Preparing Financial Statements and Holding an Annual General Meeting in Hong Kong

As a company registered in Hong Kong, it is essential to understand the requirements for preparing financial statements, undergoing the audit process, renewing your business registration certificate, and holding an annual general meeting (AGM). In this article, we will break down these key aspects of corporate governance and compliance.

Preparation of Financial Statements

To prepare accurate financial statements, companies in Hong Kong must maintain certain documents, including:

• Sales invoices
• Purchase invoices
• Petty cash vouchers
• Payment receipts
• Bank statements
• Inventory lists

The Inland Revenue Department may require additional documentation depending on the type of transaction. Keeping these records up to date is crucial for financial reporting.

Audit Process

Auditors in Hong Kong must be certified public accountants registered with the Hong Kong Institute of Certified Public Accountants (HKICPA). The audit process involves:

• Planning
• Testing and evaluating internal controls
• Analyzing results
• Reporting
• Understanding the company’s business and risks
• Formulating an audit plan
• Obtaining and evaluating audit evidence
• Testing internal controls
• Verifying financial information
• Conducting analytical procedures
• Assessing the effectiveness of internal controls
• Analyzing audit results
• Issuing an opinion on financial statements

Audit Report

After examining a company’s financial records, auditors issue an audit report. There are two main types of audit reports:

• Unqualified (clean): Indicates that the financial statements are free from material misstatements.
• Qualified: Indicates there may be certain issues or limitations in the financial statements.

Renewal of Business Registration Certificate

A local private limited company must renew its business registration certificate one month before it expires. The renewal can be done annually or once every three years, depending on whether the certificate is valid for one year or three years. The Inland Revenue Department will send a renewal demand note to registered businesses approximately in the middle of the month preceding the commencement month of the renewal Business Registration Certificate.

Holding an Annual General Meeting

Every company incorporated in Hong Kong must hold an AGM once per year. The AGM should be held within six months of their financial year-end or within 18 months from the date of incorporation for newly registered businesses. Shareholders must receive at least 21 days’ notice before the AGM.

By understanding these requirements, companies in Hong Kong can ensure compliance with corporate governance and regulations, maintaining a strong foundation for business operations and growth.