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 now satisfy new requirements with regard to keeping Significant Controllers Register (SCR).
Being compliant with the Companies Ordinance is an important step to enhancing the transparency of the company ownership and control for the Hong Kong incorporated company.
All Hong Kong incorporated companies are required to identify persons who have significant control over the company (i.e. Hong Kong significant controllers) and to keep a Significant Controllers Register that is readily available for inspection for the law enforcement officers upon request.
Overview:
Who is a significant controller in Hong Kong?
An applicable company is required by law to determine whether they have significant controllers and to establish their identities.
A Hong Kong company has to take reasonable steps to ascertain its significant controllers (SC).
These steps to determining who significant controllers are include reviewing the company’s register of members, ownership structure, and shareholder agreements (if applicable). These steps identify and verify the identity of the persons who hold significant control in the company.
A significant controller of a Hong Kong company includes a legal entity and a person. The legal entity must be a member of the company and be listed as such in the companies registry.
A person has significant control over the company if one or more of the following 5 conditions are met:
- Holding more than 25% of the issued shares in the Hong Kong business, and this is applicable regardless of whether the person is holding shares 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.
- Holds directly or indirectly the right to appoint or remove a majority of the board of directors of the company.
- Having the right to exercise, or actually exercises, significant influence over the company.
- Having the right to exercise, or actually exercises, significant control over the activities of a trust or a firm that does not have any legal entities. However, it’s important that the trustees of these trusts of firms as the members satisfy one of the above conditions.
In simple terms, a significant controller can hold control over the company if they are either a:
- Registrable person: A natural person who meets either of the above conditions; or
- Registrable legal entity: A corporate legal person, either local or overseas, which is a direct shareholder with significant control over the company.
Designated representative
An applicable company is obliged to appoint at least one person to act as its Designated Representative to provide assistance to law enforcement officers regarding the company’s Significant Controllers Registers.
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.
- An accounting professional, a legal professional, or a Trust or Company Services Provider Licensee registered in Hong Kong.
Which types of companies have to keep an Significant Controllers Register (SCR)?
The requirement to maintain a Significant Controllers Register is applicable to any company incorporated in Hong Kong.
This refers to Hong Kong companies limited by shares and/or guarantee and incorporated unlimited companies. This excludes those with shares listed on the Hong Kong Stock Exchange (HKEX) and those not incorporated in Hong Kong as they cannot appoint a person who will hold control over the company.
A Hong Kong based company that falls within this scope is known as an applicable company.
Where do you keep an SCR?
All Hong Kong companies that carry the status of an applicable company are required to keep a Significant Controllers Register at the company’s registered office or a prescribed place in Hong Kong.
The Significant Controllers Register should be kept either in hard copy or electronic form and will describe the legal entity’s control over the company in great detail.
What are the contents of an SCR?
Particulars of each of the Significant Controllers include the following:
| Registrable person | Registrable legal entity |
|
|
For both:
- Particulars of a registrable change in any of the significant controllers.
- Name and contact details of a designated representative.
- Additional matters that are applicable under new Schedule 5C of the Companies Ordinance. For example, statements in which there are no significant controllers, it’s stated in the Companies Ordinance that the company must note in the Significant Controllers Register that “the company knows, or has reasonable cause to believe, that it has no significant controller”.
Preparation and maintenance of an SCR
An applicable company is required to fulfill the following obligations in preparing and maintaining a Significant Controllers Register:
- To take reasonable steps to identify the company’s significant controllers, including the giving of notices and obtaining their required particulars.
- Entering the required particulars of its significant controllers in the Significant Controllers Register.
- Keeping the required particulars in the Significant Controllers Register up-to-date.
- Making the Significant Controllers Register available for inspection and taking of copies by a law enforcement officer.
Who is authorized to access an SCR?
The Significant Controllers Register is not open to public inspection.
Only a person whose name is entered in the Significant Controllers Register as a significant controller 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 Significant Controllers Register.
The officers include those from the following Hong Kong 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 offenses
For an applicable company
Non-compliance with the requirement of keeping an updated Significant Controllers Register is a criminal offense. The Hong Kong company and every responsible person of the company are liable to a fine.
For the addressee that received a notice
Failure to comply with the requirements laid down in the Significant Controllers Register notice within one month from the date of the notice is an offense. The addressee of the notice along with every related person is liable to a fine.
For false statement
If someone knowingly or recklessly makes a false, deceptive, or misleading statement in the Significant Controllers Register, it amounts to committing an offense. The offense is liable on conviction in the form of imprisonment or fine.
Take note
It is important that an applicable company familiarizes itself with the Significant Controllers Register regime in order to stay compliant with Hong Kong’s laws.
If there is any change in Significant Controllers or in their particulars, it is required to give notice to the same 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 and keep their Significant Controllers Register up to date.
All entries in the Significant Controllers Register relating to a significant controller may only be destroyed after 6 years from the date the person ceased to be a significant controller of the company, i.e. after that person’s control stopped existing in the company.
