• Significant Controllers Register
  • The Companies Ordinance (Cap 622) (the “Ordinance”) has been amended under the Companies (Amendment) Ordinance 2018. The amendments have come into force since 1 March 2018.
  • Under the new amendments to the Ordinance, private companies incorporated in Hong Kong are required to identify “significant controllers” and maintain a “Significant Controllers Register” (the “SCR”), which lists out the particulars of the significant controllers.
  • A “significant controller” of a company includes
    • - a registrable person - a natural person/ a corporate sole / a government / a local authority / an international organisation that has significant control over the company; and
      - a registrable legal entity – a legal entity which is a shareholder of the company that has significant control over the company.
  • There is “significant control” if one of the following requirements is met:
    1. 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. 2. The person holds, directly or indirectly, more than 25% of the voting rights of the company;
    3. 3. The person holds, directly or indirectly, the right to appoint or remove a majority of the board of directors of the company;
    4. 4. The person has the right to exercise, or actually exercises, significant influence or control over the company;
    5. 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 relation to the company.
  • Companies also need to appoint a representative to provide assistance relating to the company’s SCR to law enforcement officers, including:
    • - Companies Registry
      - Customs and Excise Department
      - Hong Kong Monetary Authority
      - Hong Kong Police Force
      - Immigration Department
      - Inland Revenue Department
      - Insurance Authority
      - Independent Commission Against Corruption
      - Securities and Futures Commission.
  • The SCR can be inspected by law enforcement officers and significant controllers listed in the SCR, but there is no duty to make available the SCR to the public.
  • Identifying significant controllers
  • Companies may identify significant controllers by reviewing documents readily available, such as the register of members, articles of association and shareholders’ agreement. Companies will also need to issue notices (the “Notices”) to any person who is believed to be a significant controller and any person who is believed to know the identity of the significant controller to obtain required particulars.
  • Offences
  • If a company fails to take reasonable steps to identify significant controllers or fails to maintain the SCR as required, the company and every responsible person may be liable to a fine on conviction.
  • Recipients of the Notices are required to respond to the Notices within 1 month. Recipients of Notices may be liable to a fine if they fail to comply with the Notice within 1 month. They may be liable to a fine or even imprisonment if they make false statements, provide misleading, false or deceptive information in reply to the Notice.
  • Implications for private companies in Hong Kong
  • A person’s particulars will be disclosed in the SCR if he falls within the definition of “significant controllers”, which is widely defined under the Ordinance. This would mean that common commercial arrangements which have been in the past used for maintaining privacy or anonymity may need to be disclosed in the SCR, including indirect shareholdings through corporate vehicle(s); shadow directorship, nominee arrangements and trust relationship. The new amendments to the Ordinance will bring greater transparency to companies so as to combat money-laundering, terrorist financing and tax evasion.
  • At the same time, as there may be criminal liability for failure to maintain the SCR or failure to respond to the Notice properly, companies and significant controllers must be more cautious in complying with the new requirements under the Ordinance.
  • This article only summarises the major changes to the Ordinance. It is desirable for companies to consult their legal advisors regarding issues arising from compliance of the new requirements. We are prepared to offer legal advice or other legal services in relation to the new requirements or general company matters.