HK Directors' Remuneration AGM Approval
HK Directors' Remuneration AGM Approval
In Hong Kong, the approval process for directors' remuneration at an Annual General Meeting (AGM) depends primarily on whether the company is a private company (governed by the Hong Kong Companies Ordinance, Cap. 622) or a publicly listed company (governed by both Cap. 622 and the HKEX Main Board / GEM Listing Rules).
1. Requirements for Listed Companies (HKEX Main Board / GEM)
For listed issuers, directors' remuneration is governed by the HKEX Listing Rules (Appendix C1 / Code on Corporate Governance) and the company’s Articles of Association.
Mechanics of Approval
General Authorization Resolution: Shareholders typically pass an ordinary resolution at the AGM authorizing the Board of Directors (or the Remuneration Committee) to fix the remuneration of directors for the forthcoming year.
Director Fees: Non-executive director fees are commonly approved as an aggregate ceiling or explicitly authorized by shareholders at the AGM.
Executive Director Remuneration & Service Contracts:
Individual executive salaries and performance bonuses are usually determined by the board upon recommendation from the Remuneration Committee under delegated authority.
Long-term Service Contracts: Shareholder approval at a general meeting (AGM or EGM) is required if a director's service contract exceeds 3 years or requires more than 3 years’ notice / compensation for termination.
Equity-Based Remuneration (Share Option / Award Schemes): Under Chapter 17 of the Listing Rules, any adoption or modification of share schemes and grants exceeding specific thresholds (e.g., grants to individual directors or connected persons) requires separate shareholder approval.
Disclosures & Reporting
Corporate Governance Report: Listed companies must publish a Remuneration Committee Report outlining the remuneration policy, performance criteria, and the structure of executive vs. non-executive packages.
Individual Disclosures: Remuneration for each director (by name, categorized by salary, fees, allowances, bonuses, and share awards) must be disclosed in the audited annual financial statements presented at the AGM.
2. Requirements for HK Private Companies
For non-listed private companies incorporated under the Hong Kong Companies Ordinance (Cap. 622):
Articles of Association: The primary authority rests with the company’s Articles of Association. Most standard articles delegate the power to fix director remuneration to the Board, unless specified otherwise.
Ordinary Resolution: If the Articles require shareholder approval or if no specific provision exists, directors’ fees are approved via an ordinary resolution (>50% vote) at the AGM.
Long-term Contracts (Section 534, Cap. 622): Shareholder approval is statutorily required for any director employment or service contract that guarantees employment for a period exceeding 3 years without company-initiated termination rights.
Dispensing with AGMs: Private companies can dispense with holding physical AGMs entirely if all shareholders pass a written resolution approving all standard business items, including directors' remuneration.
3. Summary of Standard AGM Resolutions
Resolution Type | Standard Scope | Voting Threshold |
Director Re-election | Re-electing retiring directors by rotation. | Ordinary Resolution (>50%) |
Remuneration Authorization | Authorizing the Board / Remuneration Committee to fix directors' fees. | Ordinary Resolution (>50%) |
Long-Term Service Contracts (>3 yrs) | Specific approval for executive agreements exceeding 3 years. | Ordinary Resolution (>50%) |
Share Schemes / Equity Grants | Adopting/amending share award or option schemes under Listing Rules Ch. 17. | Ordinary Resolution (>50%) |
Standard text for an AGM Resolution Authorizing the Board to Fix Directors' Remuneration for a Hong Kong Company
Here are standard draft ordinary resolutions for an Annual General Meeting (AGM) authorizing the Board of Directors to determine directors' remuneration. Choose the option that matches your company structure.
Option 1: Standard Resolution for Listed Companies
This form gives the Board (or its delegated Remuneration Committee) authority to fix all directors' remuneration, while the financial statements present the itemized figures.
ORDINARY RESOLUTION
"THAT the Board of Directors of the Company (or a duly authorized committee thereof) be and is hereby authorized to fix the remuneration of the Directors of the Company for the year ending [31 December 202X / Financial Year End Date]."
Option 2: Resolution for Private Companies or Specific Fee Structures
Use this option if shareholders approve a specific aggregate ceiling for Director Fees, while delegating authority for individual allocations.
ORDINARY RESOLUTION
"THAT the payment of Directors' fees of an aggregate amount not exceeding HK$[Amount] for the year ending [Date] be and is hereby approved, and that the Board of Directors be and is hereby authorized to allocate and distribute such fees among the Directors in such proportions and manner as the Board may determine."
Option 3: Itemized Resolution (Combined with Director Re-election)
In Hong Kong AGM notices, remuneration authorization is often combined directly into the sub-item resolutions for re-electing directors.
ORDINARY RESOLUTIONS
(a) To re-elect [Name of Director] as an Executive/Non-Executive Director of the Company;
(b) To re-elect [Name of Director] as an Independent Non-Executive Director of the Company;
(c) To authorize the Board of Directors to fix the remuneration of the Directors.
Key Legal & Drafting Considerations
Hong Kong Companies Ordinance (Cap. 622): Ensure the Company's Articles of Association allow the Board to fix its own remuneration or accept delegated authority from shareholders.
HKEX Listing Rules (Chapter 17 & Corporate Governance Code): If the company is listed on the HKEX, executive director packages and equity-based grants must align with the Remuneration Committee's terms of reference and Chapter 17 requirements, rather than being set solely by board discretion.
Exclusion of Service Contracts >3 Years: Pursuant to Section 534 of Cap. 622, any director service agreement exceeding 3 years without company termination rights requires a separate, specific resolution and explanatory statement in the circular.
HKEX Remuneration Committee Requirements
Under the Hong Kong Stock Exchange (HKEX) Main Board Rules (Rule 3.25) and the Corporate Governance Code (Appendix C1), listed companies in Hong Kong must establish a Remuneration Committee to oversee director and senior management compensation.
1. Structure & Composition Requirements
Majority Independent: The committee must consist of a majority of Independent Non-Executive Directors (INEDs).
INED Chair: The Remuneration Committee must be chaired by an INED.
Written Terms of Reference: The committee must have clear, formal written terms of reference detailing its authority and duties. These terms of reference must be published on both the HKEX website and the issuer’s website.
2. Mandatory Core Responsibilities
The committee’s terms of reference must cover, at a minimum, the following standard responsibilities:
Policy & Structure: Formulate and review the overall remuneration policy and structure for all directors and senior management, making formal recommendations to the Board.
Specific Remuneration Approvals: Review and approve management's remuneration proposals with reference to board-approved corporate goals and objectives.
Model Selection: The committee must operate under one of two framework models delegated by the Board:
Model A (Delegated Authority): The committee has delegated authority to determine the specific remuneration packages of individual executive directors and senior management.
Model B (Advisory Authority): The committee makes recommendations to the Board, and the Board ultimately determines individual packages.
Non-Executive Director Fees: Recommend fees for Non-Executive Directors (including INEDs) to the Board.
Loss of Office & Dismissal Compensation: Review and approve compensation payable to executive directors/senior management for loss of office or dismissal to ensure terms are fair, consistent with contractual terms, and not excessive.
Share Schemes Oversight (Chapter 17): Review and/or approve matters relating to share option and award schemes, including grants to executive directors or senior management.
3. Key Operational Rules & Resources
Independent Professional Advice: The committee must be provided with sufficient resources to perform its duties. Members have the right to seek independent external legal or professional advice at the company's expense if necessary.
No Self-Voting: No director or any of their close associates may participate in deciding or voting on their own remuneration package.
Consultation with Executive Management: The committee chairman should consult the Chairman of the Board and/or Chief Executive Officer regarding remuneration proposals for other executive directors.
4. Disclosure & Reporting Mandates
Corporate Governance Report: Listed companies must disclose in their annual Corporate Governance Report:
The composition of the Remuneration Committee.
Summary of work performed by the committee during the financial year.
Details of any remuneration matters/share grants reviewed.
Individual Remuneration Disclosures: Total remuneration paid to each individual director (categorized by fees, salaries, discretionary bonuses, performance-related bonuses, allowances, pension scheme contributions, and share-based awards) must be explicitly disclosed by name in the audited financial statements.
Senior Management Bands: Disclosure of senior management remuneration by pay band in the annual report.
Bestar Hong Kong: Comprehensive Guide to Company Formation, Accounting, Audit & Corporate Services
HK Directors' Remuneration AGM Approval
Key Takeaways
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Bestar offers a full spectrum of integrated financial, legal compliance, and operational services:
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3. Comparison: Managing In-House vs. Partnering with Bestar Hong Kong
Feature / Requirement | In-House Management | Partnering with Bestar HK |
Local HK Address & Secretary | Must hire/lease locally in HK | Provided by Bestar |
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Board Authorization: Bestar drafts a Board Resolution approving the resignation of your previous secretary and the appointment of Bestar.
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What does Bestar Hong Kong do?
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Why is an annual audit required for Hong Kong companies?
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