What Are Directors' Duties In Hong Kong?

Similar to almost all jurisdictions around the world, company directors are required in a company registered in Hong Kong. These appointed directors are required to adhere to the general law of the jurisdiction and the company’s Articles of Association.

In order to perform your duties or ensure your company director is doing their assigned responsibilities, we present a guide on who can become a company director, the duties of a director, consequences of not performing your duties and how to register as a director of a company.

What Is A Director?

A director is not a shareholder or member of a company. They belong on the board of directors and can have an equal or higher standing than other members of the board. What rights are the director allowed or not allowed to exercise then? This depends on the company’s Articles of Association, which should state clearly how much power a director has in running business operations as a whole.

Do I Need A Director To Set Up My Company In Hong Kong?  

To put it in simple terms, you must have a minimum of one director in order to set up a new company. Remember that in Hong Kong, it is also mandatory to appoint a company secretary. If you are the sole director or shareholder in the company, you cannot act as the company secretary. In this case, you can appoint a nominee company secretary.

On top of that, you do not necessarily have to take up the role of director for your company if you do not want to. There is an option to appoint a nominee director in your place. Keep in mind that if you wish to nominate a director, it should be done in the early stages of company incorporation.

Of course, here at East river, we strive to help entrepreneurs like yourself register and incorporate your new company, so that you do not have to worry about missing out on any important documents.

Who Can Become A Company Director?

A company director in Hong Kong must fulfil the following:

• Be at least 18 years old
• Can be of any nationality
• Not required to be a Hong Kong resident (foreigners can be directors too)

You cannot be a company director if you:

• Are bankrupt
• Have been previously convicted for any malpractices
• Are of unsound mind
• Fail to attend board of director meetings regularly
• Are convicted for fraud, dishonesty or an indictable offence before

What Is A Director Of A Company Responsible For?

As a company director, you are generally required to perform due diligence to improve and act for the good of the company. There are nonetheless some basic principles of directors’ duties you have to follow. Here are some of the most prominent ones.

1. Directors have a duty to act in good faith for the benefit of the company

A director has the duty to make decisions in the interests of all members of the company, be it, shareholders, board of directors and employees. This also means that the director should strive to achieve outcomes that are fair to all stakeholders.

2. Directors have a duty to exercise care, skill and diligence

A director plays an important role in a company and should always be exercised by a reasonably diligent person. For example, a person who has adequate experience and decision-making skills should be preferred over someone who has just stepped into the industry with no prior industry experience.

3. Directors should not delegate powers except with the proper authorisation

A director should not delegate any of their powers to other members unless it was authorised to do so by the company’s memorandum and Articles of Association. In other words, a director should be able to exercise independent judgement when using his powers to make a decision.

4. Directors have a duty to avoid conflicts between personal and company interests

The personal interests of a director should not interfere or have conflicts with the interests of a company. Keep in mind that a director must act in good faith for the best interests of the company.

5. Directors have a duty not to enter into transactions as their interests

According to Hong Kong law, directors must disclose the nature of any personal interest that concerns any company transactions. A director must not enter into any company transactions unless they are fully compliant with the law requirements.

6. Directors cannot gain advantage with the director position

A director should not make use of his/her position as a director to gain any advantages for himself or anyone else, no matter directly or indirectly. This also includes the fact that a director is not allowed to use the company’s property or information for personal gains unless it was previously disclosed to the company in general meetings and approval has been given.

7. Directors should not accept personal benefits from third parties

No matter current director or a former director, you must not accept any benefit from third parties as a reward for going through a transaction with the company in question. This applies to all benefits unless the company is informed and has consented to the transaction.

8. Directors must observe the company’s memorandum and Articles of Association

A director must act in accordance with what is listed under the company’s memorandum and Articles of Association. Remember that different companies may have different constitutions, so it is not a good idea to assume that what you are used to in your previous company applies the same way to your new company.

9. Directors must observe the company’s memorandum and Articles of Association

A director is in charge of making sure that books of accounts are kept well and present them if questioned. This includes a true and fair view of the state of affairs of the company, and each transaction performed.

For more information on the company director’s duties, check out this detailed guide.

What Powers Do Directors in Hong Kong Have?

A director can utilise certain powers given to them according to the:

• Company’s Articles of Association
• Companies Ordinance
• Common law
• Shareholder’s agreement
• Board members’ resolutions

These powers however are subject to whether there are any particular special resolutions in the company’s Articles of Association.

As a newly appointed director of a company, you should always go through the Articles of Association before signing any binding contract, just to ensure that you know what is required of you and your powers as a director.  

Are There Consequences If I Breach My Duties As A Company Director?

Every company director has the responsibility to make sure that the company is compliant with all provisions stated in the Companies Ordinance. If found to breach any provisions, there is a chance that the director and members involved will be prosecuted and fined by law.

Although the offence committed determines the maximum level of prosecution, serious regulatory offences can result in possible imprisonment.

How Do I Appoint A Director?

In order to appoint a director for your company, you can do so by passing an ordinary resolution or by the decision of existing directors. You will also need to inform the Companies Registry within 15 days of the appointment.

To complete the appointment, you will need to submit these documents to the Companies Registry.

1. The full name of the appointed director
2. Passport information of the appointed director
3. Residential address of the appointed director

What You Should Always Be Aware Of As A Director

Being a company director is no child’s play, a wrong move could result in dire consequences. In order to minimize any chance of breaking the law, a director is encouraged to regularly attend training sessions, seminars, conferences and more self-enrichment courses to refresh on his or her duties and responsibilities.

Of course, if you are a new entrepreneur and do not have the time to handle matters pertaining to appointing a director or choosing a nominee director for your new company, the team of professionals here at East river are always glad to help. If you need help on how to start a business in Hong Kong, we have just the guide you need to get started.
If you are interested in opening a company in Hong Kong and are still unclear about the steps needed for company incorporation in Hong Kong, we are more than willing to help you with the process. Furthermore, we can help with corporate secretarial tasks for your Hong Kong company while you concentrate on launching and growing your business.