New legislation means change for Hong Kong companies

Changes to legislation

Following amendments to the Companies Ordinance on 1 March 2018, the Hong Kong Government now requires all companies incorporated in Hong Kong (except listed companies) to obtain and maintain up-to-date beneficial ownership information.

Local businesses will need to keep a Significant Controllers Register (SCR). The SCR should be available for inspection by law enforcement officers upon request. Significant Controllers must meet a set of criteria and conditions.

Who is eligible to be a Significant Controller?

• A registrable person who is a natural person that has significant control over the company; or
• A registrable legal entity e.g. a company, which is a member of the company and has significant control over the company

Criteria

A person has significant control over a company if one or more of the following five conditions are met, the person:

1. 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 shares in more than 25% of the capital or profits of the company
2. Holds, directly or indirectly, more than 25% of the voting rights of the company
3. Holds, directly or indirectly, the right to appoint or remove a majority of the board of directors of the company
4. Has the right to exercise, or does exercise, significant influence or control over the company
5. Has the right to exercise, or does exercise, significant influence or control over the activities of a trust or firm that is not a legal person, but whose trustees or members satisfy any of the first four conditions in relation to the company

Requirements for busineses

If there is a natural person who has significant control over a company through a legal entity (e.g. a limited company), that person is also the significant controller of the company. The particulars of that natural person and the legal entity should be entered into the SCR.

All Hong Kong companies must designate at least one person as their representative, to provide assistance relating to the company’s SCR to law enforcement officers. The company’s designated representative must be either a member, director or 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 trust or company service business in Hong Kong, can also be appointed.

Failure to comply with the new legislation could result in criminal charges and fines. Equiom Hong Kong offers services related to this new regulation and can act as a designated representative.