18 May, 2017
In a recent article we looked at the Government’s Consultation Paper on Enhancing Transparency of Beneficial Ownership of Hong Kong Companies.
In April 2017, the Government issued its consultation conclusions. There was general support for the proposals, subject to some objections and alternative suggestions, as a result of which some proposals have been revised, as outlined below.
Scope of Application
While maintaining the original proposal of exempting only listed companies from the regime, the Secretary for Financial Services and the Treasury will have power to promulgate further exemptions should the need arise.
Foreign companies registered in Hong Kong will not be covered by the regime since they may be subject to disclosure requirements in the jurisdictions where they are incorporated.
Definition of “Beneficial Ownership
There was general support for the proposed threshold of “more than 25%” for determining beneficial ownership. For more clarity, as well as including relevant provisions on the specified conditions for determining beneficial ownership in the legislation, the Companies Registry will issue guidelines.
Content and format of PSC Register
Company’s Duty to Keep a Register of People with Significant Control (PSC Register): Most respondents supported the proposal of requiring companies to enter an “authorised person” in the PSC Register to serve as a contact point for providing information to the enforcement agencies and assisting them as necessary. It is now considered unnecessary to impose any liability on the authorised person other than that s/he should not provide deceptive, false or misleading information.
Obtaining and verifying beneficial ownership information: To address respondents’ concerns about compliance burden, the scope of persons to whom a company has to serve notices when identifying beneficial owners is reduced to any person or legal entity (i) that the company knows or has reasonable cause to believe to be registrable in relation to the company; and (ii) the company knows or has reasonable cause to believe to know the identity of someone who/which is a registrable individual/legal entity in relation to the company. A statutory defence is also to be added such that an addressee not responding to a company’s notice can argue on the ground of it being a frivolous or vexatious claim.
Public Inspection of PSC Register: The majority of respondents agreed with the proposal of keeping the PSC register at the company’s registered office or prescribed place, but the vast majority of respondents (including the Privacy Commissioner) considered that the PSC Register should be made available for inspection by competent authorities only and not general members of the public. Accordingly, it is now proposed that access to PSC Registers should be restricted to the competent authorities only.
Record-keeping requirement: A good number of respondents (including the Privacy Commissioner) thought that the proposed requirement for a company to keep PSC information for 10 years was excessive and so a period of 6 years is now proposed for companies to retain beneficial ownership information, in line with the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance.
For further information, please contact:
Karen Menon, Deacons
