The governing bodies of the company are its shareholders and board of directors. In addition, the company must appoint a company secretary.
The board of directors
A private company limited by shares must have at least one director who is a natural person. The other director(s) can be legal entities or individuals.
Directors are appointed by the shareholders or by the board if permitted by the articles of association. The sole shareholder can also act as the director of the company. Executive directors and non-executive directors are not distinguished by the Companies Ordinance (Cap. 622). Besides, there is no requirement to appoint employees to the board of directors to ensure employee representation.
The board of directors is responsible for the management and operations of the company. The directors can exercise all the powers of the company except any power reserved to the shareholders under the Companies Ordinance (Cap. 622) or the articles of association of the company. Hong Kong adopts a unitary board structure, meaning that the powers of the directors are vested in the board collectively. The rules regarding the conduct of business of the board of directors are set out in the Companies Ordinance (Cap. 622) and the articles of association. A company has the choice between adopting the model articles contained in Schedule 2 of the Companies (Model Articles) Notice (Cap. 622H) or bespoke articles. The articles of association can be amended at any time by resolution approved by at least 75% of the voting rights.
Each director is individually and collectively responsible for the management and operations of the company. The board may delegate its powers for specific issues to an individual director or to a committee of the board.
The directors have several duties. Pursuant to Section 465 of the Companies Ordinance (Cap. 622), the directors owe a statutory duty of care, skill and diligence. Fiduciary duties (to act in good faith in the interests of the company, to exercise powers for a proper purpose, etc.) are derived from common law and remain uncodified. In case a director fails to comply with these duties, it may be liable to civil or criminal proceedings.
A private company limited by shares should have a minimum of one and a maximum of 50 shareholders. Shareholders have the following key rights:
- the right to attend and vote at general meetings (except if the company has a sole shareholder), although resolutions may be passed by way of resolutions in writing signed by all the shareholders;
- the right to receive the audited annual financial statements, the directors’ report for the financial year and the auditors’ report on the financial statements;
- the right to receive dividends declared by the company;
- the right to receive a distribution upon the liquidation of the company provided that all the creditors have been repaid.
The company secretary
The company must appoint a company secretary who must be either:
- an individual Hong Kong resident (the individual company secretary does not need to hold a licence): if the company has only one individual director, they cannot also act as company secretary; or
- a company: a professional company secretarial service provider with a registered office or place of business in Hong Kong, which must be licensed as a trust or company service provider (TCSP) with the Companies Registry.
The main duties of the company secretary are to ensure compliance with local regulations and procedural matters. The role of the company secretary includes the following:
- maintaining the company’s books, registers and records;
- filing forms and documents with the Companies Registry (namely the annual return and documents relating to any changes regarding the share capital, the directors, the registered office, etc.);
- sending notices of general meetings and board meetings when required to do so by the board of directors.
If the company has only one director, the sole director cannot act as company secretary.