Implementation of Significant Controllers Register

 In Hong Kong

Overview
The Companies (Amendment) Ordinance 2018 (“the Amendment Ordinance”) introduces new requirements on the keeping of Significant Controllers Registers by companies. The Amendment Ordinance will come into operation on 1 March 2018.

To enhance transparency of corporate beneficial ownership in order to fulfill Hong Kong’s international obligations, the Companies Ordinance (Cap. 622) is amended to require a company incorporated in Hong Kong to obtain and maintain up-to-date beneficial ownership information by way of keeping a Significant Controllers Register. The Register should be open for inspection by law enforcement officers upon demand.

Which Company has to keep a Significant Controllers Register
The requirement to keep a SCR applies to all companies formed and registered under the CO or a former Companies Ordinance, namely locally incorporated companies, including:-

  • companies limited by shares
  • companies limited by guarantee
  • unlimited companies

Companies which have their shares listed on the Stock Exchange of Hong Kong are exempted from the requirement.

What is Significant Control
A person has significant control over a company if one or more of the following 5 conditions are met:-

  • The person holds, directly or indirectly, more than 25% of the issued shares in the company or, if the company does not have a share capital, the person holds, directly or indirectly, a right to share in more than 25% of the capital or profits of the company
  • The person holds, directly or indirectly, more than 25% of the voting rights of the company
  • The person holds, directly or indirectly, the right to appoint or remove a majority of the board of directors of the company
  • The person has the right to exercise, or actually exercises, significant influence or control over the company
  • The person has the right to exercise, or actually exercises, significant influence or control over the activities of a trust or a firm that is not a legal person, but whose trustees or members satisfy any of the first four conditions (in their capacity as such) in relation to the company

A significant controller of a company includes a registrable legal entity and a registrable person.

Registrable Legal Entity
A registrable legal entity is a legal entity which is a member of the company and has significant control over the company.

Registrable Person
The registrable person is a natural person or a specified entity that has significant control over the company. Each of the following bodies is regarded as a specified entity:

  • A corporation sole
  • A government of a country or territory, or part of a country or territory
  • An international organization whose members include 2 or more countries or territories (or their governments)
  • A local authority or local government in a country or territory

A natural person or specified entity that has significant control over the company is a registrable person of the company if:–

  • The person or entity holds shares or rights in the company through a registrable legal entity of the company; or
  • The person or entity holds shares or rights in the company through a chain of registrable legal entitles (including non-Hong Kong companies)

Contents of Register

  • The required particulars of every significant controller of the company
  • The particulars of any registrable change with respect to each significant controller of the company
  • The name and contact details of a designated representative
  • All additional matters required under the new Schedule 5C of the CO

A company must keep a SCR even if it does not have a registrable natural person or a registrable legal entity. If the company knows that it has no registrable person or registrable legal entity, it must state this fact in the SCR. A company must keep its SCR at the company’s registered office or a place in Hong Kong. All entries in the SCR relating to a significant controller may be destroyed only after 6 years from the date the person ceased to be a significant controller of the company.

Designated Representative
A company must designate at least one person as its representative to provide assistance relating to the company’s Significant Controllers Register to a law enforcement officer. A company’s designated representative 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 TCSP licensee as defined in the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, Cap. 615 (“AMLO”) and licensed under the AMLO to carry on trust and company service business in Hong Kong.

Penalties
Failure to comply with the above obligations is a criminal offence. The company and every responsible person of the company are liable to a fine at level 4 (i.e. $25,000). Where applicable, there is a further daily fine of $700.