A Guide to Significant Controller Register for a Hong Kong Company

A Guide to Significant Controller Register for a Hong Kong CompanyBeginning 1 March 2018, new changes were made to the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) (Amendment) Bill 2017, and the Companies (Amendment Bill) 2017. These changes were passed by the Hong Kong Legislative Council. These changes were in-line with the international standards of counter-terrorism financing and anti-money laundering regulations which were set forth by the Financial Action Task Force (FAFT).

Some Hong Kong incorporated companies will be required to identify the person(s) who has significant control over the companies, according to the Amendment (Companies (Amendment) Ordinance 2018). This person will be known as a Significant Controller, or SC, thereafter. A Significant Controller Register (SCR) must be kept and be accessible to law enforcement officers if needed.

The Amendment (Companies (Amendment) Ordinance 2018) also requires that a company incorporated in Hong Kong must designate at least one individual to be its representative. This individual must provide assistance relating to the business’s SCR should a law enforcement officer require such information. All details of this designated individual, including their name and contact details, must be listed within the SCR.

 

What Is a Significant Controller for a Hong Kong Company?

This individual would be someone who has significant control over the company. The SC could be any one of the following entities:

  • A registrable company (otherwise known as a legal entity) who is a member of the company and has significant control.
  • A natural person who is registrable, or a specific entity who has a significant control over the company. This excludes any person or entity who has rights or shares through a registrable legal entity or a chain of legal entities whereby the last one in the chain is a registrable legal entity of the company with shares listed in the Hong Kong Stock Exchange.
  • A specified entity consisting of a sole corporation, the government of a territory or country (or part of the country or territory), a local government or authority in a country or territory, and an international organisation whose members include two or more territories or countries (or their government).

An individual can be considered an SC in Hong Kong if they fulfil either one or more of the following conditions:

  • Holds (either directly or indirectly) more than 25% voting rights within the company.
  • Holds (either directly or indirectly) more than 25% of the company’s issued shares.
  • Holds (either directly or indirectly) more than 25% of the company’s profits or capital (in the event the company does not have share capital).
  • Holds (either directly or indirectly) the right to remove or appoint the majority of the company’s board of directors.
  • The individual has a right to exercise significant control or influence over the company.
  • The individual has the right to exercise significant control or influence over the activities of a firm or trust who is not deemed a legal person. This can be done if the trustees or members satisfy any of the first four conditions in relation to the company in question.

 

Identifying Significant Controllers in Hong Kong

A company must take reasonable steps to identify their SCs. These steps include the following procedures:

  • Reviewing the register of members
  • Reviewing articles of association
  • Reviewing shareholder agreements
  • Reviewing other agreements
  • Issuing notices to anyone believed to know the identity of the SC

 

What Information Is Required for a Significant Controller?

There are three categories of SC for which information must be provided:

  • For a Registrable Person (Natural Person):
    • Name and aliases (if any)
    • Corresponding address (no P.O. Boxes will be accepted)
    • Identification card or passport
    • Date when the person became the company’s SC
    • Nature of the individual’s control
  • For a Registrable Legal Entity:
    • Name of entity
    • Company registration number
    • Company registered office address
    • Registration number and registered principle address (if the entity is not a company)
    • Legal form and the law that governs this form
    • Date when the entity became the SC of the company
    • Nature of the entity’s control
  • For a Specified Entity:
    • Entity name
    • Address of principal office
    • Legal form and the law that governs this form
    • Date when the entity became the SC of the company
    • Nature of the entity’s control

 

About Significant Controller Registers in Hong Kong

Any entries relating to a person or entity who is no longer the SC of a company must be destroyed in the SCR by the end of the 6-year period. This period is from the date which the entity or individual ceased to function as the SC of the company.

All Hong Kong companies are required to designate at least one representative who will provide assistance relating to the company’s SCR. This assistance will be given to the law enforcement officer. The name and contact details of the designated representative will be recorded in the SCR. Other details of the designated representative which must be recorded are:

  • Name
  • Corresponding address
  • Date of entry as the company representative
  • Contact details (for example email address, phone number or fax number)

To qualify as the designated representative, the person or entity must fulfil the following criteria:

  • Be a director, employee or member of the company (must be a natural person who is resident in Hong Kong)
  • An accounting professional, or any of the following:
    • A corporate firm
    • A firm of certified public accountants
    • A legal professional, such as a lawyer or a solicitor
    • A TCSP licensee

 

What Happens If a Business Fails to Comply with the New Regulations?

This will be considered a criminal offence in Hong Kong. The company and all responsible individuals in the matter will be liable for a fine at Level 4, which carries a KKD25,000 penalty. If a continuing offence occurs, a daily fine of HKD700 will be further imposed on the company as long as the offence continues.

A notice will be sent by a company, and if the individual fails to comply within one month from the date of notice, that person will be guilty of committing an offence. If convicted, the person is liable to be fined HKD25,000.

If false information is given in response to the notice sent by the company, the individual in question is liable for a fine of HKD300,000 and can be imprisoned for 2-years upon conviction on indictment. If found guilty of summary conviction, the individual could be fine HKD100,000 and be imprisoned for up to 6-months.