HONG KONG: Companies (Amendment) Ordinance 2018 – Significant Controllers Regime

Thursday February 1 2018

The Companies (Amendment) Ordinance 2018 (the Amendment Ordinance) introduces new requirements on the keeping of significant controllers registers by companies. The Amendment Ordinance will come into operation on 1 March 2018.

To enhance transparency of corporate beneficial ownership in order to fulfil Hong Kong’s international obligations, the Companies Ordinance (Cap. 622) is amended to require a company incorporated in Hong Kong to obtain and maintain up-to-date beneficial ownership information by way of keeping a Significant Controllers Register. The Register should be open for inspection by law enforcement officers upon demand.

Under the Companies (Amendment) Ordinance 2018, a company incorporated in Hong Kong is required:

• to identify persons who have significant control over the company (“significant controllers”); and
• to maintain a significant controllers register (“SCR”) to be accessible by law enforcement officers.

A significant controller includes :

• a registrable person who is a natural person
• a registrable legal entity which is a shareholder of the company that has significant control over the company

that has significant control over the company.

A person has significant control over a company, if one or more of the following 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.

Failure to comply with the obligations is a criminal offence. The company and every responsible person of the company are liable to a fine at level 4 (i.e. $25,000). Where applicable, there is a further daily fine of $700.

Comprehensive information on the Amendment Ordinance, including Frequently Asked Questions, External Circular and Guideline issued by the Companies Registry on the new requirements, are available here.

Click on the link above for further information.