The evolving role of company secretaries in Hong Kong

The evolving role of company secretaries in Hong Kong

The evolving role of company secretaries in Hong Kong

Traditionally, a company secretary’s duties were restricted to simple administrative activities like filing annual returns, taking minutes, amending company constitutions and other in-house office tasks. However, the position is changing as corporate governance and company management become more important and sophisticated.

In contemporary Hong Kong, the company secretary is a high-level position with a wide variety of significant responsibilities across several business areas. As a result, the company secretary plays a key part in supporting an organisation to realise its full potential.

Read on as we examine the changing responsibilities of a company secretary, and the ways a capable company secretary can give your company a competitive edge.

What is the importance of a company secretary?

Company secretaries perform a range of tasks to assist with the operations of an organisation, but crucially, they ensure strict adherence to the Companies Ordinance and other local rules.

Do not undervalue what a knowledgeable company secretary can bring to your business, especially if you are aiming to prosper in competitive markets. They will be able to assist in improving your governance procedures so that advantages and performance are maximised.

Services provided by company secretaries include:

  • improving the structure of your company;
  • championing the creation of a robust environmental, social and governance (ESG) strategy;
  • ensuring your business meets its legal and regulatory obligations; and
  • establishing modern corporate governance procedures.

The company secretary serves as a level-headed advisor, ensuring your business pursues its objectives with tenacity and honesty.

Corporate Secretary

What do company secretaries do?

Within the Asia-Pacific (APAC) region, there are different laws and expectations governing company secretarial matters. After incorporation, companies in Hong Kong are required by law to select a company secretary.

Standard responsibilities for company secretaries in Hong Kong include:

Taking part in board conferences
Arranging annual general meetings
Communicating with directors and shareholders
Maintaining secretarial records and statutory registers
Drafting and submitting annual returns and other statutory returns with the Companies Registry
Certifying documents with local authorities
Managing the change of corporate structure
Carrying out ad hoc tasks on the board’s behalf

Company secretaries provide assistance throughout the business lifecycle, from setting up and maintaining a company in Hong Kong, business expansion across Asia Pacific, restructuring the company and even closing down the company.

In what ways has the company secretary role changed?

Company secretaries once had a relatively administrative role, but today they are extremely knowledgeable about the fast changing regional rules and regulations and high standards of corporate governance. As a result, they have adopted an advisory role within businesses: directors and shareholders are able to consult the company secretary for guidance on how to navigate compliance and corporate governance issues.

Current areas of focus for company secretaries include advising the board on matters pertaining to ESG and statutory compliance.

ESG advisory

Businesses in Hong Kong are under building pressure to exhibit good governance as demand for strong ESG grows among investors, regulators and consumers. A 2020 KPMG survey revealed that sustainability reporting across APAC has increased from 78–84% since 2017.

The company secretary has a significant role to play in advancing ESG because of their extensive involvement in both the operations and board activities of an organisation.

Company secretaries help elevate initiatives by:

  • assisting with the development of ESG measures (such as whistleblower protection policies)
  • collaborating with sustainability team members to respond to ESG opportunities and risks;
  • setting up routine ESG auditing; and
  • assisting with accurate ESG reporting in company publications.

Statutory compliance

One of the company secretary’s primary duties is to remain aware of statutory requirements and provide updates to the relevant stakeholders. Directors and management teams must be able to consult the company secretary for accurate compliance advice, though the company secretary is not held responsible for legal decisions.

Additionally, company secretaries help ensure the business is prepared for regulatory change.

Some ways company secretaries assist with statutory compliance include:

  • scheduling proceedings of board and shareholder meetings;
  • drafting resolutions for the board and shareholders;
  • ensuring all required returns are submitted on time to the Inland Revenue Department Companies Registry and other government authorities;
  • helping any listed businesses comply with the Listing Rules for HKEX; and
  • providing training and updates on regulatory changes to directors and the relevant stakeholders.

A skilled company secretary can deliver customised compliance solutions that meet regulatory criteria.

Key obstacles in company secretarial services

When appointing a company secretary, look for strong adaptability and excellent communication abilities. They will need these qualities to navigate compliance-related difficulties.

Here are the top three obstacles company secretaries encounter.

1. Keeping across evolving regulations

Maintaining organisational compliance amid shifting regulatory environments is the primary challenge company secretaries face. One way they promote continuous compliance is by collaborating directly with authorities.

Company secretaries provide a crucial link between businesses and regulators. They are able to assist with internal forward planning because, at times, they are aware of the proposed regulatory changes before the changes come into force.

This prevents the need to rush the formalities to accommodate compliance with the new rules and regulations when the changes take effect.

    2. Implementing customised compliance solutions

    Every company’s compliance structure will be unique, taking into account the company’s corporate value, mission, size, location, industry, and listing status. The ability to create specialised business solutions for an organisation in accordance with its charter, within the constraints of the Companies Ordinance, is thus a requirement for company secretaries.

    A tailored compliance framework can help a company run ethically while still excelling in its sector.

    3. Securing buy-in among stakeholders

    Some companies fail to recognise the benefits of hiring a highly qualified company secretary. This is typically due to a weak compliance culture, where compliance is considered a burdensome task rather than a promising way to progress business objectives.

    Generally, the company secretary is in charge of directing secretarial compliance at all levels of a business. It is their responsibility to help shareholders, directors and staff understand:

    • the reason statutory, regulatory and corporate requirements are in effect;
    • why it is important for the business to meet these requirements; and
    • how strong compliance benefits the business and its people.

    Selecting a company secretary that takes compliance very seriously will help ensure your business maintains strict adherence to local regulations.

    Corporate Secretary

    Appoint a company secretary you can rely on

    Many businesses decide to partner with a respected corporate services provider for support with streamlining their operations. Along with corporate secretarial services, these can include help with accounting and payroll or share registry and employee stock ownership plans (ESOP). With this strategy, executive members of staff can pay more attention to business growth and worry less about compliance requirements. This provides greater opportunity to increase your production levels, effectiveness and profitability.

    By engaging a third-party secretarial service provider, you can also:

      Ensure the incorporation of your business is expertly handled
      Streamline secretarial compliance across multiple regions
      Maintain multi-country compliance through a single point of contact
      Receive crucial advice to support business expansion
      Minimise resource expenditure through a decreased administrative load
      Channel more resources into progressing core goals

      If your company intends to grow throughout APAC, you need to be ready for the various regulations and cultural expectations of each region. In addition, you will need to meet the legal requirements for any cross-border partnerships you enter into.

      Your business runs the risk of being fined for not meeting its compliance duties if your company secretary lacks the right credentials, abilities or attitude to ensure effective corporate governance.

      Be aware that if you engage corporate advisory services in individual regions, the complexity of your operations may increase. Seek a provider with offices throughout APAC to simplify your company compliance processes.

      Corporate Secretary

      Maintain competitive advantage

      If your goal is to expand successfully throughout APAC, BoardRoom specialises in a range of corporate services to suit your business needs. Our company secretary Hong Kong team are highly qualified with extensive experience in secretarial compliance matters, so they are able to provide valuable guidance at each stage of your growth journey.

      Chat with our specialists today to learn more about working with a capable corporate secretarial service provider.

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      Setting up a company in Hong Kong: what you need to know

      Setting up a company in Hong Kong: what you need to know

      HOW TO: Setting up a company in Hong Kong

      Thinking of establishing a company in Hong Kong? Expanding into a new international market is exciting for any business, but it also presents its own set of significant challenges. For many executives, the first hurdle is understanding how the company formation regulations and processes work in the new jurisdiction. This includes the required permits and licenses, the legal and taxation requirements, and more. Not to mention, prior to setting up a company, you should also have a clear understanding of the business environment in Hong Kong as well as that of your specific market.

      While the company formation process may be complex, our guide below makes it easier to take the leap. Read on for a comprehensive overview of everything you need to know about setting up a company in Hong Kong.

      Hong Kong Market Profile

      Hong Kong is an important financial hub within the Asia Pacific (APAC) region that is renowned for its business-friendly taxation and regulatory environment, making it fertile ground for business setup. Some of the key characteristics of the Hong Kong market include:

      • Office rental pricing: Average monthly rent for grade A office space in Hong Kong’s central district was $HK 1,807 per square metre for the first quarter of 2021.
      • Average office space density: 1sq m per person
      • Fixed internet download speed: 59 megabits per second in July 2021
      • Mobile internet download speed: 06 megabits per second in July 2021
      • Gross Domestic Product US$ bn: 344.7
      • Population: 7.5 million
      • Official languages: Chinese, English
      setting up a company in hong kong

      Benefits of setting up a company in Hong Kong

      As one of the largest financial centres in Asia, Hong Kong offers many benefits to companies looking to set up a business and establish a presence in the region, including:

      • Strategic locational advantages: Hong Kong’s central location makes it an ideal destination for setting up a company that wants to enter the mainland Chinese market or expand its operations within the APAC region.

      The Hong Kong market also has many cultural similarities to mainland China, making it ideal for foreign investors to develop a footprint in the Chinese market without having to navigate all of the cultural differences that might be present in other markets during the process of company formation or when running the business.

      • Attractive tax structure: Hong Kong’s corporate tax rates between 8.25% and 16.5% (subject to the amount of profit earned) are considered some of the lowest in Asia.

      In addition, Hong Kong has no capital gains tax, sales tax, consumption tax, value-added tax, estate duty or withholding tax on dividends and interests.

      Further, the ‘territorial source’ concept applies, meaning that residents pay no tax on incomes earned beyond Hong Kong’s borders. Income earners within Hong Kong are taxed at between 2% and 17%, depending on salary. This is considered significantly lower than other jurisdictions in the West.

      • No foreign ownership restrictions: 100% of the shares of incorporated companies in Hong Kong can be owned by foreigners or foreign companies. The market also operates on free trade principles, with no onshore or offshore investment restrictions, import or export tariffs and foreign exchange controls. This means that foreigners can start setting up a company in Hong Kong with relatively few barriers.
      • Bilingual business communication: in Hong Kong, English is widely used in a business context, making it easier for foreign investors to set up companies within the region.

      Steps for establishing a company in Hong Kong

      To help you start enjoying all of the above business benefits, we have compiled a step-by-step process of company formation in Hong Kong:

      Step 1 - Choose a company type

      The first step in setting up your company is to choose the type of company you want to establish. The two most common company types for businesses operating in Hong Kong are:

      1. Limited Liability Company: This entity type means that a business is set up as its own legal entity. Foreign investors often prefer this type because it offers limited liability for business owners. Companies can be limited by shares or by guarantee.
      2. Foreign Company Office: Foreign companies can register in Hong Kong as either a representative office or a branch office. Neither option creates a separate legal entity, however, so all liability extends to the parent company.

      Step 2 - Give your company a name

      Once you’ve chosen your company type, you need to give your company a name.

      • be the same as a name already approved on the Companies Register; or
      • infringe upon any third party’s intellectual property rights.

      You can search the register for free using the Companies Registry search sites: Cyber Search Centre or Company Search Mobile Service.

      The name you choose must comply with the Guideline on Registration of Company Names for Hong Kong Companies, which states that:

      • Company names can be registered as either an English name, a Chinese name or both. However, combining English words/letters and Chinese characters is prohibited.
      • An English company name must end with the word “Limited”, and a Chinese company name must end with the characters “有限公司”.
      • A Chinese company name should contain traditional Chinese characters (繁體字) that can be found in the Kang Xi Dictionary (康熙字典) or Ci Hai Dictionary (辭海) AND also in the ISO 10646 international coding standard. Simplified Chinese characters are not acceptable.

      Step 3 - Set up your company structure

      An essential part of Hong Kong company formation is setting up the structure of your company per the following requirements:

      • Directors: a minimum of at least one person to serve as the director of the company, responsible for managing the day-to-day operations of the business. One director needs to be a natural person (i.e., an individual). Directors do not need to be residents of Hong Kong, but they must be aged 18 or older.
      • Shareholders: a minimum of at least one shareholder. Shareholders own part of the company and have a say in major decisions. They can be either an individual aged 18 or older, or a corporate. 100% of shares can be foreign-owned. Sole directors can also act as shareholders.
      • Company secretary: a sole director must not act as the company secretary. To register a company in Hong Kong, you must appoint a company secretary who is either:
        • a person who lives in Hong Kong; or
        • a body corporate with a registered office or place of business in Hong Kong. We provide expert company secretarial services so that your company can meet all of its statutory obligations in Hong Kong.
      • Share capital: no minimum share capital is required for company formation in Hong Kong. However, most companies choose to issue at least one ordinary share to one shareholder. Bearer shares are not permitted.
      • Registered address: must be a physical address in Hong Kong, not a P.O. Box. If your business does not yet have local office space, professional service firms like BoardRoom can provide your company with a registered office location.
      hong kong company formation

      Step 4 - Submit company registration documents

      Once you have your company structure in place, you must submit the following registration documents to the Companies Registry for business setup in Hong Kong:

      • the Incorporation Form;
      • a copy of the company’s articles of association; and
      • a copy of the Notice to Business Registration Office.

      Step 5 - Make other permit and business licence applications (if applicable)

      Depending on the type of business you operate in Hong Kong, you may need to apply for other permits and business licences to complete the company formation process. For example, if you’re setting up a food & beverage business, you will need to apply for a permit from the Food & Environmental Hygiene Department. Find more information about permits and licences here.

      how to register a company in hong kong

      Ensuring a successful business setup in Hong Kong

      While it can be complex, the process of setting up a company in Hong Kong as a foreigner doesn’t have to be difficult. Our team of company incorporation experts at BoardRoom can guide you through every step of the company formation journey to make it as smooth and seamless as possible. As a specialised corporate services provider with over 50 years of experience, Boardroom excels in helping businesses navigate various regional complexities, from the initial business setup to ongoing administration.

      That means not only can our team help you incorporate with ease, but we can also take care of your company secretarial needs. Our comprehensive range of company secretarial services helps you to ensure that your company remains compliant with all legal and regulatory requirements in Hong Kong. As a result, you have more time to focus on what really matters: growth and profitability.

      Speak to one of our specialists today to get started in setting up your company in Hong Kong.

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      What to look for in company secretarial services in Hong Kong

      Company secretarial services in Hong Kong

      What to look for in company secretarial services in Hong Kong

      5 qualities to look for when choosing a company secretarial service provider in Hong Kong

      The pressure of complying with the ever-evolving schedule of corporate legislative requirements in Hong Kong can be overwhelming. The pace of change is relentless, and corporate compliance obligations are only becoming more complex.

      This evolution is necessary in ensuring companies operate safely and fairly. Yes, it’s a short-term inconvenience – but there are multiple benefits for your company in the long run.

      Outsourcing your company secretarial functions to an expert provider can relieve your team of the time-consuming administrative burden of corporate compliance in the here and now. It can also reduce overheads by freeing up key staff to focus on the core functions of your business.

      However, there is a caveat. Failing to meet statutory obligations can have severe legal, reputational and financial ramifications for your company. That is why partnering with an experienced, qualified and knowledgeable corporate secretarial service provider is so essential.

      To help you find the right solution for your company, here are the top five qualities to look for when selecting a company secretarial services provider in Hong Kong.

      01 Corporate governance qualifications and experience

      In Hong Kong, every company must appoint a company secretary. This secretary must be either a resident of Hong Kong or a company whose registered office or principal place of business is in Hong Kong.

      In private companies, a director may take on the role of company secretary, unless they are the sole director. Putting a director to work as your company secretary can initially be an attractive option from a cost perspective. However, as your company grows, so too do the corporate governance requirements.

      This is why so many private companies choose to outsource their company secretarial duties, the role requires the specialist knowledge of a professional, but often doesn’t justify creating another role within the company. Although not a necessity, outsourcing is often the most efficient and cost effective option here.

      For publicly listed companies, requirements regarding who can perform the company secretary role are stricter. The chosen person or company must either have suitable professional or academic qualifications or relevant experience to be acceptable under the Hong Kong Stock Exchange Listing Rules (“Listing Rules”).

      corporate governance in corporate secretarial

      The professional or academic qualifications considered ‘suitable’ under the Listing Rules include being:

      • a member of The Institute of Chartered Secretaries;
      • a solicitor or barrister under the Legal Practitioners Ordinance; or
      • a certified public accountant under the Professional Accountants Ordinance.

      Experience that is considered ‘relevant’ under the Listing Rules includes the proposed company secretary’s:

      • length of employment in the company;
      • previous company secretary roles;
      • familiarity with the Listing Rules and other relevant laws;
      • planned or completed relevant training (the minimum training required is 15 hours per financial year); and
      • professional qualifications in other jurisdictions.

      Clearly, experience and qualifications matter when choosing a corporate secretarial services provider. Our expert BoardRoom team has solid experience and members are all suitably qualified to proactively manage even the most complex corporate governance challenges.

      02 In-depth local knowledge and global expertise

      A company secretary with detailed knowledge of the local regulatory landscape is an invaluable asset to your company. Equally important is an understanding of the subtle nuances of local cultures, traditions and customs.

      At the same time, if your company is international – or even global – you need a company secretary that is familiar with your international legal obligations who can work alongside your legal or compliance agent.  The subtle changes in both law and best-practice throughout different regions can be too easily overlooked without the correct resources on your side. Engaging the right people could help you avoid financial implications, large or small.

      The Corporate Secretarial team at BoardRoom brings together both in-depth local knowledge and international expertise. We can seamlessly guide your company across multiple markets while managing all of the cross-border complexities of tax, trade, currency conversion and contractual rules.

      03 A wide service offering that meets all of your corporate needs

      As your business grows, outsourcing non-core functions to a single corporate expert provider can save key staff members time and allow them to focus on business strategy and performance.

      At BoardRoom, we offer a full range of corporate services all under one roof. We make it easier for you to get on with business while we take care of the time-consuming, operational tasks.

      We can help you by accurately and efficiently:

      04 Dedicated, personalised customer care

      An excellent company secretarial services provider will assign a dedicated company secretary for your organisation. This is essential to give you a single point of contact who understands the exact needs of your business.

      Having a dedicated company secretary also reduces your risk of non-compliance. It is all too easy for an inexperienced company secretary to miss important corporate governance milestones. Non-compliance means costly penalties for your company.

      You can feel confident working with the team at BoardRoom, knowing that we are dedicated to ensuring you meet all your compliance obligations in relation to corporate secretarial matters.

      05 Ability to evolve with you as your company changes

      What is your vision for the future of your company? If going public is on your agenda, your corporate secretarial services provider will need the expertise to guide you through Hong Kong’s Initial Public Offering (IPO) process.

      Alternatively, suppose you are thinking of evolving your corporate structure. In that case, you need to be aware of the many specific compliance requirements involved. You also need to prepare for the significant administrative work needed to make the change happen.

      Whichever direction you choose to take your company, look for a corporate secretarial services provider that offers an extensive range of corporate services. Only with this offering breadth can the provider adapt to your company’s changing needs and evolve with you.

      Looking for quality company secretarial services in Hong Kong?

      Save yourself from the worry and time-consuming nature of corporate compliance by outsourcing your company secretarial functions to our expert BoardRoom team.

      We have a proven track record of helping companies, from large multinational corporations to fast-growing SMEs, to stay compliant. Ultimately, we will save you time and money by letting you get on with growing your business.

      Get in touch with one of our specialists today to learn more about how they can help you with your company’s corporate secretarial and compliance needs.

       

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