Company secretary legal liabilities in Hong Kong
Legal liability is an obligation that must be fulfilled by the company secretary. A listed company in Hong Kong can be charged for criminal offenses akin to those of a natural person. Therefore, the Company Secretary must ensure that the company deals in a transparent and accountable manner.
Several legal liabilities apply directly or indirectly to the corporate world. Some of these are like incorporation procedures, annual tax returns, annual company, maintenance, director/shareholder requirements, restriction concerning the appointment of a nominee director and/or a nominee shareholder, public disclosure of directors and shareholders identity, registered address requirements, company financial auditing, and business licenses & license/permit requirements.
The legal liabilities outline below mostly apply to private limited companies.
- Financial auditing of the company’s financial books
Annual filing of returns is the responsibility of a company secretary. This must be done consistently at the Inland Revenue Department of Hong Kong. The accounting records of a company must be kept safe at a place approved by the directors or at the company’s registered office. The audited financial records are not for public consumption. The company’s board of governance must approve the audited accounts and then present them at the Annual General Meeting (AGM).
- Legal Liabilities Regarding Board Meetings
Before a board meeting, a notice of the same should be sent out to the directors by the company secretary. At times directors can be consulted to attend a board meeting at a short notice.
- The mandatory company officers
The only mandatory company officers are the company secretary, a shareholder, and the director. The rest of the company officers are optional.
- Dismissal of company officers or company director
It is the legal responsibility of a company secretary to oversee the removal or dismissal of a director or a company officer. A director cannot be dismissed or removed by a written resolution. If a director is being removed, it is done so by General Meeting where he/she could speak for himself/herself before a decision is made. According to Company Ordinance, a director in a fault of company ordinance breath or negligence of company trust or duty may not be compensated in any form or be defended by the company in the courts of law. However, if the offense is not a personal liability, the company is to assume total responsibility for legal costs.
- Maximum number of shareholders and directors
In as much as a company must have a shareholder and a director to be successfully incorporated in Hong Kong, the company secretary must ensure the maximum number of shareholders cannot exceed 50 because that will change the company status from a private limited company to a public company. There are however no maximum restrictions when it comes to the total number of directors. These obligations are mostly found in the company ordinance and listing rules governing Stock Exchange. The sole director and sole shareholder must be a natural person. That position cannot be filled by a corporate body. There are no nationality restrictions for shareholders and directors of a private limited company.
The directors of a company are usually appointed by the board or the shareholders of the company in question. The sole director has an upper hand in the corporation’s management. He/she is responsible for establishing company objectives and policies. It is the directors who appoint officers to the daily company operations.
The directors, shareholders, and any other company officer in a critical position are to apply for a service provider’s license.
- Business Registration
Another legal liability requirement in Hong Kong is the filling of business registration after one year or every three years at the Inland Revenue Department.
How hiring a corporate body as a company secretary works
For a corporate body to act as a company secretary, it must be incorporated in Hong Kong as a Branch office or a Registered Office. It must also be a Service Provider recognized in Hong Kong. A sole proprietorship company should not enlist the services of a corporate body as a company secretary. Company Secretary works closely with the company shareholders and directors.
Attributes and competencies of a company secretary
- A good planner. A company secretary should be able to plan things that are feasible and see to their timely completion.
- Academically qualified. A company secretary should be academically qualified and well versed with the company laws and regulations.
- A company secretary should be a goal-getter, one who sees an opportunity and grabs it. He/she should be committed to seeing the company achieve its strategic goals.
- A company secretary should be a people-person. He/she should be able to communicate well with all people, whether employees or clients.
- A company secretary should be principled. He/ she should not be a person whose decision is swayed sideways to please a few or a majority of people.
- A company secretary should be one who is approachable. He/she should not build a fence around him/her that someone cannot easily get to him/her. An approachable company secretary is easy to consult with regarding business decisions or aspirations. He/she should combine business orientation skills with people skills.
The successful operation and growth of a Hong Kong company to a greater extent in its ability to assume legal responsibilities and liabilities as guided by the Company Secretary. There are usually penalties in terms of fines and imprisonment that are attached to the infringement of these legal responsibilities, and sometimes both penalties may be imposed at the same time.