Under the regulations of the Companies Ordinance effective from March 2018, it is a legal requirement for every company incorporated in Hong Kong to hold a Significant Controllers Register (“SCR”). Let’s dive into the simplified steps below to get an easy-to-understand picture of the preparation and maintenance of a Hong Kong SCR:
- Purpose for preparing the Significant Controllers Register
- Requirements of the Hong Kong SCR
- Detailed information and due diligence in preparing the SCR
- Who can access the Significant Controllers Register?
- Who to entrust with preparing the SCR?
- What happens if a company violates the SCR obligations?
Purpose for preparing the Significant Controllers Register
The purpose of the SCR is to enhance transparency of corporate beneficial ownership, which helps combat money laundering and terrorist financing activities. It also enables law enforcement agencies to identify the beneficial owners of a company and understand who has ultimate control over it as well.
This information is crucial in identifying and tracking down individuals or entities that may be involved in criminal activities. Moreover, the company needs to maintain this document regularly, as various authorities, including the Police Force and the Inland Revenue Department, have the authority to review it at any time.
Requirements of the Hong Kong SCR
Every Hong Kong company must identify and maintain a record of its significant controllers in the SCR.
A significant controller is an individual or entity that holds more than 25% of the company’s issued shares or voting rights, has the right to appoint or remove a majority of the board of directors, or has the right to exercise or actually exercise significant influence or control over the company.
Under the Companies (Amendment) Ordinance 2018, a company incorporated in Hong Kong is required:
- To take reasonable steps to identify and verify individuals and legal entities with significant control over the company (referred to as the “significant controller”);
- To maintain a significant controller register (referred to as the “SCR”) in either English or Chinese, making it accessible to law enforcement officers upon request;
- To keep the significant controller registered at its registered office or a designated location in Hong Kong. In the latter case, the company must inform the Registry via form NR2 within 15 days;
- To keep the significant controller register up-to-date;
- To make the significant controller register available for inspection by law enforcement officers upon demand;
- To appoint a designated representative.
The Significant Controllers Register (SCR) must be kept at the company’s registered office or a prescribed place in Hong Kong and be available for inspection by law enforcement officers upon request. The company is responsible for taking reasonable steps to identify its significant controllers, including sending notices to potential significant controllers and updating the register within 15 days of any change.
Detailed information and due diligence in preparing the SCR
The information required in the SCR includes the significant controller’s name, address, identity card or passport number, and details of the nature and extent of their control or influence. The company must also keep a record of the steps taken to identify and verify the information provided.
When identifying its significant controllers, a company must take reasonable steps to obtain and verify the required information. This may include sending notices to potential significant controllers, making enquiries within the company, and reviewing relevant documents, such as the company’s articles of association and shareholder agreement.
Failing to comply with SCR requirements is an offence and can result in a fine and/or imprisonment. Companies should seek professional advice to ensure they comply with the SCR requirements.
Who can access the Significant Controllers Register?
The SCR is not open to public inspection. It should be noted that only law enforcement agencies, including the police, the Companies Registry and the Inland Revenue Department have access to the SCR. However, the company must provide the information in the SCR to its designated representative upon request.
The officers include those from the following Hong Kong government departments or statutory bodies:
- Companies Registry
- Customs and Excise Department
- Hong Kong Monetary Authority
- Hong Kong Police Force
- Immigration Department
- Inland Revenue Department
- Insurance Authority
- Independent Commission Against Commission
- Securities and Futures Commission
Who to entrust with preparing the SCR?
The SCR is an important legal requirement that all Hong Kong companies must comply with. It aims to enhance transparency of corporate beneficial ownership and combat money laundering and terrorist financing activities. Hong Kong Companies must take reasonable steps to identify and maintain a record of their significant controllers and keep the SCR up to date and accurate. By complying with the SCR requirements, companies can contribute to the fight against financial crime and protect their reputation.
Prepare and update the SCR in Hong Kong might be complicated and time-consuming. With an expert in Secretary Corporate services, you can entrust your company secretary with preparing the SCR while maintaining the required compliance and thus mitigating liability risks. We will bring you professional guidance and support, access to resources that are not readily available to you as an individual and save time as well as money.
What happens if a company violates the SCR obligations?
For an applicable company
Failing to comply with the requirement to maintain an updated Significant Controllers Register is considered a criminal offense. The company and every responsible person of the company are liable to a fine at level 4 up to HKD 25,000 and a further daily fine of HKD 700.
For the addressee that received a notice
Failure to comply with the requirements specified in the Significant Controllers Register notice within one month from the date of the notice constitutes an offense. The recipient of the notice, along with every related person, is subject to a fine.
For false statement
Any person who knowingly or recklessly makes a false, misleading or deceptive statement in any material in the SCR or in replying a notice sent under the SCR is liable to a fine up to HKD 300,000 and imprisonment up to two years.
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