Complete Guide on the Significant Controllers Register in Hong Kong
- Published: 14 August 2024
- 9 min read
- Running a Business
Heather Cameron
Business Writer
Heather is here to inform and inspire our readers. Boasting eight years in the world of digital marketing, working in diverse industries like finance and travel, she has experience writing for various audiences. As Osome’s resident copywriter, Heather crafts compelling content, including expert guides, helpful accounting tips, and insights into the latest fintech trends that will help entrepreneurs, founders and small business owners in Hong Kong take their businesses to the next level.
The Significant Controllers Register (SCR) is a mandatory record-keeping requirement in Hong Kong for documenting individuals or entities with significant control over companies. This guide will clarify what an SCR is, which companies need it, and the requirements for compliance. We will also discuss the importance of maintaining this register and the penalties for failing.
Key Takeaways
- The Significant Controllers Register is a mandatory requirement for certain companies in Hong Kong to maintain updated records of their corporate beneficial ownership to enhance transparency and combat illicit activities.
- Only local companies registered under the Companies Ordinance must maintain an SCR. Foreign companies operating in Hong Kong through branches and companies with shares listed on the Stock Exchange of Hong Kong are exempt from this requirement.
- Non-compliance with SCR obligations may result in significant penalties, including fines and imprisonment, highlighting the importance of accurate maintenance and timely register updates.
What Is a Significant Controllers Register?
The Significant Controllers Register was established to enhance transparency regarding the beneficial ownership of companies in Hong Kong. Introduced by the Companies (Amendment) Ordinance 2018, the SCR is a mandatory requirement for certain companies to maintain updated records of individuals or entities with significant control over them. This initiative aligns Hong Kong with international standards for corporate governance, reflecting a global move towards greater transparency in business operations.
Complying with the SCR requirements can be time-consuming and complex. At Osome, we provide comprehensive corporate secretarial services that can help you stay compliant and avoid potential penalties. Contact us, and the team of professionals will assist in maintaining accurate records.
The SCR fulfils Hong Kong’s obligations to international regulatory bodies, ensuring true ownership disclosure. Companies must maintain up-to-date information on individuals or entities with significant control, including their particulars and the nature of their control. This helps combat illicit activities like money laundering and tax evasion, which thrive in corporate ownership structures that lack transparency.
The SCR is an essential tool in Hong Kong’s regulatory framework. It enhances companies' accountability by making their ownership structures more transparent, thereby fostering a more secure and trustworthy business environment.
What Types of Companies Need to Maintain an SCR?
Not all types of companies in Hong Kong are required to maintain a Significant Controllers Register. Keeping an SCR primarily applies to local companies registered under the Companies Ordinance. This includes private companies incorporated in Hong Kong and dormant companies incorporated in Hong Kong, ensuring that even those not conducting business maintain transparency in their ownership structures. Any qualifying Hong Kong company must adhere to these regulations.
Exemptions exist, such as foreign companies operating in Hong Kong through branches and companies that have their shares listed on the Hong Kong Stock Exchange, which are not required to maintain an SCR. This distinction is crucial for a company service provider and those involved in incorporation, as it defines the scope of compliance.
Understanding these nuances helps companies determine their specific obligations under the SCR regime.
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What Are the Requirements for the Significant Controller Register?
The requirements for maintaining a Significant Controllers Register are comprehensive and detailed. Unlisted companies in Hong Kong must comply with these regulations, irrespective of their structure. The SCR should be stored at the company’s registered office or another specified location in Hong Kong, making it readily accessible for inspection.
Companies must take reasonable steps to identify their significant controllers, which involves notifying suspected controllers and gathering the necessary information. Identified controllers’ particulars must then be recorded in the SCR. These details include names, contact information, and the nature of control, ensuring the register is accurate and informative.
Regular updates are essential. The SCR must be kept current, and any changes in significant controllers must be recorded within seven days. This ensures that the register reflects the most accurate information at all times. Companies must appoint a Designated Representative to manage the SCR and address related inquiries. The representative ensures compliance and facilitates access to the register for law enforcement officials.
The SCR must be accessible to law enforcement officers and significant controllers upon request. This accessibility is a cornerstone of the SCR regime, allowing for effective oversight and enforcement of corporate transparency regulations.
How To Identify a Significant Controller?
Identifying a significant controller involves understanding specific criteria that define substantial control. A significant controller can be either a legal entity or a person with significant influence or control over the company. Generally, this includes individuals who own more than 25% of the shares or voting rights in the company.
Control over the company can also be shown through the ability to appoint or remove a majority of the board of directors. Significant influence or control involves the power to direct the company’s activities. Companies must take reasonable steps to identify these controllers, including reviewing relevant documents and issuing notices to potential controllers.
Documenting the identification process is crucial. Companies should maintain records of the steps taken to identify their significant controllers. This ensures compliance with the SCR regime, fostering accountability and transparency.
Role of the Designated Representative
The Designated Representative is a crucial figure in the management of the SCR. This person must be a natural legal person residing in Hong Kong or a qualified professional, such as a lawyer or accountant. They can also be shareholders, directors, or company employees, provided they meet the residency or professional qualifications.
The role has significant responsibilities. They must ensure that the SCR is properly maintained and accessible to authorised personnel, including law enforcement officers. Their names and contact details must be recorded in the SCR to facilitate inquiries or inspections, as they are considered responsible in this context.
The role of the Designated Representative is pivotal in ensuring compliance with the SCR regime and facilitating transparency within the company.
Required Particulars in the Significant Controllers Register
The SCR must contain specific particulars about each significant controller. For individuals, this includes their names, correspondence addresses, and identification details, such as identity card numbers or passport numbers, along with the issuing country if they do not have an identity card. This information ensures that the significant controller is a legal person who is clearly identified and traceable.
For legal entities, the register must include details such as the legal entity’s registration number, legal form, place of incorporation, and address. Additionally, the nature of the control exercised by the significant controller must be documented, providing clarity on how they have influence or control over the company.
If a company has no significant controllers, this must be explicitly stated in the SCR using prescribed wording.
Accurately maintaining these details is essential for compliance. The SCR’s completeness and accuracy enable effective oversight, ensuring transparency in ownership and control structures.
Maintenance and Compliance
Maintaining the Significant Controllers Register requires ongoing compliance efforts. Hong Kong companies must identify their significant controllers and fulfil strict compliance obligations mandated by the SCR regime. This includes filing Form NR2 to disclose the location of the SCR. Companies must update the SCR within seven days of any changes regarding significant controllers, ensuring that the information remains current.
If significant controllers change, written notices must be issued to affected individuals within a week. The SCR should be stored at the company’s registered office or an approved location in Hong Kong, making it accessible for inspection by authorised personnel at any reasonable time.
Records of the steps taken to identify significant controllers should be maintained for compliance. If a company has no significant controller, this must be clearly indicated in the register.
This meticulous approach to record-keeping ensures that companies adhere to the governing law and maintain transparency in their operations.
Access to the Significant Controllers Register
Access to the Significant Controllers Register of a Hong Kong company is regulated to ensure that only authorised personnel can inspect it. Law enforcement officers from various government authorities, including the Hong Kong police force, the Hong Kong Companies Registry, and the Securities and Futures Commission, have the right to inspect the SCR. The Designated Representative must facilitate authorised personnel's access to the SCR upon request.
Significant controllers in the register also have the right to inspect it and obtain copies of their information. Companies must take reasonable steps to identify significant controllers and keep the register accessible for law enforcement. The role of the Designated Representative is crucial in assisting law enforcement inquiries related to the SCR.
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Making the SCR accessible to authorised personnel maintains the integrity of the register regime and supports corporate transparency.
Penalties for Non-Compliance
Non-compliance with SCR obligations can result in severe penalties for companies and individuals. Failure to maintain the SCR or comply with inspection requests can lead to fines and imprisonment. For instance, companies that do not keep their SCR at the designated office may face fines reaching HKD 25,000. Not complying with an SCR notice within a month can result in a fine of HKD 25,000, with an additional daily penalty of HKD 700 for ongoing failures.
Providing false information in the SCR is a serious offence, with penalties including fines up to HKD 300,000 and imprisonment for up to two years. Misleading statements in the SCR can also lead to severe consequences.
Engaging a professional Corporate Secretarial team helps ensure SCR accuracy and compliance with all regulations, which may require consultation with a legal professional. These penalties underscore the importance of compliance. Companies must take their SCR obligations seriously to avoid severe consequences.
Ensure your business is SCR compliant and avoid potential penalties with a professional bookkeeping service. Our team of experts at Osome can assist you in maintaining accurate records and preparing necessary reports. Contact us and stay up-to-date with the latest regulations.
Summary
The Significant Controllers Register is a critical component of corporate governance in Hong Kong, designed to enhance transparency and accountability among listed companies. Companies can ensure compliance with the SCR regime by understanding the requirements, identifying significant controllers, and maintaining accurate records.
Adhering to SCR obligations fulfils legal requirements while also promoting a culture of transparency and trust in the corporate sector. Companies must proactively manage their SCR effectively, ensuring they contribute to a transparent and responsible business environment.
FAQ
Who needs to maintain a Significant Controllers Register?
Local Hong Kong companies registered under the Companies Ordinance, including dormant entities, must maintain a Significant Controllers Register (SCR). This requirement ensures transparency regarding ownership and control.
How do I identify a significant controller?
To identify a significant controller, look for individuals or legal entities that hold more than 25% of shares or voting rights or have significant influence or control over the company.
What information must be included in the SCR?
The SCR must include the names, correspondence address, relevant contact details, and identification details of any Hong Kong significant controllers and the nature of their control.
What are the penalties for non-compliance with SCR obligations?
Non-compliance with the Significant Controllers Register regime obligations can result in fines up to HKD 300,000, imprisonment for up to two years, and additional daily fines for continued infractions.
Adhering to these obligations is crucial to avoid such severe penalties. Consulting a legal professional or accounting professional can be a huge help to ensure compliance.
Who can access the SCR?
Only law enforcement officers, relevant government authorities such as the Securities and Futures Commission, Hong Kong significant controllers, and the Designated Representative can access the SCR of a Hong Kong company upon request.
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