The Companies (Amendment) Ordinance 2018 (“the Amendment Ordinance”) introduces new requirements on the keeping of significant controllers registers by companies. The Amendment Ordinance has commenced operation on 1 March 2018.  This article will give a brief introduction of the newly enacted Division 2A, Part 12 of the Companies Ordinance, cap. 622 relating to the significant controller register, and their major implications and take-aways.

Application

The new changes will apply to all companies incorporated under the Companies Ordinance, whether they are companies limited by share or guarantee or unlimited companies, but exclude non-Hong Kong companies and listed companies.

Requirements

The register must be kept at its registered office or a place in Hong Kong and the company must inform the Company Registry by filing a Form NR2. The new changes primarily impose obligations on the company to: –

  1. keep a Significant Controller Register (“SCR”) at the company’s registered office or a prescribed place;
  2. take reasonable steps to identify the company’s significant controllers, including the giving of notices and obtaining their required particulars;
  3. enter the required particulars of its significant controllers in the SCR;
  4. keep the required particulars in the SCR up-to-date; and
  5. make the SCR available for inspection and taking of copies by a law enforcement officer and a significant controller whose name has been entered in the SCR.

The significant controllers register must contain, among others, the required particulars of the significant controller(s) and contact details of the designated representative of the company.

For a significant controller

  1. Name
  2. for a registrable person – correspondence address, identity card number (if the person does not have an identity card, the number and issuing country of the passport)
  3. for a registrable legal entity (e.g. a company) – legal form, registration number, place of incorporation (governing law) and address of registered office
  4. date of becoming a significant controller
  5. nature of control over the company

For a designated representative:

  1. name
  2. contact details

All these are straight-forward enough. The crux is how to determine who is a significant controller.

What is a Significant Controller?

On this issue, the new law sets out 5 conditions and if one is met, the person is a significant controller:
1. The person holds, directly or indirectly, more than 25% of the issued shares in 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; or
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.

What is a Designated representative?

A company must designate at least one person as its representative to provide assistance relating to the company’s significant controllers register to a law enforcement officer.

A company’s designated representative must be either a shareholder, director or an employee of the company who is a natural person resident in Hong Kong or, alternatively, an accounting professional, a legal professional or a person licensed to carry on a business as trust or company service provider.

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. 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.

Please feel free to contact us for any questions regarding the Significant Controllers Registers


 
 

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