in the Companies Ordinance regarding the types of accounts to be prepared and we can supply further details on request. Generally, Hong Kong private companies having a share capital are not required to file their accounts with the Registrar.

A directors’ report must be prepared in conjunction with the annual accounts. The Companies Ordinance provides a list of what this report should contain and this list includes details of contracts with the company or certain companies with which it is associated which are significant in relation to the company’s business and in which any director has a material interest.

2. Annual general meeting

An annual general meeting of the shareholders must be held within 18 months of incorporation and then at least once in every calendar year, although not later than 15 months after the last annual general meeting. (This 15 month period may be extended at the discretion of the Registrar upon payment of a fee.) An annual general meeting must be held even though there may be no accounts available for presentation to the meeting and no other relevant business to attend to.
Before the annual general meeting is held, the directors must approve the accounts and the directors’ report, they may recommend a dividend and must resolve to call the annual general meeting. If all the shareholders entitled to attend and vote at the annual general meeting so agree, the meeting may be held at short notice, but otherwise at least 21 clear days’ notice is required. Copies of any audited accounts to be considered at the annual general meeting must be sent to all shareholders, debenture holders and other persons so entitled not less than 21 days before the date of the meeting, unless all shareholders entitled to attend and vote at the meeting otherwise agree.

3. Annual return

An annual return must be filed with the Registrar at least once a year (except if there has been no change in the filed particulars since the date of the last annual return, in which case a certificate confirming this fact can be filed in lieu of an annual return). The annual return contains among other things:
• particulars of the authorised and issued share capital of the company
• the names and addresses of its directors and the secretary
• the names and addresses of its registered shareholders
• the amount secured by any registered charges.

The return must be signed by a director and the secretary of the company and must be filed within 42 days of the anniversary of the incorporation of the company. Public companies and companies limited by guarantee without a share capital must file their annual return within 42 days of the annual general meeting in each year.

Maintenance - changes in particulars

1. Filing obligations

A company must file the relevant particulars with the Registrar within the period indicated, in the event of:
• any change in the directors or secretary or in the filed particulars of any existing directors or secretary - 14 days
• any change in the location of the registered office - 14 days
• any increase in the authorised share capital - 15 days
• any relocation of the company’s statutory books from the company’s registered office - 14 days
• the passing of a special resolution or certain other resolutions - 15 days
• any allotment or issue of new shares (this also requires the payment of a capital fee on the amount of any premium over the nominal value at which the shares are allotted or issued) - 8 weeks
• the creation of a charge over certain types of assets or the acquisition subject to an existing charge of certain types of assets, in either case whether the asset is within or outside Hong Kong - 5 weeks.

In relation to the last two items, if the relevant particulars are not filed with the Registrar within the prescribed period, an application will have to be made to the Court for an extension of the time within which the particulars may be filed. Any such application will need to be supported by an affidavit giving an explanation as to why the particulars were not filed within the prescribed period.

2. Change of name

To effect a change in the name of a company (which includes the adoption or abandonment of a formal English or a Chinese version of the name):
• the shareholders must approve of the change in name by special resolution
• the new name must be registered with the Registrar.

It normally takes about 14 working days from the time of the filing of the special resolution for the certificate of incorporation on change of name to be issued. The change in name is effective from the date on such certificate.

3. Increases in authorised and issued share capital

Any increase in the authorised share capital of a company requires the approval of the shareholders. A company’s articles of association typically provide for the increasing of the company’s authorised share capital by way of ordinary resolution. Any increase in authorised share capital will attract a capital fee and notice of the increase must also be filed with the Registrar together with a signed copy of the resolution.

4. Changes to memorandum or articles of association

Most of the provisions of a company’s memorandum and articles of association can be changed by special resolution .

There are exceptions to this general rule. Where a company has issued different classes of shares, the special rights of any one class may, subject to the articles of association, be changed only with the approval of 75% of the holders of shares of that class. Where the special rights exist by virtue of the memorandum of association and there is no provision for alteration, all such shareholders must agree before the rights can be changed. Also, a member must agree in writing to an alteration to the memorandum or articles of association which requires that member to take or subscribe for more shares or increase his liability to contribute to the share capital of the company or otherwise pay money to the company.
A signed copy of every special resolution and every resolution varying a provision in the memorandum or articles of association must be filed with the Registrar and annexed to every copy of the memorandum and articles of association of the company issued subsequently to any such change. When the memorandum of association is amended it must be reprinted and filed with the Registrar.

5. Share transfers

The transfer of legal title to shares in a Hong Kong company is effected by an "instrument of transfer". Beneficial title to shares is transferred by way of contract notes (a bought note and a sold note).

Contract notes must be submitted for stamping within two days (30 days if the sale takes place outside Hong Kong) of their execution. Ad valorem stamp duty is levied on each contract note (i.e. both the bought note and the sold note) at the rate of HK$1.00 per HK$1,000 or part thereof, of, whichever is the higher of the consideration paid or the value of the shares transferred (so that the total rate of duty on a sale of shares is effectively 0.2%) . Exemptions from stamp duty are available for intra-group transfers. We will be pleased to provide more detailed advice on the requirements for exemption on request.

In the case of a private company, a copy of the latest audited accounts (consolidated where relevant) or latest management accounts (if audited accounts have not been prepared or if they are not up to date) together with details of any land and properties held and a copy of any sale and purchase agreement must normally be submitted when the documents are lodged for stamping. The Stamp Duty Office may also require additional information.

The instrument of transfer attracts a HK$5 fixed duty. In the case of a sale and purchase of shares by a person who is not resident in Hong Kong, the ad valorem stamp duty can be paid on the instrument of transfer in additional to the HK$5 fixed duty if contract notes have not been made out and stamped.

Where a transfer of the beneficial ownership is made otherwise than by sale and purchase e.g. by way of gift, the instrument of transfer is stampable at the fixed rate of HK$5 plus ad valorem stamp duty of 0.2% of the value of the shares at the date of transfer.

When there is a sale of beneficial ownership only and no transfer of legal ownership (i.e., where the shares will remain registered in the name of the same person as a nominee for the beneficial owner), contract notes must be made out and ad valorem stamp duty of 0.2% paid. An instrument of transfer will not be required in this case but it is advisable for there to be a declaration of trust (see below).

Ad valorem stamp duty is not payable on a transfer in registered ownership which does not involve any change in the beneficial ownership of the shares. Where shares are registered in the name of a nominee, it is sensible to execute a declaration of trust and to have the declaration of trust adjudicated as not chargeable to duty. The fee for this is HK$20. Adjudication can avoid later disputes with the Stamp Duty Office about the beneficial ownership of shares.

Penalties for failure to stamp documents within the required time range from two to ten times the amount of duty payable, although the Collector of Stamp Revenue has power to remit the whole or any part of any penalty in appropriate cases. Neither the company nor any other person is permitted to act on or in general rely in court proceedings on any stampable instrument which is not duly stamped. An unstamped instrument may not be registered in the company’s books.

After stamping (and compliance with any other formalities prescribed by the articles of association), the transfer can be registered in the statutory books of the company and a new share certificate issued.

Share transfers are sometimes restricted by, for example, provisions in the company’s articles of association which require that the shares are first offered for sale to existing shareholders.