What Is a Director's Current Account in Hong Kong?

How it works

• The director pays a company expense personally, or puts money into the company: credit the account (the company owes the director).
• The company pays a personal expense or hands the director cash: debit the account (the director owes the company).

Why the balance matters

• A credit balance is a liability of the company to the director.
• A debit balance is effectively a loan to the director. Section 500 of the Companies Ordinance restricts companies from making loans to directors, or to companies they control, without the prescribed approval of members, subject to exceptions (see: Can a Hong Kong company lend money to its directors?).
• Loans and similar dealings with directors must be disclosed in the notes to the financial statements (s.383).

Good practice

1. Keep one clearly labelled account per director.
2. Support every entry with a receipt, claim form or written note.
3. Do not net personal and business items quietly; record each one.
4. Review the balance at every month end and again at year end. Agree it with the director in writing, and discuss any debit balance with your accountant before the year end.

The record also helps the auditor, who will ask about director balances.