Can a Hong Kong company lend money to its directors? What does Part 11 of the Companies Ordinance say?
Not freely. Section 500 prohibits a company from making a loan to a director, or to a body corporate the director controls, or guaranteeing such a loan, without the prescribed approval of its members. The Ordinance lists exceptions, including small amounts up to 5% of net assets and expenditure for the company's business.
Part 11 of the Companies Ordinance regulates dealings between companies and their directors.
The core rule (s.500). Without the prescribed approval of its members, a company must not make a loan to a director (or to a body corporate controlled by a director), or give a guarantee or security for such a loan. Similar rules cover loans to directors of a holding company, and quasi-loans and credit transactions for certain specified companies (ss.501-503).
Exceptions include
- aggregate transactions that do not exceed 5% of net assets (or of called-up share capital if there are no relevant statements) (s.505);
- funds to meet expenditure for the company's purposes or to perform duties as an officer (s.506);
- defence-of-proceedings costs in defined cases (s.507);
- certain home loans (s.509);
- lenders acting in the ordinary course of business on arm's-length terms (s.511);
- intra-group transactions (s.512).
Approval (s.496). The members' resolution must be passed before the loan, after every member is sent a memorandum stating the nature, amount and purpose of the loan. Section 518 covers loss-of-office payments, not loans.
Breach (ss.513-514). Part 11 attaches civil consequences, not a fine: the loan is voidable at the company's instance, and the director concerned and any director who authorised it can be liable to account for any gain and to indemnify the company for loss. Members can affirm the loan within a reasonable period.
Disclosure. Loans and quasi-loans to directors must be disclosed in the notes to the financial statements (s.383).
In practice: a debit balance on a director's current account can amount to a loan. Take advice before the company funds a director personally, and document member approval where it is needed.
Legal basis
- Companies Ordinance (Cap. 622), ss.383, 496, 500-514
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
- 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.
- 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.
- Which documents should a Hong Kong business keep for its books?Keep every document that supports an entry in your books: sales and purchase invoices, receipts, bank statements, contracts, payroll and MPF records, asset purchase papers, loan agreements, and stocktake sheets. The test is whether someone else could trace any figure back to its source.
- Can a Hong Kong company keep its accounting records digitally or scan paper originals?Yes. The Companies Ordinance allows records in hard copy or electronic form, provided they stay available for reference and can be reproduced on paper. The IRD also accepts electronic books and scanned source documents if integrity, legibility and origin details are preserved, and no prior approval is needed.