Nov 2026
It is not uncommon for Hong Kong-listed companies incorporated in Bermuda to encounter difficulties in which their audited financial statements are not available in time for the annual general meeting. Whether due to delays in the audit process, a change of auditor mid-cycle or other operational reasons, the question of how to proceed with the annual general meeting (AGM) while deferring the laying of accounts arises with some regularity. This article provides a high-level overview of the key considerations that the board of directors of a Bermuda company should bear in mind in such situations.
Key Points
- Where the annual financial statements have not been laid, the chairman of the AGM may adjourn the meeting for up to 90 days, or such longer period as the shareholders may agree. The laying of accounts should instead be placed as the last substantive item on the AGM agenda, because an adjournment takes effect immediately.
- Removing an auditor before the end of its term requires a resolution passed by at least two thirds of the votes cast, and an incoming auditor must first request a written statement from the outgoing auditor.
- Directors who fail to take all reasonable steps to comply with the requirement to lay financial statements risk a fine under section 84(4) of the Companies Act 1981, and the AGM circular should address the status of the audit and any HKEx Listing Rules disclosures.
What Must Directors Do About Financial Statements Before the AGM?
Directors of Bermuda companies should note that section 84(4) of the Bermuda Companies Act 1981 (the “Act”) imposes a potential fine on any director who fails to take all reasonable steps to comply with the requirement to lay financial statements. The Act provides that a director is not liable where the director had reasonable grounds to believe, and did believe, that a competent and reliable person was charged with the duty of ensuring compliance and was in a position to discharge it. Whilst the sanction is rarely imposed, directors should take care not to fall foul of the requirement.
Can a Bermuda Company Adjourn Its AGM if the Accounts Are Not Ready?
Under the Act, directors are required to lay the annual financial statements before the company in general meeting. The bye-laws of Bermuda companies commonly impose an obligation to send a copy of the annual financial statements to shareholders before the AGM and to lay those statements before the meeting. Where a company proceeds to hold its AGM without the financial statements having been prepared or sent, it risks being in technical breach of both the Act and its bye-laws. Fortunately, the Act addresses this situation, providing that where annual financial statements should have been laid at a general meeting but have not been laid, the chairman of the meeting may adjourn the meeting for a period of up to 90 days or such longer period as the shareholders may agree. The provisions under the bye-laws governing adjournment of meetings should also be complied with.
How Should the AGM Agenda Be Sequenced if the Accounts Are Not Ready?
A question of practical importance is the sequencing of resolutions at the AGM. Historically, for HKEx-listed companies, the laying of accounts to shareholders would invariably be the first item of business at the AGM, followed by routine items such as the re-election of directors and the granting of general mandates. Given that an adjournment takes effect immediately, and to avoid the need to seek the consent of the shareholders present at the meeting to re-order the business of the meeting, careful thought should be given to the order of business on the agenda. Having the laying of accounts as the last substantive item of business would allow all other business to have been considered and voted upon, prior to adjourning the meeting due to the unavailability of the accounts.
What Happens if the Company Is Also Changing Its Auditor?
The position becomes more complex where the company is also seeking to change its auditor. Under Bermuda law, the removal of an auditor before the expiration of its term of office requires a resolution passed by at least two-thirds of the votes cast at a general meeting with sufficient prior written notice to the current auditor and the proposed new auditor. Bermuda law also provides that no person shall accept appointment as auditor of a company until that person has requested and received from the outgoing auditor a written statement of the circumstances and reasons for the replacement, unless no response is received within the time prescribed by the Act.
What Should Be Disclosed in the AGM Circular?
Given the potential for uncertainty where a company does not table its audited financial statements at its AGM, companies should be mindful of the disclosures made in the AGM circular regarding the estimated timing for, or the status of, the audit, the company’s plans for the appointment of a new auditor and any matters required to be disclosed under the HKEx Listing Rules.
What Are the Key Takeaways for Boards?
The procedure for holding an AGM, where audited accounts are not yet available, involves careful consideration of the Act, the company’s bye-laws and the HKEx Listing Rules. While Bermuda law provides mechanisms to accommodate certain delays, the specific arrangements will depend on the company’s bye-laws and the particular circumstances. Companies facing these issues are encouraged to seek Bermuda law advice at an early stage to manage their situation appropriately.
Frequently Asked Questions
Can a Bermuda Company Adjourn Its AGM if the Audited Accounts Are Not Ready?
Yes. Where the annual financial statements should have been laid but have not been, the chairman may adjourn the meeting for up to 90 days, or such longer period as the shareholders may agree, subject to the adjournment provisions in the company’s bye-laws.
Where Should the Laying of Accounts Sit on the AGM Agenda?
As the last substantive item, because an adjournment takes effect immediately and all other business should be considered and voted upon before the meeting is adjourned.
What Is Required to Remove an Auditor of a Bermuda Company Before Its Term Expires?
A resolution passed by at least two thirds of the votes cast at a general meeting, with sufficient prior written notice to both the current and the proposed auditor, and the incoming auditor must first request a written statement of the reasons for the replacement from the outgoing auditor.
If you would like to learn more about the various ways Conyers can assist, please contact Richard Hall, Michael Yu or your usual contact at the firm.