Under the Hong Kong Companies Ordinance, a Hong Kong private company limited by shares must have at least 1 director, while public companies and companies limited by guarantee – at least 2 directors. If a company has 2 or more directors, they are referred to as board (or board of directors).
This role is essential for business success and comes with a number of high responsibilities. This article will take a closer look at these responsibilities and what they mean for public and private Hong Kong companies.
In summary, the company director is in charge of the following:
1. Company’s Strategic Objectives and Policies
Director (board of directors) should determine the business activities the company will actively engage in and those to avoid. These objectives should be adequate and long-term and be expressed in both physical and financial terms. Director prepares the company’s business plan based on these objectives and regularly reviews it.
The various parties involved in the business are known as stakeholders. The stakeholders include shareholders, employees, clients, suppliers, creditors, government and community, and their interests may not always coincide. Company directors serve as mediators who secure a necessary balance between the interests of different shareholders.
On the finance side, company director approves the budgets presented by the management and ensures that they are compatible with the company’s objectives.
He / she also determines the extent and priority of the company’s investments, approves major investments and policy proposals and decides on dividend policy.
2. Appointment of Company’s Top Management
Company directors of smaller companies sometimes manage day-to-day tasks, but this duty is reserved for top managements in bigger companies. Board selects the Managing Director and determines his / her contract terms. Board also evaluates the performance of managing staff, approves the remuneration and ensures the adequacy of the company’s management structure and resources for specific and general tasks.
3. Monitoring Progress towards Achievement of Objectives and Compliance with Policies
Director ensures that the company’s information systems are adequate to monitor performance and help him/ her and management make sound decisions.
Director also identifies short- and long-term vulnerabilities in the company’s financial position and monitors management performance against strategic objectives and compliance with strategic policies and, if necessary, can initiate appropriate corrective actions.
4. Giving an Account of the Company’s Activities to Different Parties
To ensure the fullest communication with shareholders, directors are statutory required to publish an annual report about the company’s performance.
Director also oversees the company’s compliance with legal requirements, such as disclosure of information, and maintains an appropriate level of transparency about the business.
How Do the Company Director’s Responsibilities Apply To Different Companies?
Public Companies
In public companies there is usually a clear distinction between direction, management and ownership, and the board’s function is more about strategic decisions. The directors of public companies operate under a tighter regime since public companies, especially if they are listed, are subject to much more stringent control than private companies.
Private Companies
Director or board of directors set up a programme of meetings with a pre-prepared agenda which will help ensure that they:
- Fulfils their legal obligations
- Prepare in advance for discussions
- Concentrate on long-term strategic direction rather than day-to-day operational management
If you have any questions regarding the role and responsibilities of Hong Kong company director, please contact us at info@sg-cs.com for further assistance.