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.
Companies Ordinance (Cap. 622)
- Failure to keep adequate accounting records (s.373), to keep them in the right place (s.374) or to preserve them for seven years (s.377): the director commits an offence, with a fine of HK$300,000.
- If the failure to take all reasonable steps is wilful: HK$300,000 and imprisonment for 12 months.
- Defence: the director reasonably believed that a competent and reliable person was charged with the duty and in a position to do it.
- Not allowing a director to copy records (s.375): a level 5 fine (HK$50,000) plus HK$1,000 for each day the breach continues.
- Records not adequately recorded (s.376(1)): a level 3 fine (HK$10,000) plus HK$300 a day. No safeguards against falsification, or electronic records that cannot be printed (s.376(3)-(4)): a level 3 fine (HK$10,000). These fall on the company and every responsible person.
Inland Revenue Ordinance (s.51C)
- A fine of up to HK$100,000 for failing, without reasonable excuse, to keep sufficient records.
Indirect costs. Poor records usually lead to delays in the audit, estimated or disputed tax assessments, higher accounting fees to rebuild the books, and difficulty proving deductions.
The fine levels come from Schedule 8 of the Criminal Procedure Ordinance (Cap. 221). These are maximums set by statute; actual outcomes depend on a court's decision.
Legal basis
- Companies Ordinance (Cap. 622), ss.373-377
- Inland Revenue Ordinance (Cap. 112), s.51C
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.
- 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.
- 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.
- 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.