Hong Kong Companies Registration of Beneficial Owners
May 25, 2018
Hong Kong companies must record their beneficial owners starting 1 March 2018
The proposed presentation of standards requiring Hong Kong companies to monitor their beneficial owners by maintaining a ‘significant controllers register’. The new rules which amend the Companies Ordinance have now been adopted and will become effective on 1 March 2018.
This Legal Alert summarizes what Hong Kong companies need to do in order to comply with the new requirements under these new rules known as ‘Companies (Amendment) Ordinance 2018’.
What are the new requirements?
Companies must set up a register of all persons who have significant control over the company and guarantee that constantly the information in the register is stayed up with the latest. Regardless if a company does not have any huge controllers, it should in any case set up a significant controllers register.
Who are the significant controllers?
A significant controller of a company is:
• a natural person or government entity, which has significant control (not through a listed company) over that company; or
• a legal entity (other than a government entity), which is a member and has significant control over that company.
A person has “significant control” over a company if he/she/it holds directly or indirectly:
• more than 25% of the issued shares in that company;
• the right to share in more than 25% of the capital or profits of a company with no share capital;
• more than 25% of the voting rights in that company; or
• the right to appoint or remove a majority of the board of directors of that company.
In addition, anyone who has the right to exercise, or actually exercises, significant influence or control over a company is also a significant controller.
What must go into the significant controllers register?
The significant controllers register must contain the particulars of the significant controllers including:
• address; and
• nature of the control exercised by the significant controller.
Staying up with the latest
Companies have a continuous duty to discover who its significant controllers are. In the event that a company believes or has reason to believe a person is significant controller, it must contact that individual to affirm the same.
As soon as a company knows or reasonably believes that a significant controller’s details have changed, it must contact the significant controller with a view to obtaining the necessary information to update the register.
Failure to comply with the above obligations may expose a company and every responsible person of that company to a fine.
Must all Hong Kong companies keep a significant controllers register?
The obligation applies to all companies incorporated in Hong Kong, except for:
• listed companies; and
• companies, which fall within a type or class of companies specifically exempted by the Financial Secretary of Hong Kong.
Delegating a man in control
All companies must assign no less than one individual to be accountable for helping staff of the Companies Registry or law enforcement officers with enquiries in regards to its significant controllers register. That individual must be a director, employee or member from the company who is also a natural person resident in Hong Kong, or an accountant, a lawyer or a company service provider (TCSP).
What do to?
Companies should prepare for the implementation of the new regime by ascertaining who their known significant controllers are and making arrangements for the establishment of a significant controllers register. They should also formulate a compliance manual setting out guidelines for maintaining compliance with the new obligations.
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