New Hong Kong Companies Changes – Update
Under the amended Companies Ordinance, which became effective on 1 March 2018, companies incorporated in Hong Kong are required to identify persons who have significant control in the company (“significant controllers”) and keep a register of such significant controllers (“SCR”).
The new law has been introduced as part of a wider effort to increase transparency of corporate beneficial ownership in Hong Kong to combat money laundering and terrorist financing.
Who do the SCR requirements apply to?
The SCR requirements generally apply to all Hong Kong companies except for companies whose shares are listed on the Stock Exchange of Hong Kong.
What is a significant controller?
A person has significant control over a company if one or more of the following five conditions are met:
(1) the person holds, directly or indirectly, more than 25% of the issued shares in the company;
(2) the persons holds, directly or indirectly, more than 25% of the voting rights of the company;
(3) the person holds, directly or indirectly, the right to appoint or remove a majority of the board of directors of the company;
(4) the person has the right to exercise, or actually exercises, significant influence or control over the company;
(5) the person has a 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 4 conditions in relation to the company.
The SCR
Each Hong Kong Company is required to prepare and maintain an SCR, which is a document that is not publicly filed, but will be accessible by law enforcement officers on demand.
In February 2018, all Hong Kong companies should have received a letter from the Companies Registry regarding the new requirements regarding significant controllers, which appends a sample form of how an SCR may appear.
The new law requires Hong Kong companies to designate at least one person as its representative (the “Designated Representative”) to provide assistance relating to the significant controllers register of the company to law enforcement officers. The name of the Designated Representative must be stated in the SCR.
What should Hong Kong companies do?
If you have a Hong Kong company, you should identify all of its significant controllers (i.e. those persons that fit any of the conditions above), and prepare a significant controllers register to list them all.
Where a significant controller is an individual, the register should contain:
• their name;
• their correspondence address;
• their identity card or passport number;
• the date of which they became registrable as a significant controller of the company; and
• the nature of their control over the company.
Where a significant controller is a legal entity, the register should contain:
• its name;
• its registration number;
• 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 registrable as a significant controller of the company;
• the nature of its control over the company.
Consequences of non-compliance
Failure to comply with the new SCR requirements, or entering false or misleading in a company’s SCR will attract criminal liability. The company and each of its responsible officers will be punishable with a fine at level 4 (HK$25,000), and a further daily fine of HK$700 will apply for continued non-compliance.
Timeline
There is no particular deadline by which a Hong Kong company is required to have their SCR in place.
A company’s SCR may be located at its registered office address or at some other place, which needs to be notified to the Companies Registry. If, from the outset, a company’s SCR is located at its registered office address, there is no need to make any public filing. If, however, the SCR will be located at a different address, a filing will need to be made to the Hong Kong Companies Registry to notify the Registrar of this fact within 15 days of the date on which the other address is used.
We hope the information above is of assistance. If you require further assistance, please feel free to contact us.