Legal liabilities of non-director shareholder

[tparker]

If someone is a minority shareholder of a company, previously a director but since resigned, what are their legal liabilities?

For more background:

• Say for simplicity sake, 1/3 ownership and director when registered.
• Company did nothing and remains a shelf company only.
• Other 2 x 1/3 owners are AWOL, out of country, and not responding.
• Resigned as director in light of the above and want nothing more to do with this business.
• Can't rid of shares as nobody to take them up.

If I'm not mistaken, the 1/3 ownership only means no power to force through any changes / force closure of company etc...

Regarding legal liabilities: 1) if BR remains perpetually unpaid 2) non-complains possibly with some other ordinances, such as legal requirement to display sign at office etc...

Bearing in mind said person above has resigned from directorship... what other possible consequences remain?

Thanks

[bobly]

very generally speaking, unless there was fraud during the time you were director (and perhaps the standard is actual or implied knowledge), you should have no liability as a shareholder. if it's a shelf company and has no activities, then renewing BR isn't an issue. If it never had activities, then a lot of issues would be irrelevant.

that said, you might want to hire a company secretary agent (or talk to one as an introduction) to see if they can tie up loose ends. for example, even if you resigned formally, the company still has to register those changes with CR. personally, I would want my name off the director list as in HK, those are public.

[Shiojiri Hiro]

yea - get yourself off the list otherwise it may affect future directorships. if you have some sort of professional qualification it might affect that too. of course if you are employment and change jobs it will show up if any background check is conducted

[tparker]

Thanks.

I've just done a company search and confirmed that said person (it's not me) is no longer a director - so the ND4 form sent back 2022 was taken care of.

In that case it sounds like we need not worry, and will just ignore whatever mail CR are sending.

Company has no activities and I believe never did either.

Thanks!

[PLamHK]

will just ignore whatever mail CR are sending.

This seems unwise to me. If the Companies Registry sends you mail then I strongly recommend not ignoring it!

[tparker]

This seems unwise to me. If the Companies Registry sends you mail the I strongly recommend not ignoring it!

... it would be on the basis of all of the above. Though curiosity will probably get the better of said person anyways so will see what the letters say.

But with both directors being foreigners & overseas, and being a minor shareholder without the power to do anything else (ideally just want to get out of it) - well I'm sure there are many similar cases of individuals being stuck in a corner and surely there would be a reasonable precedent for how CR and IRD would deal with this.

[GRRR]

https://www.cr.gov.hk/en/faq/faq-compliance.htm

Does the company have a Company Secretary and any remaining Directors? By law, the company must have at least one Company Secretary and one Director.

As stated on the Companies Registry website:

"If a company fails to comply with the requirements of the Companies Ordinance, the company and every responsible person of the company, including every director, company secretary and manager of the company, are liable to prosecution and, if convicted, default fines."

The Company and responsible persons will receive a court summons, and failure to appear in Court may lead to contempt of court proceedings.

"If a person upon whom a summons is served fails to appear in Court without a good reason, he / she may be in contempt of court and punished accordingly."

surely there would be a reasonable precedent for how CR and IRD would deal with this.

Yes, there is. The reasonable precedent is huge fines and prosecution for contempt of court.

I would not be so callous as to ignore letters from the CR.

[WineLuver]

it will show up if any background check is conducted

curious, i am partner-director of a unlimited partnership (not a limited “company” registered in CR).

during background check it did not show up. Also did not show directorship in Transunion.

is it more of a background check matter if director of a incorporated company?

[traineeinvestor]

This seems unwise to me. If the Companies Registry sends you mail then I strongly recommend not ignoring it!

I agree with this.

Apologies if I missed it in the previous posts, but if any of the company's non-compliance took place while OP was still a director, they will need to deal with it sooner or later - and better to open a dialogue with CR before they decide to commence prosecution than after.

If the CR correspondence does not have OPs name on it, then they could consider mailing to back to CR with a cover letter explaining the situation.

[tparker]

I would not be so callous as to ignore letters from the CR.

Probably sound advice. Unfortunately it was registered mail that was signed for by someone who didn't know better - so we can hardly claim non-receipt. Ultimately curiosity did get the better of us and the letter was opened: turns out it's just CR notifying us that the company will be struck off. Which is a win.

If this was anything to go by, it shows CR does have some common sense then. No point prosecuting two non-HKID and non-HK domicile directors, and the only shareholder found to have HKID is a minor one without power to do anything on their own.

For future reference, I'd say this has happened in the space of about 4-5 years since non-payment of BR fees.