New Requirement for Register of Significant Controllers for Hong Kong Companies - February 2018
A new regime requiring Hong Kong companies to obtain and maintain up-to-date beneficial ownership information through keeping a Significant Controllers Register will come into force on 1 March 2018, following the passing of the Companies (Amendment) Bill 2017 on 24 January 2018. In addition, the Companies Registry announced on 25 January 2018 that a new licensing regime for trust and company service providers (TCSPs) will come into force on 1 March 2018 under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (AMLO).
Significant Controllers Register
A significant controller can be:
- A registrable person who is a natural person that has significant control over the company; and
- A registrable legal entity (e.g. a company), which is a shareholder of the company that has significant control over the company.
A person (or entity) has significant control over a company if one or more of the following five conditions are met:
- 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;
- The person holds, directly or indirectly, more than 25% of the voting rights of the company;
- The person holds, directly or indirectly, the right to appoint or remove a majority of the board of directors of the company;
- The person has the right to exercise, or actually exercises, significant influence or control over the company;
- 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.
The significant controllers register can be kept at the registered office of the company or any other place in Hong Kong. It must contain the required particulars of the significant controller(s), as well as the name and contact details of the designated representative of the company. The Register should be open for inspection by law enforcement officers upon demand.
The information required for a significant controller is:
- For a registrable person: name, correspondence address, identity card number (if the person does not have an identity card, the number and issuing country of the passport);
- For a registrable legal entity (e.g. a company): name, legal form, registration number, place of incorporation (governing law) and address of registered office;
- Date of becoming a significant controller; and
- Nature of control over the company.
Failure to comply with the SCR obligations is a criminal offence, with both the company and every responsible person of the company potentially liable for a fine of HK$25,000 and possible additional daily fines of HK$700.
The New TCSP Licensing Regime
Under the new licensing regime, TCSPs will be required to apply for licences from the Registrar of Companies and satisfy a "fit-and-proper" test before they can provide trust or company services in Hong Kong. TCSPs also have to comply with statutory due diligence and record-keeping requirements under Schedule 2 of AMLO.
Under this new regime, the Registrar has the power to grant, refuse to grant, renew, suspend or revoke a licence, and impose or vary any conditions in relation to a licence. A TCSP licence will generally be valid for three years. TCSP licensees are required to obtain prior approval from the Registrar before any person becomes an ultimate owner, a partner or a director of a licensee.
Any person who carries on a trust or company service business in Hong Kong without a licence after 1 March 2018 will commit an offence and will be liable on conviction for a fine of up to HK$100,000 and imprisonment for up to six months (subject to the transitional arrangements outlined below).
With effect from 1 March 2018, a person will be deemed to have been granted a licence to carry on a trust or company service business if immediately before 1 March 2018 (the commencement date) the person was carrying on a trust or company service business in Hong Kong and held a valid business registration certificate for that purpose (deemed licence).
A deemed licensee will then have to apply for a licence during a 120 day transitional period, which will commence on 1 March 2018 and end on Friday 29 June 2018. The deemed licence will cease to have effect on the expiry of the transitional period. If the deemed licensee applies for a licence during the transitional period, the deemed licence will generally cease to have effect when the application is granted, rejected or withdrawn or at the end of the transitional period.