There’s a peculiar ritual in Hong Kong business where once a year, company directors everywhere must participate in the ancient tradition of “telling the government who owns and runs your company.” Miss this ceremony, and the punishment is swift: escalating fines, potential prosecution, and the business equivalent of being marked with a scarlet letter of non-compliance.
The NAR1 Annual Return isn’t particularly complicated, but it is absolutely mandatory. Here’s everything you need to know to keep the Companies Registry gods appeased.
What is NAR1?
The “NAR” in NAR1 stands for “Notice of Annual Return”, and the “1” indicates it’s the primary or first form in this category. The NAR1 is the standard form companies use to update the Companies Registry with current information about their company structure, shareholders, directors, and registered office address on an annual basis.
It isn’t a financial statement but a legal declaration that ensures a company’s records remain accurate.
The process of incorporating a company in Hong Kong com
People sometimes act like corporate roles are mysterious and complex, but the question “Can shareholders be directors?” has a refreshingly straightforward answer: Yes, they absolutely can. In fact, it happens all the time.
The person who owns the company and the person who runs the company are often the same person, which makes intuitive sense. Why create artificial separation between ownership and management when you’re just trying to sell noodles or build an app?
Hong Kong law is quite accommodating about this arrangement, though of course there are some rules to follow. Let’s explore what you need to know.
Yes, shareholders can be directors in Hong Kong companies. This dual role is common, especially in startups and small businesses where founders want to maintain both ownership and control over daily operations.
What Is a Shareholder?
A shareholder is essentially an investor and part-owner of the company. Shareholders fund the business in exchange for shares and are entitled to a portion of the profits (i.e., dividends) and certain rights in company decisions. Under Hong Kong regulations, every limited company must have at least one shareholder.
A shareholder may be:
- An individual over the age of 18 (regardless of nationality or residency)
- A corporate entity
- Someone who also acts as a director (yes, dual roles are allowed)
Shareholding also determines ownership percentage and voting power. At incorporation, it’s crucial to decide how shares are divided, the number of shares issued, and how share transfers may be handled in the future.
What Is a Director?
A director is part of the company’s leadership team, responsible for strategic direction and operational oversight. Directors act on behalf of the company and are legally bound to act in its best interests.
All Hong Kong private limited companies must have at least one individual director, and they cannot act as the company secretary if they are the sole director.
Unlike shareholders, directors must actively manage the company’s affairs and ensure compliance with all legal, financial, and corporate obligations.
Who Can Be a Director in Hong Kong?
According to the Companies Ordinance, a director must be:
- At least 18 years old
- A natural person (at least one must be an individual, not a company)
- Of any nationality and residency (no HK residency requirement)
Note: While corporate directors are allowed in some cases, a company limited by guarantee must have at least two individual directors, and cannot appoint a corporate director.
What Are a Director’s Duties?
Directors are held to high legal standards. Their responsibilities include:
- Acting in good faith for the benefit of the company as a whole
- Exercising powers for proper purposes
- Avoiding conflicts of interest
- Not misusing company information or assets
- Maintaining accurate accounting records
- Complying with the company’s constitution and shareholder resolutions
Failure to meet these obligations can result in penalties, fines, or legal action.
Important Considerations for Those in Both Roles
While it’s perfectly legal to be both a shareholder and director, remember:
- The sole director cannot also be the company secretary
- It’s advisable to separate ownership and management in more complex or growing companies for better governance and checks and balances
The Relationship Between Shareholders and Directors
While directors run the company, shareholders have ultimate authority through their voting rights. They can:
- Override director decisions via special resolutions
- Remove directors (in most cases)
- Amend the Articles of Association to adjust governance structures
This balance of power is key to good corporate governance.
Final Thoughts
The overlap between shareholders and directors is not just permitted in Hong Kong—it’s common practice. But understanding the legal distinctions between owning a company and running it remains important. Whether you’re just incorporating your Hong Kong company or scaling up, getting this structure right can save you legal trouble down the line.
Need Help Setting Up Your Company in Hong Kong?
At Monx, we guide founders through incorporation, share structuring, and director appointments—plus we offer virtual offices, accounting, and company secretary services to keep you compliant and focused on growth.
Get in touch with our consultants at hello@monx.team or book a free consultation today.
