Directors’ roles and duties in Hong Kong.

All Hong Kong companies must have at least one director. Directors’ roles and duties include managing the overall operations of the company in the interest of its shareholders. In this article, we will provide you with specific requirements of being a director and other factors you as a director should know.
Directors’ roles and duties in Hong Kong

Roles of a director

  • Manages the company in the interests of all shareholders
  • Represents the company’s interests
  • Administers, controls and directs the company
  • Conduct and discharge his/her duties effectively
  • Ensure that the company is legally compliant

Who can be a company director?

A company director must be:

  • At least 18 years old
  • At least one director who is a natural person
  • Of any nationality
  • Not needed to be a resident in Hong Kong

A corporate director is allowed for private companies which is not a member of a group of companies of which a listed company is a member.

Who cannot be a company director?

  • Bankrupt or convicted of any malpractices
  • Unsound mind
  • Fail to attend board of director meetings regularly
  • Convicted for an indictable offence
  • Convicted for fraud and dishonesty

Appointment of a director

A Hong Kong company can appoint a director by passing an ordinary resolution or by the decision of existing directors of the company.

The company is to inform the Companies Registry within 15 days after appointing the director.

Documents required to appoint a director

To complete the appointment, the Companies Registry requires:

  • The full name of the director
  • Passport information of the director
  • Residential address of the director

Resignation of a director

  • If a director resigns, the company must deliver a notice of the resignation to the Registrar as required by section 645(4)
  • The resigning director must provide a notice for registration to the Registrar if the director believes the company will not deliver the notice
  • The notice must state (S464(4))
    • Whether the director’s resignation is required by the articles of the company or by any agreement with the company to give notice of registration to the company; and
    • If notice is so required, whether the notice has been given in accordance with the requirement.
  • If notice of the registration of a director of a company is required to be given by the articles of the company or by any agreement with the company, the resignation does not have effect unless the director gives notice in writing of the resignation
    • In accordance with the requirement
    • By leaving it at the registered office of the company
    • By sending it to the company in hard copy form or electronic form

Removal of a director

A director can be removed from the company before the end of his term by an ordinary resolution. The resolution must be passed by the shareholders at a general meeting that the director involved has the right to attend and speak. In some cases, such as if the director becomes bankrupt or mentally incapacitated, the person will cease to be a director immediately. Once the company confirms the removal, the company must notify the Companies Registry within 15 days.

Register of directors

  • A Hong Kong company must keep a register of directors at (S641(3)):
    • The company’s registered office
    • A prescribed place
  • A register of directors in English or Chinese (S641(1))
  • If the company is a private company, its register of directors must contain the following for each director (S643)
    • If the director is a natural person
      • Present forename and surname, former forename or surname (if any), and aliases (if any)
      • Residential address and a correspondence address
      • Number of Hong Kong identity card. Number and issuing country of director’s passport if he/she has no identity card.
    • If the director is a body corporate, the corporate name and the address of its registered or principle office.
  • If a company is a public company, a company limited by guarantee or a private company that is a member of a group of companies of which a listed company is a member, its register of directors must contain the following for each director
    • The present forename and surname, former forename or surname (if any);
    • Residential address and correspondence address; and
    • Number of Hong Kong identity card. Number and issuing country of director’s passport if he/she has no identity card.
  • If the company is a private company having only one member and is the director of the company, the register of directors must contain
    • The present forename and surname, former forename or surname (if any);
    • Residential address and correspondence address; and
    • Number of Hong Kong identity card. Number and issuing country of director’s passport if he/she has no identity card.

Power of directors

A director can exercise certain powers given to them in accordance with:

The power of directors and their ability to delegate their power to others is subjected to:

  • Any provisions in the company’s articles of association limiting those powers
  • CO, including the directors’ general duties set out in the CO and any matters reserved to the members by CO
  • Common law
  • Shareholders’ agreement
  • Certain resolutions of its members

Duties of a director

Following the Hong Kong Companies Registry, directors have duties to:

  • Act in good faith for the benefit of the company
  • Use power for proper purposes
  • Refrain from delegating power without proper authorisation
  • Exercise care, diligence and skill
  • Avoid conflict of interest between personal and company matters
  • Avoid entering transactions favouring directors’ interests
  • Avoid abusing power
  • Refrain from unauthorised use of property
  • Refrain from accepting benefits from third parties
  • Comply with the company’s articles of association
  • Keep proper account books

Fiduciary duties of a director

Directors of companies in Hong Kong are subject to follow fiduciary duties which include to act bona fide in the best interest of the company, not use his /her powers for unnecessary purposes, refrain from fettering his/her discretion and avoid conflicts with the interests of the company.

The Companies Ordinance also states some restrictions that reflect the duties of a direction which include:

  • Disclosure of conflicts of interest – The director of a company must disclose conflicts of interest with the company and deal with them honestly.
  • Restrictions on the extension credit – A Hong Kong company is restrained from extending credit to its directors.

Statutory duties

  • Duty to exercise care, skill and diligence (S465)

Liabilities of a director

The Companies (Winding Up and miscellaneous provisions) Ordinance (C(WUMP)O) and the Securities and Futures Ordinance (SFO) enforced a list of liabilities on directors.

These liabilities include:

  • Civil and criminal liabilities under the C(WUMP)O for untrue statements in a prospectus
  • Civil and criminal liabilities for engaging in any market misconduct offences under Part XIII and XIV of the SFO. This includes:
    • Insider dealing
    • False trading
    • Price rigging
    • Disclosure of information about prohibited transactions
    • Stock market manipulation
    • Disclosure of false or misleading information
  • Civil liability for making false or misleading public communication
  • Criminal liability under the SFO for failing to make timely disclosure for a director’s interest in shares and debentures of the listed company

Interestingly, unlike in many other jurisdictions based on English law, Hong Kong’s companies laws do not contain any provisions for imposing personal liability on directors and senior managers for trading while insolvent.

Nominee directors

Nominee directors are directors who are appointed by a shareholder or creditor to protect your real identity and keep it confidential. Before selecting a nominee, several documents must be signed, and the nominee director will control the company activities through a power of attorney (POA) and Declaration of Trust (DOT). Under the POA, the nominee director will only act as instructed by the principal.

Documents and agreements to be prepared include:

  • The nominee director statement – Agreement between the owner and new nominee that the nominee agrees to represent the company and act on the owner’s behalf.
  • The power of attorney – Document which the transfer of power is accomplished and states clear rights of the nominee director.
  • A resignation letter – Signed by the nominee but is not dated. Used to re-transfer rights in case the nominee is no longer needed.
  • The Declaration of Trust – A confidential agreement to ensure that the owner’s identity will not be exposed.

Even if you are a foreigner and not living in Hong Kong, you can be a director of a company in Hong Kong. Roles and responsibilities of directors in Hong Kong are just like other companies around the world in that they manage and direct the company in its best interests.

More people are choosing to invest in Hong Kong every year because of its variety of benefits, and if you are interested in setting up a company and being director, feel free to contact Acclime. We will help you through the process hassle-free.

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