Eligible private company

 

The private company must not exceed any two of the following:

(a) Total annual revenue of HK$200 million

(b) Total assets of HK$200 million at the end of the reporting period

(c) 100 employees

 

At least 75% of the voting rights must pass a resolution at a general meeting that the company is to fall within the reporting exemption for the financial year, with none objecting either at the meeting or otherwise in writing.

 

The resolution is defeated if any member objects either at the meeting or at any time by giving notice in writing to the company, provided that written notice is given at least 6 months before the end of the financial year to which the objection relates. 

 

Alternatively, the company may pass a written resolution under section 548(1), which can be passed without a meeting and without any previous notice being required, for falling within the reporting exemption. A written resolution is passed when all eligible members have signified their agreement to it (section 556(a)).

 

(Sections 359(1)(c), 360(1), 362, Schedule 3 sections 1(3), (4) and 2 of the new Companies Ordinance)

 

 

 

Group of eligible private companies

 

(a) Each company in the group must meet either the size test of small private company or larger "eligible" private company; and

(b) The aggregate amounts for the group in total must not exceed 2 out of 3 of the size tests for larger "eligible" private companies.

 

All the companies in the group individually, as well as the parent of the group, must have obtained the necessary shareholder approval (except for those subsidiaries within the group that fall within the "small private company" category)

 

(Sections 359(2)(a),(b) and (c)(ii), 360(2), 365, Schedule 3 sections 1(10), (11), (12) and 2 of the new Companies Ordinance)

 

 

 

Eligibility: Change in ownership after general meeting

 

The new CO or SME-FRF & SME-FRS (Revised 2014) contains no specific requirement mandating that a larger “eligible” private company (a company that complies with sections 359(1)(c) and 360(1)) must pass a new resolution at a general meeting to re-confirm its eligibility to use the SME-FRF & SME-FRS (Revised 2014) following a change in ownership. Therefore, if the new shareholders are in agreement with the earlier decision to use the SME-FRF & SME-FRS (Revised 2014), then no further action is required.

 

If the new shareholders disagree with the earlier decision and it is at least 6 months before the end of the financial year, then they may exercise their right to object under section 360(3), causing the company to be ineligible for the reporting exemption. In all other cases of disagreement, the new shareholders may consider seeking legal advice as to their ability to call for another vote and/or their rights (if controlling shareholders) to reverse the earlier decision.

 

 

 

Eligibility: Shareholders’ approval in subsequent years

 

A larger “eligible” company (or group) will not have certainty about their ability to adopt the SME-FRF & SME-FRS (Revised 2014) until the later of a successful shareholder vote and a date 6 months before the end of the financial year in question.

 

Therefore, even if a larger “eligible” company attempts to pass a resolution to adopt SME-FRF & SME-FRS (Revised 2014) for more than one year, it needs to be aware that the objection period will remain open for future years.

 

 

 

 

Source: http://www.hkicpa.org.hk/en/standards-and-regulations/standards/sme-frf-frs/smefrfre/

             http://www.hkicpa.org.hk/en/standards-and-regulations/standards/new-co/qa-index/pd-sme-frf-frs/#qd1