Do I need consolidated accounts for my Hong Kong holding company?

General rule (s.379(2)) If a company is a holding company at the end of the financial year, the directors must prepare consolidated financial statements instead of single-entity ones.

Exceptions (s.379(3))

• The company is a wholly owned subsidiary of another body corporate.
• It is a partially owned subsidiary and the directors notified members in writing at least 6 months before year-end of an intention not to consolidate, and no member asked for consolidated statements by 3 months before year-end.

Small groups A holding company of a group of small private companies can fall within the reporting exemption (s.359(2)). Group limits are aggregate: revenue up to HK$100 million, total assets up to HK$100 million and no more than 100 employees (Schedule 3). Where the company falls within the exemption, one or more subsidiary undertakings may be excluded from the consolidation (s.381(2)).

Audit Consolidated accounts are still audited. Overseas subsidiaries' auditors may be needed, and the auditor may require the company to obtain information from them (s.412(4)-(6)).

Offences Directors failing to take reasonable steps to prepare compliant statements face a fine of HK$300,000 (s.379(4)).

Check the group structure with the auditor early, including any overseas entities.