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6. Part 9 Accounts and Audit

Reporting Exemption

Certain companies are allowed to prepare simplified financial and directors’ reports.

Companies which qualify for simplified reporting are referred to in the New CO as companies “falling within the reporting exemption”.

Sections 359 to 366 and Schedule 3 set out the qualifying conditions for companies to prepare simplified financial and directors’ reports–

A “small private company” or a private company that is the holding company of a “group of small private companies” that satisfies any two of the following conditions automatically qualifies for simplified reporting –

  1. total (or aggregate total) annual revenue of not more than HK$100 million;
  2. total (or aggregate total) assets of not more than HK$100 million;
  3. no more than 100 employees.

An “eligible private company” or an eligible private company that is the holding company of a “group of eligible private companies” that satisfies any two of the following conditions and has the approval of members holding at least 75% of the voting rights with no other members objecting qualifies for simplified reporting –

  1. total (or aggregate total) annual revenue of not more than HK$200 million;
  2. total (or aggregate total) assets of not more than HK$200 million;
  3. no more than 100 employees.

A “small guarantee company” or a guarantee company that is the holding company of a “group of small guarantee companies” automatically qualifies for simplified reporting if its total annual revenue or aggregate total annual revenue (as the case may be) does not exceed HK$25 million.

For more details on the types of companies defined in the New CO under this part, please refer to the following sections:

Types of companies as stated in the New CO

Relevant sections

“small private company”

Section 359(1)(a)(i)
Section 361
Schedule 3 section 1(1) and (2)

“group of small private companies”

Section 359(2)(a),(b) and (c)(i)
Section 364
Schedule 3 section 1(7), (8) and (9)

“eligible private company”

Section 359(1)(c)
Section 360(1)
Section 362
Schedule 3 section 1(3) and (4)

“group of eligible private companies”

Section 359(2)(a),(b) and (c)(ii)
Section 360(2)
Section 365
Schedule 3 section 1(10), (11) and (12)

“small guarantee company”

Section 359(1)(a)(i)
Section 363
Schedule 3 section 1(5) and (6)

“group of small guarantee companies”

Section 359(3)
Section 366
Schedule 3 section 1(13) and (14)

 

Section 380(7) provides that these companies are not required to give a “true and fair view” of the financial position of the company as at the end of the financial year or the financial performance of the company for the financial year in their financial statements.

Under section 388(3)(a), they are not required to include a business review in the directors’ report to comply with Schedule 5.

Under sections 3(3A), 4(3), 8(3) and 10(7) of the Companies (Directors’ Report) Regulation (Cap. 622D), they are not required to disclose the following in the directors’ report:-

  • directors’ interests in arrangements to enable directors to acquire benefits through the acquisition of shares or debentures;
  • donations;
  • directors’ reasons for resignation or refusal to stand for re-election; or
  • the material interests of directors in transactions, arrangements or contracts of significance entered into by a specified undertaking of the company.

Under section 23 of the Companies (Disclosure of Information about Benefits of Directors) Regulation (Cap. 622G), there is also no requirement to disclose in the notes to financial statements the material interests of directors in transactions, arrangements or contracts of significance entered into by the company.

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