How can I catch up when my company's books are years behind?
Collect all bank statements and documents first, rebuild the ledger one year at a time from the bank records, then reconcile, close each year and prepare the overdue financial statements for audit. Directors remain exposed while records are inadequate, so start promptly and get professional help for the older years.
Hong Kong law requires records that can explain transactions and show the position at any time (s.373), and it holds directors responsible. Backlog does not remove the duty, so the aim is to restore compliant records as early as possible.
A workable catch-up plan
- Gather everything: request statements for all bank, card and payment-platform accounts for each year. Collect invoices, contracts, payroll and MPF records, and loan agreements.
- Work in date order, one financial year at a time, so each year's closing balances become the next year's opening balances.
- Start from the bank, because it is the most complete record. Code every line, then match to documents.
- List the gaps: missing receipts, unexplained transfers, personal items. Ask the director to confirm, in writing, what each was.
- Reconcile bank, receivables, payables, loans and payroll for each year-end.
- Prepare the financial statements for each overdue year, then arrange the audit.
- Tax filings: talk to your tax adviser early about late returns; the IRD can prosecute a failure to furnish a return in time (a fine of HK$10,000 plus treble the tax undercharged, s.80(2)) and may also impose additional tax under its Penalty Policy.
Section 433 also makes late delivery of reports to members an offence.
Once caught up, keep current with monthly reconciliation to avoid repeating the problem.
Legal basis
- Companies Ordinance (Cap. 622), ss.373, 429-433
Sources
Applies to 2026 · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Related questions
- What does section 51C of the Inland Revenue Ordinance require from my business?Anyone carrying on a trade, profession or business in Hong Kong must keep enough records, in English or Chinese, to work out assessable profits, and keep them for at least 7 years. Failing to do so without reasonable excuse can lead to a fine of up to HK$100,000.
- What are the penalties for failing to keep proper accounting records in Hong Kong?Under the Companies Ordinance, a director who fails to take all reasonable steps faces a fine of HK$300,000, and a fine plus up to 12 months' imprisonment if wilful. Under the Inland Revenue Ordinance, failing to keep business records without reasonable excuse can bring a fine of up to HK$100,000.
- When must MPF contributions be paid, and what happens if they are late?Contributions are generally due by the 10th of the following month for the previous wage period, paid through the eMPF Platform. Late payment can bring a charge of the greater of HK$5,000 or 10% of the amount due, a 5% surcharge on default amounts, and criminal penalties of up to HK$450,000 and four years' jail in serious cases.
- Is a Hong Kong company legally required to keep accounting records?Yes. Section 373 of the Companies Ordinance (Cap. 622) requires every company to keep accounting records that explain its transactions and show its financial position and performance at any time. Directors who fail to take all reasonable steps risk a fine of HK$300,000, and up to 12 months' jail if the failure is wilful.
- How long must a Hong Kong company keep its accounting records?Seven years. Under section 377 of the Companies Ordinance, a company must keep its accounting records for 7 years after the end of the financial year to which the last entry relates. The Inland Revenue Department separately requires business records to be kept at least 7 years after the transactions they relate to.