On January 24, 2018, the Companies (Amendment) Bill 2017 was passed, which mandates incorporated companies of Hong Kong to keep a Significant Controllers Register (SCR). The new legislation will enter into force on March 1, 2018. The Hong Kong Companies Registry has set up a special section on SCR on its website containing, amongst others, a detailed Guideline on the Keeping of SCR and specific forms for the companies to use.
The main requirements for the new SCR regime are listed below.
Who are required to keep a SCR?
All companies “formed and registered” in accordance with the the Hong Kong Companies Ordinance, including dormant companies, financial institutions, charitable organizations, companies limited by guarantee and any other types of companies incorporated in Hong Kong, except for the listed companies, and foreign companies registered under Part 16 of the Hong Kong Companies Ordinance, must keep a SCR.
What should be contained in the SCR?
The SCR must contain information on the significant controllers of the applicable company, namely registrable persons (i.e., a natural person or a specified entity such as a government and international organisation) and/or registrable legal entities (i.e., a legal person, but not a specified entity, which is a member of the company) who have significant control over the company.
A person has significant control over if one or more of the specified conditions have been fulfilled, which include holding directly or indirectly more than 25 percent of the issued shares (or voting rights) in the company, the right to exercise or to have significant impact or control over the company.
The examples are given in the Hong Kong Companies Registry SCR Guideline explaining what may constitute “exercising significant influence or control”, such as having veto rights in adopting or amending the company’s business plan or appointing (removing) the CEO.
Registrable persons: name, address, identity card/passport number, date of registration of a person, and nature of control.
Registrable legal entities: name, address, registration number, legal form and governing law, date of registration of a legal entity, and nature of control.
How to prepare the SCR?
The applicable company has an obligation to ascertain the identity of any significant controller. In other words, the company that is subject to the new SCR regime must:
take reasonable steps to identify its significant controllers and the required particulars;
send out written notice to significant controllers requesting required particulars (or confirmation of particulars) within seven days after 1 March 2018;
enter the date of Notice in the SCR;
enter the particulars in SCR within seven days after receipt of all required particulars provided or confirmed by the addressee of the Notice and date of receipt of such confirmation (in the case where no confirmation is received within the statutory period of one month); and
follow similar steps for any change in particulars to keep the SCR up-to-date, i.e; and
send the notice to a person within seven days, knowing (or having reasonable grounds to believe) that a particular person (or entity) is a new significant controller; or in the case where the identity of the new significant controller is unknown, send the notice to third party whom the company believes (or having reasonable grounds to believe) to know the significant controller within the prescribed time; and
to enter the particulars within seven days after receiving the confirmation by the significant controller (or a negative statement if it is appropriate).
Where is the SCR to be kept?
The SCR must be kept in English or Chinese language at the company’s registered office or at a prescribed place in Hong Kong. The Company must notify the Registrar of Companies of the place where the SCR is kept within 15 days after its creation or any change in location.
Access to SCR is limited only to officers of Companies Registry and law enforcement officers (who currently include Police officers, Independent Commission Against Corruption, Securities and Futures Commission, Hong Kong Monetary Authority, Insurance Authority, Customs and Excise, Immigration, or Inland Revenue Department). The company will have to appoint a representative who will serve as a contact point for providing information about the SCR and appropriate assistance to law enforcement officers.