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Significant controllers register in Hong Kong

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Under the Companies (Amendment) Ordinance 2018 (“the Amendment Ordinance”), all Hong Kong incorporated companies must satisfy new requirements with regard to keeping significant controllers register (“SCR”). 

This is an important step to enhance the transparency of ownership and control. A company incorporated in Hong Kong is required to identify persons who have significant control over the company (“significant controllers”) and to keep a SCR and make it available for inspection by the law enforcement officers upon request.

Who is a significant controller in Hong Kong

An applicable company is required by law to determine whether they have significant controllers and establishes the identity of significant controllers.  A company has to take reasonable steps to ascertain its significant controllers (“SC”). The steps include reviewing the company’s register of members, ownership structure and shareholder agreements (if applicable) to identify and verify the identity of SC.  

 

A SC of a company includes a legal entity and a person.  The legal entity must be a member of the company. A person has significant control over a company if one or more of the following 5 conditions are met:

  • Holding more than 25% of the issued shares in the company, either directly or indirectly. In situations, where there is no share capital in the company, the person has the right to share in more than 25% of the capital or profits of the company;
  • Holding more than 25% voting rights directly or indirectly in the company;
  • Directly or indirectly having the right to appoint or remove a majority of the board of directors of the company; or
  • Having the right to exercise or actually exercises significant influence over the company;
  • Having the right to exercise or actually exercises significant influence or control over the activities of a trust or a firm that does not have a legal identity. However, the members or trustees of these trusts or firms must meet one of the above conditions.

In simple terms, a SC is:

  • Registrable person: A natural person who meets either of the above conditions; or
  • Registrable legal entity: A corporate entity, either local or overseas, which is a direct shareholder with significant control over the company.

Designated representative

An applicable company must appoint at least one person to act as its Designated Representative to provide assistance to a law enforcement officer regarding the company’s SCR. The Designated Representative for this purpose must be one of the following:

  • A member, director, or an employee of the company who is a natural person resident in Hong Kong; or
  • An accounting professional, a legal professional, or a Trust or Company Services Provider Licensee registered in Hong Kong.

Which type of company has to keep a SCR

The requirement to maintain a SCR is applicable to any company incorporated in Hong Kong i.e. companies limited by shares and/or guarantee and incorporated unlimited companies, excluding those with shares listed on the Stock Exchange of Hong Kong and those not incorporated in Hong Kong. A company that falls within the scope is known as an applicable company.

Where to keep a SCR

An applicable company is required to keep a SCR at the company’s registered office or a prescribed place in Hong Kong. The SCR should be kept either in hard copy or electronic form.

Contents of the SCR

Particulars of each of the SCs, including:

 

Registrable person

Registrable legal entity

  • Name
  • Correspondence address (PO Box is not acceptable)
  • The Hong Kong identity card number or, if the person has no identity card, the number and issuing country of a passport 
  • The date on which the person became a registrable person of the company
  • The nature of the person’s control over the company
  • Name
  • The legal entity’s registration number or the equivalent in its place of incorporation or formation
  • The address of its registered or principal office
  • The legal form of the legal entity and the law that governs it
  • The date on which the legal entity became a registrable legal entity of the company
  • The nature of the legal entity’s control over the company
  • Particulars of a registrable change in any of the SCs;
  • Name and contact details of a designated representative; and
  • Additional matters that are applicable under new Schedule 5C of the Companies Ordinance. For example, statements on where there is no SC, the company must note in the SCR that “the company knows, or has reasonable cause to believe, that it has no significant controller”.

Preparation and maintenance of a SCR

An applicable company is required to fulfil the following obligations in preparing and maintaining a SCR:

  • To take reasonable steps to identify the company’s SCs, including the giving of notices and obtaining their required particulars;
  • Entering the required particulars of its SCs in the SCR;
  • Keeping the required particulars in the SCR up-to-date; and
  • Making the SCR available for inspection and taking of copies by a law enforcement officer.

Who is authorised to access SCR

The SCR is not open to the public inspection.  Only a person whose name is entered in the SCR as a SC and the law enforcement officers for the purpose of performance of functions relating to the prevention, detection or investigation of money laundering or terrorist financing can request to inspect the SCR.  The officers include those from the following government departments or statutory bodies:

  • Companies Registry
  • Customs and Excise Department
  • Hong Kong Monetary Authority
  • Hong Kong Police Force
  • Immigration Department
  • Inland Revenue Department
  • Insurance Authority
  • Independent Commission Against Commission
  • Securities and Futures Commission

Non-compliance and offences

For an applicable company

 

Non-compliance with the requirement of keeping an updated SCR is a criminal offence.  The company and every responsible person of the company are liable to a fine.

 

For the addresses who received a notice

 

Failure to comply with the requirements laid down in the SCR notice within one month from the date of notice is an offence. The addressee of the notice along with every related person are liable to a fine.

 

For false statement

 

If someone knowingly or recklessly makes a false, deceptive, or misleading statement in the SCR, it amounts to committing an offence. The offence is liable on conviction in the form of imprisonment or fine.

Take note

It is important that an applicable company familiarizes itself with the SCR regime. If there is any change of SC or change of particulars of a SC in a company, it is required to give notice to the person within 7 days unless it was already informed of the change.

 

The company must update the register within a week following the confirmation of the revised particulars. All entries in the SCR relating to a SC may only be destroyed after 6 years from the date the person ceased to be a SC of the company.

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