Circulation No.: KNC/2018/150
Date: February 2018
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.
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.
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.
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
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.
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
A person or an entity is considered as a SC if he meets one or more of below conditions: –
Information Required of Significant Controller
For registrable person who is a natural person:
For registrable legal entity:
For specified entity:
Procedures to Identify Significant Controllers
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
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.
Every Hong Kong company must designate at least one person as its representative to aid 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.
A company’s designated representative must be one of the followings: –
The following particulars of the designated representative must be recorded:
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.
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.
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
Kaizen CPA Limited is a certified public accounting firm and its associated firms, Kaizen Corporate Services Limited and Kaizen Secretaries Limited, are licensed 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 HKD1,200 per annum.
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.