The Companies (Amendment) Bill 2017, which mandates Hong Kong-incorporated companies to keep a Significant Controllers Register (SCR) was passed on 24 January 2018. The new legislation will come into effect on 1 March 2018. The Hong Kong Companies Registry has set up a dedicated section on SCR on its website containing, amongst others, a detailed Guideline on the Keeping of SCR and specific forms for companies to use.
As the bill was passed without much amendment, please refer to our Legal Update of 4 July 2017 for details of the proposed SCR requirements, including scope of application, meaning of significant control, obligations of each applicable company and person having significant control. The key requirements under the new SCR regime are summarised below.
Who are required to keep a SCR?
All companies "formed and registered" under the Hong Kong Companies Ordinance (HKCO), including dormant companies, financial institutions, charitable organisation, companies limited by guarantee and any other types of companies incorporated in Hong Kong, EXCEPT listed companies and foreign companies registered under Part 16 of HKCO, are required to keep a SCR – the applicable company.
What is to be kept 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 are met, which include holding directly or indirectly more than 25 percent of the issued shares (or voting rights) in the company, having the right to exercise or actually exercising significant influence or control over the company.
In the Hong Kong Companies Registry SCR Guideline, examples are given to explain 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 becoming a registrable person, and nature of control.
Registrable legal entities: name, address, registration number, legal form and governing law, date becoming a registrable legal entity, and nature of control.
How to prepare the SCR?
An applicable company is under an active obligation to ascertain the identity of any significant controller (or any change in particulars). In other words, for an existing company that is subject to the new SRC regime, it must:
- take reasonable steps to identify its significant controllers and the required particulars (such as examination of its Articles of Association and register of members);
- send out written notice (Notice) to significant controllers seeking required particulars (or confirmation of particulars) within seven days after 1 March 2018;
- enter the date of Notice in 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, a negative statement to that effect); and
- follow similar steps for any change in particulars to keep the SCR up-to-date, i.e.,
- send the Notice to the person within seven days from knowing (or having reasonable cause to believe) that the particular person (or entity) is a new significant controller (or that there is any change in particulars); or in the case where the identity of the new significant controller is not known, send the notice to third party whom the company believes (or having reasonable cause to believe) to know the significant controller within the prescribed time; and
- enter the particulars within seven days after receipt of confirmation by the significant controller (or a negative statement if that is the case).
Where is the SCR to be kept?
The SCR must be kept in either the English or Chinese language at the company's registered office or a prescribed place in Hong Kong. The company should notify the Registrar of Companies of the place where the SCR is kept within 15 days after the setting up of the SCR or any change in location.
Access to SCR is restricted only to officers of Companies Registry and law enforcement officers (who currently include officers of the Police, 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 designate a representative to serve as a contact point for providing information about the SCR and related assistance to law enforcement officers.
When a SCR is required to be kept?
The legislation will come into effect on 1 March 2018.