What happens if my Hong Kong company does not get audited?

Company law risks

• Directors' duty (s.379): directors must prepare compliant financial statements. A director who fails to take all reasonable steps, in respect of accounts laid before the company or circulated, commits an offence with a fine of HK$300,000. If the failure is wilful, imprisonment for 12 months can apply as well.
• Laying the accounts (s.429): the reporting documents laid before members include the auditor's report (s.357(2)). A director who fails to take all reasonable steps to secure that they are laid in time commits an offence with a fine of HK$300,000, or that plus 12 months' imprisonment if wilful. It is no defence that the statements were not in fact prepared as required.
• Auditor's role: an auditor must be appointed for each financial year (s.394). Without one there is no auditor's report.
• Court appointment: a member can ask the Court to appoint an auditor (s.398).
• Deadlines: private companies must lay and send accounts within nine months of year-end (s.431).

Other consequences

• Banks, buyers and investors may refuse to deal without audited accounts.
• IRD's guidance asks for audited accounts with the return for companies with gross income (see the answer on submitting audited accounts with the profits tax return).
• A filed return without audited accounts is a likely trigger for enquiries.

No separate offence for failing to appoint Sections 394-398 carry no offence of their own. The exposure comes through the offences above and the filing duties. If you are already late, take professional advice.

Best step Appoint an auditor now and agree a catch-up plan; late and multiple years can usually be audited together.