What you need to know about Significant Company Registry in Hong Kong
The Companies (Amendment) Ordinance 2018 has come into operation on 1 March 2018. New requirements were introduced under the Ordinance to enhance transparency of corporate beneficial ownership.
The Hong Kong Government is committed to fulfill its international obligations and enhance its tools to tackle money laundering and terrorism financing under the AMLO (Anti-Money Laundering and Counter-Terrorist Financing Ordinance), introducing similar requirements to the ones that have been put in places in other jurisdictions.
Which companies must comply with these requirements?
The requirements apply to all companies formed and registered under the Companies Ordinance (Cap. 622) or a former Companies Ordinance, therefore all companies locally incorporated.
Companies excluded from applying the new requirements include listed Companies, non-Hong Kong Companies and unincorporated businesses.
What are these introduced requirements?
Under the Companies (Amendment) Ordinance 2018, a company incorporated in Hong Kong is required:
- To take reasonable steps to identify and ascertain persons and legal entities who have significant control over the company (namely the “significant controller”);
- To maintain a significant controller register (namely the “SCR”) in either English or Chinese language to be accessible by law enforcement officers upon request;
- To keep the significant controller, register as its registered office or prescribed place in Hong Kong. In the latter case, the company must inform the Registry via form NR2 within 15 days;
- To keep the significant controller register up to date;
- To make the significant controller register available for inspection by law enforcement officers upon demand;
- To appoint a designated representative.
Who is a Significant Controller?
A significant controller of a company includes a registrable legal entity and a registrable person.
A registrable legal entity is a legal entity that is a member of the company and has significant control over the company (e.g. a shareholder).
A registrable person is a natural person or a specified entity that has significant control over the company.
A person has significant control over a company if one or more of the following 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.
How to identify the Significant Controller?
A company is required under the Companies (Amendment) Ordinance 2018 to take reasonable steps to identify and ascertain persons and legal entities who have significant control over the company.
Such steps include:
- Review all the documents and information available such as the register of members, articles of association, statement of capital, shareholder agreement or other relevant agreements available;
- Considering the interest in the company as held by individuals, legal entities, trusts or firms;
- Considering any evidence of joint arrangement or evidence of rights held by through a variety of means that might ultimately be controlled by the same person;
- Any other action that may have to be taken depending on the circumstances of individual companies.
If a company has reasons to believe that a person is a significant controller of the company, the company must give notice to such person within 7 days of such knowledge or belief.
If a company has reasons to believe that a person knows the identity of another person who is a significant controller of the company, the company must give notice to such person within 7 days of such knowledge or belief.
A person or a legal entity who has received the above notice must comply with the requirements stated in the notice within one month from the date of the notice.
Which particulars should be entered in the Significant Controller Register?
The required particulars to be entered in the significant controller register for a registrable person are:
- Full name;
- Correspondence address;
- Identity Card Number or the number and issuing country of a passport held by such person;
- The date on which the person became a registrable person of the company;
- The nature of the person’s control over the company according to the 5 conditions above.
The required particulars to be entered in the significant controller register for a registrable legal entity are:
- Full 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 according to the 5 conditions above.
A significant controller register cannot be blank. If the company is still identifying or ascertaining its significant controllers or the company does not have significant controllers such statements must be recorded in the significant controller registry along with notices sent to third parties to ascertain the identity of the significant controllers.
Who is the Designated Representative?
Under the Companies (Amendment) Ordinance 2018, companies are required to designate at least one person as its representative (namely the “Designated Representative”) to provide assistance relating to the company’s significant controller register to a law enforcement officer.
A 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-Terrorism Financing Ordinance Cap. 615 (namely “AMLO”).
The definitions of accounting professional, legal professional and TCSP licensee are defined respectively according to the Professional Accountants Ordinance (namely “PAO”), the Legal Practitioners Ordinance (namely “LPO”) and the Anti-Money Laundering and Counter-Terrorism Financing Ordinance (namely “AMLO”).
Inspections of the Significant Controller Register
A company is required at any reasonable time to make its significant controller register available for inspection by a law enforcement officer at the place at which the SCR is kept.
Law enforcement officers include:
- Companies Registry;
- Hong Kong Monetary Authority;
- Customs and Excise Department;
- Immigration Department;
- Insurance Authority;
- Inland Revenue Department;
- Hong Kong Police Force;
- Securities and Futures Commission;
- Independent Commission Against Corruption.
Law enforcement officers are allowed to inspect the significant controller register as well as make copies of it. A person whose name is registered in the significant controller register is entitled upon request to inspect the SCR and be provided with copies of it.
Failure to comply with the new requirements
Failure to comply with the new requirements under the Companies (Amendment) Ordinance 2018 is a criminal offense. The company and every responsible person of the company are liable to a fine at level 4 up to HKD 25,000 and a further daily fine of HKD 700.
Any person who knowingly or recklessly makes a false, misleading or deceptive statement in any material in the SCR or in replying a notice sent under the SCR is liable to a fine up to HKD 300,000 and imprisonment up to two years.