To enhance transparency of corporate beneficial ownership in order to fulfill Hong Kong’s international obligations, the Companies Ordinance (Cap. 622) is amended to require a company incorporated in Hong Kong to obtain and maintain up-to-date beneficial ownership information by way of keeping a Significant Controllers Register. The Register should be open for inspection by law enforcement officers upon demand.

Which company has to keep a SCR

The requirement to keep a SCR applies to all companies formed and registered under the CO or a former Companies Ordinance, namely locally incorporated companies, including companies limited by shares, companies limited by guarantee and unlimited companies. Companies which have their shares listed on the Stock Exchange of Hong Kong are exempted from the requirement.

The company is required to take reasonable steps to ascertain its significant controller(s). The steps include reviewing the company’s register of members, articles of association, shareholder agreements or other agreements and issuing notice(s) to any person that the company knows or has reasonable cause to believe (a) to be a significant controller; or (b) to know the identity of another person who is a significant controller.

The company will have to designate a representative to serve as a contact point for providing information about the SCR and related assistance to law enforcement officers. The designated representative must be either a shareholder, director or an employee of the company who is a natural person resident in Hong Kong or an accounting professional, a legal professional or a person licensed to carry on a business as trust or company service provider. The particulars of the designated representative should also be entered into the SCR.

A Significant Controller of A Company

A person has significant control over a company if one or more of the following 5 conditions are met:

1. 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, the person holds, directly or indirectly, a right to share in more than 25% of the capital or profits of the company.
   
   
2. The person 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 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 any of the first four conditions (in their capacity as such) in relation to the company.

Where to keep a SCR

A company required to keep a SCR must keep its SCR at the company’s registered office or a place in Hong Kong. The SCR may be kept in hard copy or electronic form.

Penalty

If a company fails to comply with the requirement of keeping a SCR, the company, and each of its responsible persons, will be liable on conviction to a fine up to $25,000 and a daily fine of $700.

The addressee of the notice is required to confirm or provide (as appropriate) the requested particulars relating to the significant controller within one month from the date of the notice. Failure to comply with any of the requirements in the notice within 1 month from the date of the notice is a criminal offence. The notice addressee and every related person (if any) are liable to a fine at level 4 (i.e. $25,000).

Offence for False Information

A person commits an offence if the person knowingly or recklessly makes a statement or provides any information that is misleading, false or deceptive in a material particular.

A person who commits an offence is liable:

• on conviction on indictment to a fine of $300,000 and to imprisonment for 2 years; or
  
  
• on summary conviction to a fine at level 6 and to imprisonment for 6 months.

We Can Help

We can assist your company in complying with the upcoming requirements including the preparation and maintenance of a SCR. We can also act as your company’s designated representative to assist in all matters relating to SCR. For assistance, please contact Ms. Amie Cheung at amie@beas.com.hk .