Every Hong Kong company must have one director as a requirement. Directors have to perform several roles including overseeing the company’s operations on the behalf of its shareholders. This blog post will explore the core responsibilities of a director, some of the other factors you as a director should understand.

What Is a Company Director?

A company director in Hong Kong is a person appointed to manage and oversee the affairs of a company on behalf of its shareholders. Directors act as the guiding force behind a company’s strategic direction, operations, and legal compliance. Every private company in Hong Kong is legally required to appoint at least one natural person as a director, as stipulated under the Companies Ordinance (Cap. 622).

Directors hold significant responsibilities that influence a company’s performance, compliance, and reputation. Their role is central to maintaining sound governance and ensuring the company operates within the boundaries of Hong Kong’s regulatory framework.

Who can be a company director? 

A company director should be: 

• Be at least 18 years old.
• Include at least one natural person as a director, ensuring direct human oversight.
• Any nationality
• Not requiring residency in Hong Kong, providing flexibility in directorship.
• Permit corporate directors for private companies not part of a listed group, enabling varied corporate structures.

A company director is suitable for one private company within a group of companies with at least one listed company as a member or affiliation.

Who Cannot Be a Director in Hong Kong?

Certain individuals are disqualified from serving as directors under Hong Kong law to protect companies from mismanagement and maintain governance standards. These include:

1. Bankrupt Individuals or Those Convicted of Malpractice

Anyone declared bankrupt or convicted of fraud, breach of trust, or serious financial misconduct cannot be appointed as a director. These individuals are considered unfit to manage company assets responsibly.

2. Persons of Unsound Mind

Individuals diagnosed with mental illness or lacking mental capacity are disqualified. Directors must be mentally fit to make sound decisions and act in the best interests of the company and its stakeholders.

3. Those Who Regularly Miss Board Meetings

A director who fails to attend board meetings regularly may be deemed uncommitted. Active participation in meetings is essential for making key decisions and fulfilling governance duties.

4. Individuals Convicted of an Indictable Offense

Anyone found guilty of a serious criminal offense (indictable offense) is generally disqualified. This helps protect the company’s reputation and ensures responsible leadership.

5. Persons Convicted of Fraud or Dishonesty

Individuals with a history of fraud or dishonest conduct are not allowed to serve as directors. Integrity and ethical behavior are essential for maintaining investor and stakeholder trust.

Types of Directors in Hong Kong

Under Hong Kong company law, individuals can serve in different types of directorial roles. It’s important to understand these distinctions, as each type carries specific responsibilities and in some cases, liabilities under the Companies Ordinance (Cap. 622).

Company Directors (Official Directors)

A company director is an officially appointed individual listed in the company’s Register of Directors and reported to the Companies Registry. These directors are responsible for managing the company’s operations, ensuring legal compliance, and acting in the best interest of the company and its shareholders.

Key responsibilities include:

• Attending board meetings and making strategic decisions
• Overseeing financial and operational performance
• Ensuring the company meets all statutory obligations under Hong Kong law
• Every Hong Kong private company must have at least one individual director.

Shadow Directors

A shadow director is not formally appointed but acts as a director in practice. This person gives instructions or directions that the official directors routinely follow even if they are not officially listed as a director.

Under Hong Kong law, shadow directors may still be held legally liable for decisions that affect the company. If they act as if they control or influence the board, they can be subject to the same fiduciary duties and penalties as official directors.

Why Shadow Directors Matter:

• They may be liable for breaches of duty, such as misconduct or negligence
• Authorities can investigate and penalize them for improper influence over company affairs
• Courts treat them seriously to prevent abuse of power behind the scenes

Resident directors

The resident directors are appointed by a creditor or shareholders to maintain their true identity and keep it private. Before signing the contract, the resident director is going to sign the power of attorney (POA) and Declaration of Trust (DOT) that will empower the agent to control the company activities. However, the POA is going to limit the director in his actions to those ones that are being guided by the principal.

You do not have to be a resident of Hong Kong or a Hong Kong national to take on the role of a director in a company based in Hong Kong. As to the tasks and functions of the directors in HK, they resemble what others in other companies globally do by managing and directing the company in its best interest.

Key Roles Of A Director In Hong Kong

Fiduciary Duty to Shareholders: 

The company, as the directors’ fiduciary duty to shareholders is to manage the company for all of the shareholders’ benefit by acting with loyalty and care. This means that the directors should ensure the long-term success and sustainability of the company. As a result, this function involves making decisions that try to balance shareholder value with the overall impact on the rights of other stakeholders like employees, customers, suppliers and the community.

Strategic Representation: 

The role of the manager as the face of the company is vital in that it serves as a medium between the company and its stakeholders, which are the shareholders, the board of directors, the regulators, and the public. Such strategy means presenting to the stakeholders the company mission, vision, and strategic objectives, as well as the actions that are aimed to support the business.

Administrative Oversight: 

The manager is accountable for commanding, administering, and controlling the company’s operations, encompassing managing day-to-day activities, allocating resources, and overseeing the proper delivery of business processes. For this to be achieved, the organization needs to establish the right structures for delegating responsibilities and supervising performance with risk mitigations in place.

Effective Leadership: 

The principle of performing and discharging duties must be properly demonstrated by the manager with some leadership qualities like decisiveness, integrity, transparency and accountability. Through the use of clear goals, the provision of guidance and support to employees, and the creation of a culture of creativity and unrelenting step-by-step improvement, the manager can make employees become confident and build the company’s success.

Legal Compliance: 

The fact that the company should run legitimately and be in accordance with the regulations is one of the most important things for building credibility and gaining the trust of stakeholders. The manager has to establish compliance policies, procedures and keep on monitoring them. Also, the manager has to implement measures to mitigate legal risks, and ensure ethical conduct in the organization by periodically reviewing the current situation.

Appointment of a director

A Hong Kong company can decide to have a director either through a passed by ordinary resolution or through the existing directors of the company if it is decided on by them.

The company must submit the information about appointing the director to the Companies Registry within 15 days after this task is completed.

How to Appoint a Director

A director can be appointed in either of the following ways:

• By passing an ordinary resolution during a general meeting of shareholders, or
• Through a board resolution approved by existing directors (if permitted by the company’s Articles of Association)

Once the appointment is made, the company must notify the Companies Registry within 15 days using the appropriate form.

Required Documents for Director Appointment

To complete the appointment process, the following documents must be prepared and submitted:

• Board Resolution or Shareholder Resolution – depending on the method of appointment
• Form ND2A (Notice of Change of Director) – to inform the Companies Registry of the appointment
• Consent to Act as Director – a written statement signed by the appointee
• Personal details of the new director, including:
  • Full name
  • Passport or Hong Kong Identity Card details
  • Residential address

Resignation of a director

• If the director resigns, the company has to give a notice of the resignation to the Registrar to the extent of the statutory provisions under section 645(4).
• The resigning director is required to give a notice of registration to the Registrar if he feels that the company is not going to comply with this requirement.
• The declaration should state (1fsje) Section 464(4)).
  • As to whether the resignation is stipulated in the articles of the company or by any agreement with the company about the need to give notice of registration to the company.
  • Whether the notice is so required and if notice has been so given in accordance with the requirement.

• If specification of the registration of a director of the company is mandated to be given in the memorandum of association of the company or in any agreement with the company the resignation would not have effect until the director in writing gives a notice of the resignation.
  • In line with what is required.
  • The provision is satisfied when the directorate resolution is signed and left at the registered office of the company.
  • This should be done by sending it in the form of hard copy or electronic copy.

Removal of a director

The dismissal of directors can be done by an ordinary resolution before the end of their term. The resolution should be passed at the general meeting involving all the shareholders and the director who is involved in the matter should be present and have the right to speak. In certain situations, for instance, when the director is declared bankrupt or mentally incompetent, his position as a director will be terminated automatically. The company should inform the Registrar within 15 days if the company confirms the removal.

Register of directors

The Registration of Companies Ordinance stipulates under section 641(3) that a Hong Kong company is required to keep the Register of Directors at their registered office, a prescribed place or either in English or Chinese.

According to section 641(1), the directors register has to be kept either in Chinese or English.

For private companies, as outlined in Section 643, the register of directors must contain the following particulars for each director who is a natural person:

• Full name, such as maiden name, aliases, or other changes in the name.
• Residential address and current address at work.
• Hong Kong identity card number or passport number and issuing country if the passport is not held by the director.
  

In addition, for companies which are private, a company limited by guarantee, or a private company which is linked with a public company, the register must also include similar details as specified for companies limited by guarantee.

Further, as per the provisions of section 643, for the case of companies without any members and in which the director and the member are the same person, the register must include the particulars specified for such companies irrespective of the fact that the director and the member are the same person.

General Duties of a director

Following the Hong Kong Companies Registry, directors have duties to:

• Acting in good faith for the interest of the corporation is a must.
• Use power for the right reasons.
• Don’t abuse your mandate of decision-making or delegation of power without proper authorization.
• Behave prudently, carefully and adequately.
• Try to stay away from the conflict of interest between the self and the firm related matters.
• It is essential to avoid the situations where the company is favouring the interest of directors.
• Avoid abusing power
• Abstain from unauthorised uses of property.
• Avoid accepting any benefits offered by third parties.
• Conduct the business in compliance with the company’s charter.
• Keep proper account books

Fiduciary Duties of a Director in Hong Kong

Directors are legally required to uphold a set of fiduciary duties to ensure the company is managed with integrity, transparency, and accountability. These duties exist to protect the interests of the company, its shareholders, and other stakeholders.

Duty to Act in the Best Interests of the Company

Directors must always act in good faith and make decisions that benefit the company as a whole. This includes considering long-term growth, sustainability, and stakeholder interests not just short-term gains or personal benefits.

This duty requires directors to:

• Make informed decisions using reasonable care and diligence
• Stay updated with market and legal developments
• Seek professional advice when necessary

Duty of Loyalty

Directors are expected to avoid conflicts of interest and must not use their position for personal gain. They should:

• Disclose any personal or financial interest in company transactions
• Refrain from voting on matters where a conflict exists
• Prioritise the company’s needs over personal benefits

A breach of this duty may lead to legal consequences, including fines or disqualification.

Duty of Confidentiality

Directors must keep company information confidential and avoid disclosing sensitive details to external parties without proper authorisation. This applies both during and after their term of office.

Confidential information includes:

• Financial records
• Business strategies
• Client data and trade secrets

Misuse of confidential information can lead to legal penalties and reputational damage to both the director and the company.

Statutory Duties of a Director in Hong Kong

In addition to fiduciary obligations, directors in Hong Kong must comply with statutory duties outlined in the Companies Ordinance (Cap. 622) and other applicable laws. These duties ensure transparency, good governance, and legal compliance in managing a company.

Duty to Maintain Proper Accounting Records

Directors must ensure that accurate and complete accounting records are kept and maintained. These records must reflect the company’s financial position and comply with statutory reporting standards.

• Records must be retained for at least 7 years
• Non-compliance may result in fines or imprisonment

Duty to File Annual Returns

Hong Kong companies are required to file an Annual Return (Form NAR1) with the Companies Registry each year. Directors are responsible for ensuring timely submission.

• Late filings may result in penalties or prosecution

Duty to Hold Annual General Meetings (AGMs)

Unless exempt, private companies must hold an AGM within the prescribed period. Directors are responsible for arranging and managing this process.

• Failure to hold an AGM can lead to regulatory consequences

Duty to Disclose Interests

Directors must disclose:

• Personal interests in contracts or transactions involving the company
• Changes in shareholdings in the company or its associated companies

Disclosures must be made in writing and filed with the board and Companies Registry if required.

Liabilities of a Director in Hong Kong

Company directors in Hong Kong carry serious legal responsibilities. Under various laws, directors may face civil, criminal, and regulatory liabilities for breaches of duty or misconduct. The main laws governing these liabilities include the Companies (Winding Up and Miscellaneous Provisions) Ordinance (C(WUMP)O) and the Securities and Futures Ordinance (SFO).

Breach of Duties – Civil and Criminal Liabilities

Directors can be held civilly or criminally liable for:

• Untrue statements in a prospectus (under C(WUMP)O)
• Failure to act with care, skill, and diligence
• Breach of fiduciary or statutory duties

Liabilities for Company Misconduct (Under the SFO)

Directors of listed companies may face prosecution under Part XIII and XIV of the SFO for:

• Insider dealing
• False trading
• Price rigging
• Disclosure of information about prohibited transactions
• Stock market manipulation
• Disclosure of false or misleading information
• False or misleading public communications

These offenses can result in fines, disqualification, or even imprisonment.

Penalties for Non-Compliance

Directors also risk criminal liability if they fail to:

• Disclose interests in shares or debentures of listed companies
• Submit statutory filings or financial statements on time

These failures can lead to substantial penalties imposed by the Companies Registry or Securities and Futures Commission (SFC).

No Personal Liability for Insolvent Trading

Unlike many other jurisdictions with English common law roots, Hong Kong does not impose personal liability on directors for trading while insolvent. However, directors still have a duty to avoid reckless or fraudulent trading, which can attract other forms of liability.

Conclusion 

In summary, directors in Hong Kong play a crucial role in ensuring sound corporate governance, legal compliance, and strategic leadership. From understanding their appointment process and legal responsibilities to fulfilling fiduciary and statutory duties, directors must act in the best interests of the company and its stakeholders. Failure to comply with these obligations can result in significant civil or criminal liabilities. Whether you’re appointing a new director or stepping into the role yourself, it’s essential to understand these responsibilities under Hong Kong law to safeguard your company’s success and reputation.

How FastLane Group Can Help 

FastLane Group is a professional company secretary in Hong Kong providing all-rounded corporate services. We guide directors with their duties and responsibilities, making sure that they are in compliance with regulatory requirements. Our experienced team deals with directors’ appointments, resignations, and keeps record of the register. Through Fastlane, directors are well positioned to confidently manage legal complexities, place governance and compliance concerns at the back of their minds, and concentrate on the strategic leadership of their company. Contact us now.