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Under the new Companies Ordinance (”CO”) (Cap. 622), starting from the financial year-end of 2015, all HK incorporated companies will be required to present a business review in the director’s report except for those falling within reporting exemption. In response to the new requirement, we have picked some FAQs as follows for you to get yourself prepared:
1. Can I Be Exempted?
If your company falls into 1 of the 3 categories below, you will be exempted :
  1. A wholly owned subsidiary of another body corporate.
  2. A company that falls within the reporting exemption (i.e. small private company that satisfies at least 2 out of 3 of the following statements) :
    Annual revenue not exceeding HK$100 million.
    Total assets not exceeding HK$100 million.
    Average number of employees not exceeding 100.
  3. A special resolution is passed at least 6 months before the end of the financial year, by the members to the effect that the company is not to prepare a business review.
2. My Company Is Not Exempted, What Should I Prepare Now?
The business review will form part of the director’s report in your audited financial statements and so you can work with your audit advisor to add this part in your director’s report started from this financial year. The structure guideline of a business review is very clear indeed, please refer to Q3 below for what it will contain.
Or, you can prepare a special resolution for opting out of preparing a business review. Once your company has passed this special resolution, the effect will last forever until the company members revoke that by another special resolution. E.g. If your company’s fiscal cut-off date is 31 March 2016, you will need to pass the resolution on or before 30 September 2015 (i.e. at least 6 months before the end of the financial year). If you require assistance in preparing such a special resolution for filing to the Companies Registry, please feel free to contact our company secretarial team at any time.
3. What Are Included in a Business Review?
  1. A fair review of the company’s business;
  2. A description of the principal risks and uncertainties facing the company;
  3. Particulars of important events that have occurred since the end of the financial year;
  4. An indication of likely future development in the company’s business;
  5. An analysis using financial key performance indicators;
  6. A discussion on the company’s environmental policies and performance, and its compliance with the relevant laws and regulations that have a significant impact on the company;
  7. An account of key relationships significantly impacting the company and on which the company’s success depends, e.g. employees, customers and suppliers.
4. My Company Is Not Incorporated in HK, Am I Affected?
No. Only HK incorporated companies are affected. By the way, even if your company is incorporated in HK, as long as the corporate falls within the reporting exemption as stated in Q1 above, you are not required to prepare a business review.