6 March, 2018
On 1 March 2018, new provisions under the Companies Ordinance (Cap. 622) came into force requiring companies incorporated in Hong Kong to maintain a Significant Controllers Register ("SCR").
The new provisions aim to enhance the transparency of beneficial ownership of Hong Kong companies and require a company to hold up-to-date information on each of its Significant Controllers on its SCR.
While the SCR will not be publicly available, it must be produced on demand to a law enforcement officer on matters relating to the lawful performance of that officer's functions. In addition to the Hong Kong police force, law enforcement officers include officers of authorities such as the Securities and Futures Commission and the Hong Kong Monetary Authority.
A company must also designate at least one person (a "Designated Representative") to provide assistance to a law enforcement officer on matters relating to the SCR. The Designated Representative must be:
- a natural person resident in Hong Kong and a member, director or employee of the company; or
- an accounting professional, a legal professional or a TCSP licensee under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615).
Does this affect you?
The requirement to keep a SCR applies to all companies incorporated in Hong Kong and includes:
- companies limited by shares;
- companies limited by guarantee; and
- unlimited companies.
However, companies listed on the Hong Kong Stock Exchange are exempt from this requirement.
Who are Significant Controllers?
A Significant Controller of a company is any Registrable Person or Registrable Legal Entity.
Registrable Persons
A Registrable Person is a natural person or a Specified Entity that has significant control over the company. A Specified Entity includes:
- a corporation sole;
- a government of a country or territory, or part of a country or territory;
- an international organisation whose members include 2 or more countries or territories (or their governments); or
- a local authority or local government in a country or territory.
Certain exemptions apply to persons or entities who have significant control only through holding shares in another company that is listed on the Hong Kong Stock Exchange.
Registrable Legal Entities
A Registrable Legal Entity is a legal entity that is a member of the company (such as a shareholder) and has significant control over that company.
Significant Control
A common requirement for both Registrable Persons and Registrable Legal Entities is significant control.
A person or entity only has significant control over a company if one or more of the following is true:
- where the company has a share capital, the person or entity holds, directly or indirectly, more than 25% of issued shares in the company;
- where the company does not have a share capital, the person or entity holds, directly or indirectly, a right or rights to share in more than 25% of the capital or, as the case requires, the profits of the company;
- the person or entity holds, directly or indirectly, more than 25% of voting rights in the company;
- the person or entity holds, directly or indirectly, the right to appoint or remove a majority of the board of directors of the company;
- the person or entity has the right to exercise, or actually exercises, significant influence or control over the company; and/or
- the person or entity has the right to exercise, or actually exercises, significant influence or control over the activities of a trust or firm that is not a legal person and whose trustees or members meet one of the conditions above.
What do you have to do?
Companies must take reasonable steps to identify their Significant Controllers. The Companies Registry of Hong Kong has issued guidance explaining that such reasonable steps may include:
- reviewing available documents, such as the company's register of members, articles of association, statement of capital and shareholder agreements;
- a review of interests in the company held by individuals, legal entities and trusts or firms;
- considering any evidence of joint arrangements or evidence of rights held through a variety of means that might ultimately be controlled by the same person; and
- any other actions depending on the circumstances.
If a company knows or has reasonable cause to believe that a person is, or knows the identity of, a Significant Controller then it must give notice in the prescribed form to that person within 7 days of attaining such knowledge or belief. The notice will request particulars in relation to the Significant Controller. A person who receives the notice must comply and reply within one month.
Giving such notice is not required if the company has already been provided the relevant information for a Registrable Legal Entity, or for a Registrable Person where that information has been provided by that Registrable Person or with that Registrable Person's knowledge.
Contents of the SCR
After a company has obtained, and confirmed in the case of Registrable Persons, the relevant information of a Significant Controller, it must enter that information into its SCR.
The relevant information that must be entered for a Registrable Person includes:
- name;
- correspondence address;
- identity card number, or if none, passport number;
- date of becoming a Registrable Person; and
- nature of the person's control.
The relevant information that must be entered for a Registrable Legal Entity includes:
- name;
- registration number;
- address of registered or principal office;
- legal form of entity and governing law;
- date of becoming a Registrable Legal Entity; and
- nature of the entity's control.
The SCR must also contain the contact details of the company's Designated Representative.
For further information, please contact:
Joshua Cole, Partner, Ashurst
joshua.cole@ashurst.com
