Hong Kong Directors Duties: What Exactly Are Their Roles?

As a director in Hong Kong, it is important to be aware of your key duties and responsibilities to ensure that your company is run effectively and following the law.

In this article, we will look at various types of directors, their duties, and the eligibility requirements for being a director in Hong Kong companies.

Importance of director’s duties in Hong Kong

The director is undoubtedly one of the most important positions in an organization.

Simply put, directors are the ones responsible for ensuring that a company is run lawfully and efficiently. They make sure that all legal and regulatory requirements are met, and that the company’s finances are in order.

Furthermore, the company director is responsible for protecting the company’s interests and preparing and overseeing the company. Not to mention they must act in the company’s best interests at all times.

In Hong Kong, there are some specific duties that directors must uphold.

• Protect the company’s interest, including all of the company’s shareholders
• Properly exercise powers in controlling the Hong Kong company (as prescribed in the entity’s articles of association) and following the company’s purposes
• Exercise reasonable care, skill, and diligence when performing directorial duties, ensuring that the company is operating legally and ethically and that all financial records are accurate
• Properly use the organizational information and other assets of the company
• Responsible for the constitution and resolutions, filing regular financial reports and other required documents

Types of company directors

Several types of company directors in Hong Kong that you should understand are as follows:

• Executive Director: directors who make decisions on day-to-day business activities
• Non-Executive Director: industry experts who are not involved in daily operations, but provide an objective professional perspective in the decision-making process.
• Managing Director (or CEO): the other directors can appoint the managing director (MD) of the company who looks after the company in the absence of other directors.
• De Facto Director: not officially appointed as a director but acts as one in the place of other directors, with the same responsibilities and obligations.
• Shadow Director: they do not have any official title but the board of directors is accustomed to acting by their instructions.
• Reserve Director: Typically seen in companies with a single shareholder and a sole director. In case the sole director is absent or dead, the reserve director can make decisions on behalf of that sole director.

What are nominee directors?

Many directors conceal their identity for numerous reasons and hire another person to act in their role. This employed person is recognized as a nominee director.

Despite carrying the administrative responsibilities as a regular director, the nominee director is strictly non-executive and must consult for approval before making decisions.

More on the benefits and how to pick the right nominee director for your Hong Kong Company.

Further responsibilities of a company director in Hong Kong

The duties and responsibilities of Hong Kong’s company directors are vital to the company itself and its shareholders.

Directors must act honestly and in good faith with a view to the best interests of the company. They must also maintain good relationships with shareholders, employees, and creditors.

Furthermore, directors must avoid conflicts of interest, and must not make improper use of their position. This means making decisions that benefit the company, not themselves or others.

Additionally, he/ she must well manage the relationship between the director’s personal gains and the organizational interests, by not joining into transactions related to the company’s interest unless complying with laws.

Directors have a responsibility to keep proper accounting records and prepare director reports, based on which the shareholders and other interested parties will be able to make informed decisions about the company.

Directors must ensure that all financial records are accurate and up-to-date and that any relevant information is included in the director’s reports.

Requirements for being a Hong Kong company director

A few specific requirements should be noted to become a director in a Hong Kong company. A business entity in Hong Kong that is registered as a company must appoint a director.

This director is responsible for the management of the company and must act per the company’s constitution. If the director fails to perform their duties, they may be held liable by the courts.

For foreign investors, Hong Kong companies limited by shares and by guarantee are often widely selected to incorporate thanks to their distinct characteristics.

There is no maximum number of directors restricted in a Hong Kong company. You must appoint a least 1 director for a company limited by shares, while the company limited by guarantee must have two directors. Your directors:

• Can be any natural person who is over the age of 18 and has not been declared bankrupt or disqualified from being a director
• Can be of any nationality, either Hong Kong citizens or foreigners
• Must be of good character and have a clean criminal record
• Must also be competent and qualified to perform their directorial duties, meaning having the necessary skills and experience to understand and manage the company’s operations

Hong Kong law regulates the public release of information about directors just like that of company secretaries in Hong Kong companies.

How to remove a company director in Hong Kong

As a company director in Hong Kong, you have certain statutory duties to fulfill. If you fail to meet your duties or are unable to continue performing your role, you may be removed from your position.

Grounds on which a director can be removed from their post

• Failure to comply with their duties as director
• Misconduct
• Being unable to discharge their duties due to illness or incapacity
• Resigning from their position
• Being convicted of an offense involving dishonesty

Basic removal procedures

If the director of a company is removed from their position, they will no longer be able to act as director of that company. The process for removing a director from their position is relatively straightforward.

Shareholders may pass an ordinary resolution at the general meeting of the company to remove the director, according to Cap. 622 Companies Ordinance.

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Conclusion

So what is the takeaway from all of this? Simply put, directors in Hong Kong have a lot of important duties and responsibilities to uphold.

This is why it’s so important for them to be well-informed about the law and how it applies to their company. By ensuring that they are fulfilling their obligations, directors can help protect their business and its shareholders.

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