Home to over 9,000 overseas and mainland companies, Hong Kong has long been a prime destination to do business. Its competitive tax regime, ease of doing business, robust financial system, and world-class infrastructure make it a natural choice for foreign investors to set up shop.
While setting up a company in Hong Kong is a straightforward process, you must comply with various requirements. In particular, the Companies Ordinance stipulate that you must appoint a suitable and well-qualified company secretary. The role is not to be confused with a “secretary” who mainly carries out administrative and clerical duties.
Your company secretary plays a central role in your organisation, whose responsibilities should be taken earnestly. Ensuring that your Hong Kong company meets its statutory obligations, your company secretary acts as a custodian of corporate governance. It is, therefore, crucial to select the right candidate for this all-important position.
This article walks you through the eligibility requirements, role, and responsibilities of a company secretary. In addition, we will explain why enlisting the services of a professional to take care of your corporate secretarial functions is a sound option.
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What is a company secretary?
Pursuant to Section 474 of the Companies Ordinance (Cap. 622), a limited company incorporated in Hong Kong is required to have a company secretary. This is a prerequisite at the time of incorporation. From the date of the company’s establishment, the person designated as the company secretary on the incorporation form will serve as the company’s first company secretary.
In a nutshell, the company secretary is responsible for ensuring that the organisation scrupulously adheres to all rules relating to corporate governance as well as other financial and legal regulations. As a principal officer of the organisation, the company secretary possesses a comprehensive understanding of the corporate governance framework, ensuring that protocols and guidelines are accurately documented. Tasked with completing and submitting the relevant paperwork on time, the company secretary also makes sure that all filing requirements are duly observed.
Additionally, the company secretary serves as the trusted adviser to the chairman and the board of directors. The company secretary is often their first port of call, whose advice is sought on whether an individual director or directors as a collective body have discharged their duties properly. Although not having the same scope of duties and responsibilities as directors, the company secretary is entrusted with important tasks. They may even be held accountable if they fail to execute them satisfactorily.
According to The Essential Company Secretary published by the Hong Kong Chartered Governance Institute, company secretaries as guardians of corporate governance should wield their influence to uphold best practices. Further, they are expected to exercise impartial judgment and abstain from matters involving a conflict of interest. They make no less a commitment to promoting the company’s success than directors.
Who can be a company secretary?
As per Section 474 of the Companies Ordinance, you must appoint a company secretary who is either an individual ordinarily residing in Hong Kong, or another company with a Hong Kong-based registered office or place of business.
It is important to note that, where there is only one director, the sole director cannot simultaneously act as the company secretary. Corporate action requiring both a director and the company secretary cannot be executed by an individual who concurrently assumes these two roles.
It is essential to appoint licensed professionals as your company secretary. They must hold a relevant licence for trust or company service providers (“TCSPs”). Hong Kong has introduced a licensing regime to regulate and oversee TCSPs. The Companies Registry administers the licensing mechanism for TCSPs. Anyone who intends to carry on a trust or company service business in Hong Kong must apply for a TCSP licence. There are, however, licensing exemptions for legal professionals and certified public accountants.
Before you hire a company secretary, make sure to verify their credentials on the Companies Registry’s website here. CW is a certified TCSP licensee that fully complies with all regulatory requirements.
What are the duties and responsibilities of a company secretary?
Besides staying abreast of the latest regulatory requirements and keeping stakeholders informed, the company secretary assumes responsibility for a wide range of duties, including:
- Maintenance and safekeeping of statutory books:
The company secretary is responsible for the custody, control, and preservation of all relevant statutory records. These include the registers of directors and shareholders, the corporate minute book, the share certificate book, and the Significant Controllers Register. More importantly, they are obligated to provide government bodies with access to certain information upon request. For instance, if a company is suspected of falling foul of its tax obligations, the company secretary will be responsible for handling and coordinating any inspection upon the request of the Inland Revenue Department.
- Meeting various filing obligations:
The company secretary is in charge of preparing and filing statutory returns and other documentation with the Companies Registry.
- Organising annual general meetings and other board meetings:
As well as arranging meetings, the company secretary formulates the agenda, circulates relevant documents, sends out notices, and prepares accurate minutes.
The procedural and paperwork requirements as regards general meetings and written resolutions demand strict adherence. Therefore, the company secretary must demonstrate a full command and detailed understanding of all the necessary formalities. In the event of non-compliance, the meeting’s business could be rendered void.
- Filing of changes of particulars with the Companies Registry:
The company secretary is mandated to file any changes to the company’s constitution or corporate structure with the Companies Registry. These include, for example, alterations to the articles of association, significant changes to the share capital, amendments to directors’ particulars, the appointment and resignation of directors.
- Maintaining the registered office:
The company secretary is tasked with the upkeep of the registered office to ensure the safe receipt and secure storage of government correspondence and other formal communications.
- Ensuring all-round compliance:
Among the sundry responsibilities, attending to corporate compliance matters is certainly one that tops the list of importance. The company secretary implements and administers all compliance protocols, policies, and processes.
For example, Phase One and Phase Two of the New Inspection Regime have been implemented, with Phase Three to be rolled out in December 2023. As a corporate governance professional, the company secretary must address the practical compliance implications arising from the new legislative changes.
Part and parcel of the job is staying on top of regulatory trends. Nowadays, an increasing emphasis is placed on environmental, social, and governance (“ESG”) concerns in the business world. ESG has become a major consideration in both strategic planning and regulatory compliance. Companies are expected to establish best ESG practices and exhibit sustainable corporate governance behaviours. Company secretaries play an integral role in facilitating the formulation of ESG parameters and identifying ESG opportunities and risks.
- Serving as the primary point-of-contact for shareholders, directors, and external stakeholders:
The company secretary is responsible for communicating with shareholders on matters relating to the issuance and transfer of shares. Besides this, offering counsel to directors on their obligations, and ensuring that they observe all applicable regulations and the articles of association fall within the scope of duties.
Furthermore, the company secretary serves as an interface between internal stakeholders and external parties, such as lawyers and auditors. This involves conveying instructions from the directors to external stakeholders. By the same token, the company secretary also relays important information back to internal stakeholders.
How can you change your company secretary?
Why should you outsource corporate secretarial functions?
The corporate landscape has taken on a vastly different shape. Nowadays, all the various stakeholders are jostling for their demands to be heard. Investors, regulators, customers, and employees alike are pushing for businesses to be more transparent and accountable. As a result, proper governance is growing in relevance and urgency, which has in turn amplified the need for company secretaries to act as corporate guardians.
In addition to juggling different stakeholder expectations, your company must stay on top of the compliance game, which is constantly increasing in volume and complexity. As regulatory changes continue rapidly apace, your compliance burden will inevitably become more onerous. But as your organisation expands and scales up, you may struggle to cope with the ever-multiplying compliance obligations. The resources and costs in maintaining corporate secretarial functions in house can hamper your overall growth and profitability.
Furthermore, the compliance specificities and peculiarities of a foreign jurisdiction often present a unique set of challenges to overseas businesses. The lack of familiarity with local regulations, the cascade of burdensome obligations, and strained resources may altogether have the unintended consequence of driving up your company’s risk of non-compliance. Since Hong Kong legislation imposes strict compliance obligations on companies, an omission or blunder can have very dire repercussions.
Outsourcing corporate secretarial functions to licensed professionals can add significant value to your business. It can substantially minimise your risk exposure as well as free up your time and resources, which can now be invested in revenue-generating areas of your business that propel growth. Enlisting the services of qualified professionals can give you peace of mind to concentrate on core business activities. Armed with specialist expertise and knowledge, they ensure that your company is in full compliance with all applicable laws and regulations, thereby keeping fines and penalties at bay.
What can CW do for you?
At CW, we understand that your time and resources would be better spent on delivering value for your business. Needing to keep track of the constantly evolving and increasingly complex regulatory landscape only adds to your compliance burden.
With over 30 years’ experience, our professional and well-qualified Corporate Secretarial team can help you navigate the compliance minefield and lift the heavy burden off your shoulders. As a fully licensed TCSP, we provide timely and reliable support, catering to your complex governance needs as well as ensuring seamless continuity in your business activities. Well versed in local and international regulations, we ensure that your company is compliant at all times.
Contact us today to learn more about how our corporate secretarial services can raise your bottom line.