HONG KONG SAR, CHINA Law and Practice Contributed by: Vincent Lung and Mike Yeung, Parkside Chambers
The regime is important for market transparency. It helps investors understand control, influence and potential changes in ownership.
auditors, profit warnings or alerts and other material matters. 5.2 Corporate Governance Arrangement Disclosure Private Companies Private companies are not generally required to pub - lish a standalone corporate governance report. Their governance disclosures mainly arise through statutory filings. These filings include annual returns, director chang - es, company secretary changes, registered office changes, share allotments, share capital changes and charges. Internal Records Even where information is not filed publicly, compa - nies must maintain proper internal records. These include registers of members, directors, company secretaries and mortgages over company properties. Listed Companies Listed companies must include corporate governance disclosure in annual reports. They must address the Corporate Governance Code’s mandatory disclosure requirements and explain deviations from code provi - sions. The disclosure usually covers board composi - tion, director attendance, board committees, company secretary matters, auditor remuneration, shareholder rights, risk management and internal controls. Listed companies must also disclose their approach to risk management and internal controls. HKEX guid - ance emphasises that the board is responsible for maintaining and reviewing effective risk management and internal control systems. 5.3 Incorporation and Registration Companies Registry Companies are incorporated and registered with the Companies Registry. Business registration is also required through the Inland Revenue Department for all entities carrying on business or generating revenue in Hong Kong. For local companies, the incorporation process nor - mally includes simultaneous business registration.
5. Corporate Reporting and Disclosures 5.1 Financial Reporting Requirements Accounting Records
Hong Kong companies must keep proper accounting records for six years. These records should be suffi - cient to show and explain the company’s transactions and financial position. Directors are responsible for ensuring that account - ing records and financial reporting systems are ade - quate. This is a governance obligation, not merely an accounting task. Annual Financial Statements Companies must generally prepare annual financial statements and a directors’ report. The financial statements must comply with the applicable financial reporting framework and standards. Most companies must have their financial statements audited. Dormant companies are the main exception. Filing Requirements for Private Companies Private companies must file annual returns with the Companies Registry (with updates on registered address, directorship and shareholding indicated), but they do not file their audited financial statements publicly. Listed Companies Listed companies must publish annual and interim financial reports within the time limits prescribed by the Listing Rules. The annual reports have to be audit - ed while the interim reports would usually be reviewed by the auditors (a standard that is short of a full audit). They must also announce results. Outside the periodic reporting cycle, listed compa - nies must announce inside information, major transac - tions, connected transactions, changes in directors or
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