Hong Kong’s Significant Controllers Register: How Does It Work?

One of Hong Kong companies’ most important regimes is creating and maintaining the Significant Controllers Register (SCR). This is to uphold the transparency of corporate beneficial ownership with the government and maintain a business environment with integrity.

To help you navigate better, this article provides a step-by-step guide for Hong Kong companies, outlining the necessary actions in response to the requirements for maintaining the SCR.

Overview of the Hong Kong Significant Controllers Register (SCR)

Let’s kick off by understanding the fundamental features of the significant controllers register system. How does this regime enable businesses to express integrity with the law?

What is the Significant Controllers Register?

In Hong Kong, the Significant Controllers Register refers to a legal requirement under the Companies Ordinance. This regulation mandates Hong Kong companies to maintain a record of individuals or legal entities that exercise significant control over the company.

The initiation of the SCR stems from concerns that diverse business structures, such as companies and trusts, have been employed to conceal the true controllers. This raises concerns about the potential misuse of such structures for inappropriate purposes.

For that reason, the SCR was conducted, requiring the relevant businesses to:

• Determine natural persons (also known as ultimate beneficial owners) and entities who have significant control over the company
• Maintain a significant controllers register, in either English or Chinese, available for inspection by law enforcement officers upon demand
• Strengthen the transparency of company ownership and control
• Keep the required particulars, including particulars of their Hong Kong company directors, updated with the latest information in the SCR.

In short, the SCR allows the authorities to identify and contact the person or the corporation in charge of making the latest decision for the company.

What must an SCR include?

Per the law, the SCR document should encompass several essential details:

(1) Required particulars of each significant controllers

• The full name
• The date of becoming a significant controller
• The nature of control over the company
• The date on which the person/legal entity became a registrable person/registrable legal entity of the company
• For registrable persons/ beneficial owners: correspondence address and identity card number (local) or the number and issuing country of the passport (foreigners)
• For registrable legal entities: the legal form, registration number, place of incorporation, and address of the registered

(2) The particulars of any registrable change in any of the SCs;

(3) The name and contact details of a designated representative;

In addition to the above information, the company must also fulfill other criteria as noted under the new Schedule 5C of the Companies Ordinance. Companies without significant controllers must state in their SCR that “the company knows, or has reasonable cause to believe, that it has no significant controller. ”

Which businesses shall comply with the SCR Regime?

The Hong Kong Significant Controllers Register regime applies to local companies established and registered under the Companies Ordinance, or the former Companies Ordinance.

For instance, here are some applicable business structures under this regulation:

• Companies limited by shares
• Companies limited by guarantee
• Unlimited companies

Accordingly, non-Hong Kong companies and listed companies on the Hong Kong Stock Exchange are not subject to this regime.

Penalties for non-compliance with the SCR regime

Any failure to comply with the regime requirements is deemed a criminal offense. Responsible individuals/ companies can be fined at level 4 (i.e. $25,000), or even get a further daily penalty of $700 under specific circumstances.

Moreover, any individual knowingly or unintentionally providing false, misleading, or deceptive information related to the Register may face severe consequences, including a substantial fine and imprisonment of up to two years.

Who are regarded as the company’s significant controllers?

This is the most fundamental step for Hong Kong-incorporated companies to keep a significant controller register. To pinpoint it, you should be well aware of what a significant controller is.

A Hong Kong company’s significant controller can be:

• A registrable legal entity that is the company’s member with significant control over the company; or
• A registrable person who is a natural person/specified entity with significant control over the company. In the case of a natural person, this individual is also known as an ultimate beneficial owner (UBO). A beneficial owner example is a corporate shareholder, or sometimes a trustee.

Ownership requirements for Hong Kong significant controllers

The subject regarded as having significant control over the company must satisfy at least ONE or MORE criteria listed below:

• Hold directly or indirectly over 25% of the company’s issued shares (or over 25% of the capital or profits if there is no share capital)
• Hold directly or indirectly over 25% of the voting rights of the company
• Own the right to appoint or remove a majority of the board of directors
• Have the right to exercise, or exercise significant influence or control over the company
• Have the right to exercise, or exercise significant influence or control over the activities of a trust or a firm that is not a legal person, but whose trustees or members meet one of four criteria as described above

How to maintain a legal Significant Controllers Register

As per requirements of the SCR regime, it is highly recommended that Hong Kong-incorporated companies take appropriate actions as the following:

Step 1: Determine the significant controller

First, the company must determine whether there is any significant controller. If yes, take reasonable steps in identifying the company’s significant controllers:

• Review the company’s register of members, articles of association, capital statement, and other documents readily available
• Investigate the company’s interest that individuals, legal entities, trusts, trustees, or firms are holding
• Examine the proof of joint arrangements or rights held through various means that might ultimately be controlled by the same person
• Conduct other actions that may have to be taken subject to the circumstances of individual companies

Step 2: Deliver the notice to relevant parties

Following the identification, if the company has grounds to believe that a person or entity qualifies as a significant controller, it must notify that individual or entity within seven days of acquiring such knowledge or belief.

In cases where the company has reason to believe that an individual is aware of the identity of another person with significant control over the company, it must also issue a notice to that individual within 7 days.

Upon receiving the notice, the person or entity must comply with the requirements stated in the document within one month. If the SCs fail to do so, the company should consider reporting the case to the Companies Registry.

Step 3: Update the details in the company’s significant controllers register

After the information is provided, the company is responsible for entering the details into the Significant Controllers Register (SCR) and promptly updating it in the event of any changes. This phase ensures that the register accurately captures the current status of individuals or legal entities exercising significant control over the company.

Timely adjustments are crucial for keeping the SCR reliable and up-to-date, ensuring compliance with legal requirements without added complexity. If there is any change of Significant Controllers or change of particulars of the SC in a company, the company must send notice to the SC no more than 7 days unless it was already informed of the change.

Step 4: Enable the SCR availability for inspection

The company may be requested to make the SCR accessible for inspection at any reasonable time. Specifically, a law enforcement officer can often visit to check if the information is legitimate, thus making copies of the documents.

Who is considered a law enforcement officer?

A company is required to make its SCR available for inspection by a law enforcement officer at any reasonable time. To be specific, below are 9 statutory bodies whose offices can access the SCR:

• Companies Registry
• Customs and Excise Department
• Hong Kong Monetary Authority
• Hong Kong Police Force
• Immigration Department
• Inland Revenue Department
• Insurance Authority
• Independent Commission Against Corruption
• Securities and Futures Commission

The right to inspect the register is not exclusive to law enforcement; anyone whose name is registered may also request an inspection.

In the event that the SCR is not accessible for inspection, penalties could be imposed on the company, its employees, directors, and all responsible individuals within the company.

Step 5: Select a Designated Representative

To complete the process, the designated representative needs to be appointed. This is a natural person who provides support regarding the company’s SCR to a law enforcement officer.

Under the Companies (Amendment) Ordinance, a company is mandatory to have a minimum of 1 designated representative. This person can be a significant controller of the business.

To qualify for this position, the natural person must meet one of the following criteria:

• Be a shareholder, director, or employee of the company, residing in Hong Kong.
• Be an accounting or legal professional, or operate as a Trust or Company Service Provider (TCSP) licensee registered in Hong Kong.

With a designated representative to take responsibility for dealing with the relevant authority, the company can now stay compliant with the SCR. 

To wrap up

In conclusion, the Significant Controllers Register in Hong Kong stands as a crucial mechanism mandated by the Companies Ordinance to enhance transparency and accountability in corporate structures.

Hong Kong companies engaging with the SCR process should approach it diligently, acknowledging its vital role in maintaining transparency and fostering a responsible business environment in this robust jurisdiction.

Should you have more questions regarding the Hong Kong Significant Controllers Register, do not hesitate to drop us a chat message or email via service@bbcincorp.com. Our dedicated team is available for support!

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