11 Oct 2014
A Summary on the conditions for the Reporting Exemption under the 2014 HK Companies Ordinance (Part 1)
The Hong Kong Companies Ordinance (Cap 622) took effect on 3rd March 2014. The requirement under Part 9 relating to the financial statements will come into operation for the accounting year beginning on or after that date. Where the company closes its book at the end of March every year, the requirement shall first apply to the financial statements for the year ending 31st March 2015.
Section 359 under Part 9 of the Companies Ordinance (the new CO) provides that, 7 categories of companies, given that they meet specified conditions in terms of size of business, legal structure and member’s consent in writing, can adopt simplified financial reporting (the reporting exemption) in the preparation of the financial statements for a financial year, as defined. 1
Exclusion from exemption scope
Subsection (4) of S359 excludes certain companies from the benefit of reporting exemption, if these companies (the excluded companies), whether as a single company or the holding company of a group of companies, carry on the banking, insurance, securities business and, in the case of non-financial institutions, accept loans at interest or repayable at premium, other than on terms involving the issue of debentures or other securities, at any time during the financial year in question.
It is useful to understand the conditions for reporting exemption. A company that meets the condition for reporting exemption is eligible for the exemption from preparing the business review under section 388(3), which is the burden for the small and medium size companies.
A summary on the conditions under which the reporting exemption is applicable under Part 9 of the new CO is given below, by each type of companies.
1. See the definition of financial year in a separate Article (Part 3).
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