By 1 March 2018, Hong Kong companies must prepare for and maintain Significant Controller Register (SCR) of the companies, according to The Companies (Amendment) Ordinance 2018 to enhance the transparency of company ownership.
Who is affected?
The regime applies to every responsible persons of every companies incorporated in Hong Kong under the Companies Ordinance, except Hong Kong listed companies since they are already subjected to more stringent regulatory.
The regime applies to the types of Hong Kong companies as follows:
- Hong Kong Private Company Limited by Shares
- Hong Kong Private Company Limited by Guarantee
- Hong Kong Public Company
But it does not apply to companies which are not incorporated in Hong Kong, and non-incorporated entities registered in Hong Kong, including:
- Non-Hong Kong Company registered in Hong Kong
- Sole proprietorship
- Representative Office
- Branch Office
What is the purpose of SCR?
The SCR must contains the beneficial ownership information over the company, although is is not a required public record, it must be available to the law enforcement authorities (it is listed below) for inspection on demand. In a broad understanding, SCR enables the authorities to identify and contact the person(s) and/or corporate(s) who are the latest decision makers of the company.
Who is significant controller?
A significant controller (SC) of a Hong Kong company includes a registrable legal entity and a registrable person who has significant control over a company.
A person is deemed to have significant control over a company when at least one of the following condition is 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, 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 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 an of the four conditions above in relation to the company.
What to include in a SCR?
The register must includes up-to-dates particulars and contact methods of every SC of the company, whose control over the company is described.
For the particulars of SC, it must includes:
- Full name
- Correspondence address
- Identity Card / Passport
Registrable legal entity:
- Registered name
- Company Incorporation Document
- Principal office address
For the description of SC’s control of the company, it must includes:
- The date of becoming a SC
- The nature of their control
How to prepare and maintain a SCR?
The company is required to take “reasonable steps”:
- to identify the company’s SC, including the giving of notices to identified SC and persons who are believed to be SC, and obtaining their required particulars;
- to enter the required particulars of its SC in the SCR;
- to keep the SCR up-to-date, including the giving of notices to known SC and persons who are believed to be SC when there is a registrable change; and
- to make the SCR available to inspection anytime.
In additional, the company must appoint at least one designated representative for providing assistance relating to the SCR of the company. The eligibility of the representative are either:
- a natural person resident in Hong Kong, and a director, employee or member of the company; or
- A Trust or Company Services Provider licensee, an accounting professional or a legal professional as defined in the Anti-Money Laundering and Counter-Terrorist Financing Ordinance.
Where to keep a SCR?
It is acceptable to keep the SCR in hard copy or electronic form, and the SCR must be kept within the Hong Kong territory. Preferably, the SCR should be kept at the Registered Office Address. Otherwise, the company must notify the authorities of its location.
Who can access the SCR?
As the particulars on the SCR is confidential, only the person whose name is entered in the SCR as a SC and the law enforcement officers can access it.
The law enforcement authorities include:
- Companies Registry
- Customs and Excise Department
- Hong Kong Monetary Authority
- Hong Kong Police Force
- Immigration Department
- Insurance Authority
- Independent Commission Against Corruption
- Securities and Future Commission
How long should the records of SCR be maintained?
The company should be retained for a period of not less than 7 years. For instance, once a person’s particulars is entered in the SCR, this records shall be kept for 7 years when the person is no longer the SC.
What are the penalties for non-compliance with?
Failure to comply with the SCR obligations is a criminal offence, with both the company and every responsible person of the company potentially liable for a fine of HK$ 25,000 and possible additional daily fines of HK$ 700.
What should I do next?
AsiaBC can assist you to comply with the SCR related regimes by:
- Advisory on the duties and obligation of the company and its responsible persons.under the regimes
- Sending out the notices to persons who is identified or believed to be the SC on your behalf
- Preparation of the up-to-date SCR based on the returned notices