What is a directors' report in Hong Kong and who signs it?

Under section 388 of the Companies Ordinance, directors must prepare a report for each financial year.

Content. It contains the information prescribed by the Ordinance and its regulations. Companies that do not qualify for simplified reporting must also include a business review (Schedule 5, an assessment of the company's business, covering matters such as risks and key performance indicators). A private company outside the reporting exemption can opt out of the business review by special resolution (a resolution passed by at least 75% of the votes cast) passed at least 6 months before the end of the year.

Reduced content for exempt companies. If the company falls within the reporting exemption, no business review is required, and some items may be omitted: directors' interests in share or debenture arrangements, donations, reasons for resignations, and directors' material interests in significant transactions.

Approval and signing (s.391). The directors approve the report, and it is signed on their behalf by a director or the company secretary, whose name must appear on every copy.

Penalty for not preparing it: directors who fail to take all reasonable steps face a fine of HK$150,000 (HK$150,000 plus 6 months' imprisonment if wilful).