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Maintenance of Significant Controller Register of Hong Kong Companies

Circulation No.: KNC/2018/150
Date: February 2018

Important Notice
Hong Kong Companies Ordinance Amendment 2018
Maintenance of Significant Controller Register of Hong Kong Companies



Introduction
1. The Hong Kong Legislative Council passed the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) (Amendment) Bill 2017 and Companies (Amendment Bill) 2017 on 24 January 2018 and the Bills will come into operation on 1 March 2018.
2. These amendments bring Hong Kong’s anti-money laundering and counter-terrorism financing regulation in line with the international standards set by the Financial Action Task Force ("FATF"), which reviews the effectiveness of such regulations as implemented by participating member countries.
3.  The Amendment (’Companies (Amendment) Ordinance 2018')requires certain companies incorporated in Hong Kong to identity persons who have significant control over the companies ("Significant Controller" thereafter "SC"), to provide for related matters of the Significant Controller and to keep a Significant Controller register ("SCR") to be accessible by law enforcement officer. 
4.   The Amendment (’Companies (Amendment) Ordinance 2018')also requires a company to designate at least one person as its representative to provide assistance relating to the company’s SCR to a law enforcement officer. The particulars of the designated representative, including the name and contact number, must be recorded in the Significant Controller Register.

Definition of Significant Controller

5.   Significant controller of a company is the person who has significant control over the company which includes (a) a registrable legal entity (such as a company) who is the member of the company and has significant control over the company and (b) a registrable person who is a natural person or specified entity (except the person or entity holds the shares or rights through a registrable legal entity or a chain of legal entities with the last one in the chain being a registrable legal entity of the company which has any of its shares listed in Stock Exchange in Hong Kong) that has significant control over the company.
6. Specified entity is a corporation sole, a government of a country or territory, or part of a country or territory, an international organization whose members include 2 or more countries or territories (or their government) and a local authority or local government in a country or territory.

Identification of Significant Control

7.  A person or an entity is considered as a SC if he meets one or more of below conditions:-
(1) 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
(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 (the right to remove or appoint a director holding a majority of the voting rights at the meeting of the board of the directors on all matters or substantially all matters)
(4) The person has the right to exercise, or actually exercises, significant influence or control over the company
(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

Information Required of Significant Controller

8.    For registrable person who is a natural person:
(1) Name (present forename and surname, former forename or surname (if any), and aliases (if any);
(2) Correspondence address (a post office box number is not acceptable);
(3) Identity card number or, if the person has no identity card, the number and issuing country of a passport the person held;
(4) Date on which the person became a registrable person of the company;
(5) Nature of the person’s control over the company.

9.   For registrable legal entity:
(1) Entity’s name;
(2) If the entity is a company, its company’s registration number as stated in its certificate of incorporation (or the equivalent), and the address of its registered office;
(3) If the entity is not a company, its registration number (or the equivalent) in the place of its incorporation or formation, and the address of its registered or principal office;
(4) Entity’s legal form, and the law that governs it;
(5) Date on which the entity became a registrable person of the company;
(6) Nature of the entity’s control over the company .

10.  For specified entity:
(1)    Entity’s name;
(2)    Address of the entity’s principal office;
(3)    Entity’s legal form, and the law that governs it;
(4)    Date on which the entity became a registrable person of the company;
(5)    Nature of the entity’s control over the company .

Procedures to Identify Significant Controllers

11.  A company is required to take reasonable steps to identify the significant controller(s). The steps include reviewing the company’s register of members, articles of association, shareholders agreements or other agreements and issuing notice(s) to any person who is believed to be the significant controller and any person who is believed to know the identity of the significant controller.

Maintenance of SCR

12. If a person or entity ceases to be an SC of an applicable company, all the entries in the company’s SCR relating to such SC may be destroyed after the end of a period of 6 years from the date on which the person or entity ceases to be the company’s SC.

Designated Representative

13.  Every Hong Kong company must designate at least one person as its representative to provide assistance relating to the company’s SCR to a law enforcement officer.  A company needs to record the name and contact details of its designated representative in the register.

14. A company’s designated representative must be one of the followings:
(1) A member, director or an employee of the company who is a natural person resident in Hong Kong
(2) An accounting professional (a certified public accountant or a certified public accountant (practising), a corporate practice or a firm of certified public accountants (practicing)), a legal professional (a solicitor or a foreign lawyer) or a TCSP licensee (a person licensed to carry on trust or company services business in Hong Kong) as defined in the Anti- Money Laundering and Counter-Terrorist Financing Ordinance, Cap. 615 ("AMLO")

15. The following particulars of the designated representative must be recorded:
(1) Name;
(2) Correspondence address;
(3) Contact details (e.g. telephone number, fax, email);
(4) Date of entry as representative.

Penalty

16. Failure to comply with the new requirements and obligations will raise a criminal offence. The company and every responsible person of the company are liable to a fine at level 4 (e.g. HKD25,000 penalty). In the case of continuing offence, a further daily fine of HKD 700 will be incurred during the period which offence continues.
17. If a person (or legal entity) fails to respond to a notice sent by a company within 1 month of the date of the notice, the person (or legal entity and every related person of the entity) commits an offence and on conviction, is liable to a fine of HKD25,000.
18.  If a person gives false information in response to a notice sent by a company, the person is liable to a fine of HKD300,000 and to imprisonment for 2 years on conviction on indictment; or HKD100,000 and to imprisonment for 6 months on summary conviction.

Services Offered by Kaizen

19.  Kaizen CPA Limited is a certified public accounting firm and its associated firms, Kaizen Corporate Services Limited and Kaizen Secretaries Limited, are licenced corporate agents registered with the Hong Kong Companies Registry in Hong Kong. Kaizen can act as the designated representative of your Hong Kong company in this matter and help you identify the SCs, create, update and maintain the SCR for a fee of HKD800 per annum. 

20.  During the period from now to 7 March 2018, being the deadline for prepare the SCR, Kaizen will be sending to each and every of our clients who maintain a Hong Kong company with us a notice of this requirement imposed by the Amendment and if clients do agree to our fee quoted, to request from our clients a confirmation that the list of significant controller and their related personal particulars we prepared from our internal records are correct, and to request our clients to provide us with the personal particulars of any other person they know or have evidence to believe to be a significant controller. Clients are required to reply to our notice within 30 days.

If you wish to obtain more information or assistance, please visit the official website of Kaizen CPA Limited at www.bycpa.com or contact us through the following and talk to our professionals:
Email:info@bycpa.com, enquiries@bycpa.com
Tel: +852 2341 1444
WhatsApp/Line/Wechat: +852 6114 9414, +86 1521 9432 644

Enclosure:
Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) (Amendment) Ordinance 2018
Companies (Amendment) Ordinance 2018

Company Secretarial Department
Kaizen CPA Limited


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