Is a Hong Kong company legally required to keep accounting records?

Section 373 sets the duty. The records must be good enough to:

• show and explain the company's transactions;
• disclose, with reasonable accuracy and at any time, its financial position and financial performance; and
• let the directors check that the financial statements comply with the Ordinance.

The duty applies to every company, including one that is not trading, one that qualifies for simplified reporting, or one that is dormant (a dormant company is exempt from audit but must still keep records). It sits with the directors, not with an outside bookkeeper or the company secretary, although directors can delegate the work.

Separately, anyone carrying on a business in Hong Kong, including sole proprietors and partnerships, must keep records of income and expenditure under section 51C of the Inland Revenue Ordinance so that assessable profits can be worked out. Failing to do so without reasonable excuse can bring a fine of up to HK$100,000.

A company's duty is not met by keeping bank statements in a drawer. The records should be organised so that a director, auditor or the IRD can follow any entry back to its source document. The full list of penalties is in the answer on penalties for not keeping accounting records.

This is general information, not legal advice or a substitute for your statutory audit.