What You Need to Know about the new Chinese Significant Controls Register

In January 2018, the Legislative Council of China passed The Companies Ordinance and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, both came into effect on the 1st March 2018. These laws now apply to all companies created and registered in Hong Kong. Companies registered under Part 16 of the HK Companies Ordinance are not subject to these new laws.
 

Defining the Significant Controller

A significant controller is defined as a registerable person, company or other legal entity who has clear significant control over the Hong Kong registered company.

This is any person or entity that holds 25% or more shares. If the company does not hold shares, the SC would possess legal right to share 25% or more should it do so. The person could also hold 25% or more of the voting rights in the company and the right to appoint and remove board members. Any other condition under which this person might determine policy or direction of the company, or otherwise exert influence or control, makes this person a Significant Controller. All of this also applies to trustees of trusts.
 
If any of these criteria apply, for legal purposes they are considered a Significant Controller.
 

How This Affects Eligible Companies

From the 1st March 2018, all companies subject to these new rules will be expected to:
 

• Maintain a Significant Controller Registry
• Keep the SCR at its main premises or any other office based in Hong Kong
• Inform the Companies Registrar of the location of the SCR within 15 days
• Within 7 days, the company must give written notification that a person is a Significant Controller
• Notify any person or entity if the company knows or has reasonable cause to believe this person or entity is a Significant Controller, and this person must provide the registrable details within one month from notice.

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Any person may inform the Registrar if they have reason to believe that another person is now a Significant Controller.
 

What Needs to Go in the SCR?

The Person: Required details include their name and correspondence address (but not a PO Box), their ID card details. If they are a foreign national and not a Hong Kong resident, a passport number and the issuing country of the passport. You will also need to keep details on when they became registered with the company and the nature of their control over it.
 
The legal entity: entity name, registered address and registration number as standard. It should also include details of the form of the legal entity and the date on which it registered. Finally, you need to keep details of the nature of control over the company.
 

The Consequences of Failure to Comply

Should the company fail to comply with these issues, each controlling member is in breach of the law and will be subject to an HK$25,000 fine. For continuing offences, additional HK$700 fines will apply for each and every day where there is non-compliance. Any person supplying false information knowingly will be subject to a maximum fine of HK$300,000 and possibly a prison sentence of up to two years.