In Hong Kong, maintaining a Significant Controllers Register (SCR) is a legal obligation for most companies under the Companies (Amendment) Ordinance. The SCR is designed to record individuals or entities that have significant control over a company, promoting corporate transparency and aligning with international anti-money laundering standards. Whether you’re a business owner, company director, or corporate service provider, understanding the SCR requirements is essential to ensure compliance, avoid penalties, and uphold good governance in your Hong Kong entity.
Content Outline
Key Takeaways
Legal Requirement for Most Companies
All companies incorporated in Hong Kong (except listed companies and certain exempted entities) must maintain a Significant Controllers Register (SCR) to comply with the Companies (Amendment) Ordinance.
Identifying Significant Controllers
A significant controller is any individual or entity with more than 25% ownership, voting rights, or decisive influence over the company; companies must take reasonable steps to identify and notify them.
SCR Content and Storage
The SCR must include detailed information about each controller and the company’s Designated Representative, and it must be kept at the registered office or a notified location in Hong Kong.
Access and Designated Representative
The SCR is private and accessible only to law enforcement and the designated representative who must be a qualified Hong Kong resident or licensed service provider responsible for liaising with authorities.
Compliance and Penalties
Companies must update the SCR within seven days of changes and follow strict compliance procedures. Failure to comply can result in fines up to HK$300,000, daily penalties, and potential imprisonment.
What is a Significant Controllers Register (SCR)?
The Significant Controllers Register (SCR) is a statutory requirement introduced under the Companies (Amendment) Ordinance, which amended the Companies Ordinance (Cap. 622) in Hong Kong. It is a register that records details of individuals or legal entities that have significant control over a company. The primary purpose of the SCR is to enhance corporate transparency and align Hong Kong with international standards on combating money laundering and terrorist financing. By requiring companies to maintain up-to-date information on their significant controllers, the SCR promotes accountability and discourages the misuse of complex corporate structures for illicit purposes.
Who Needs to Maintain an SCR?
All companies incorporated in Hong Kong under the Companies Ordinance (Cap. 622) are required to maintain an SCR, including private companies and dormant companies, regardless of whether they are actively trading. These companies must identify their significant controllers, record their details, and ensure the information remains accurate and accessible. However, there are exemptions; companies listed on the Hong Kong Stock Exchange and foreign companies operating in Hong Kong through branches are not required to maintain an SCR. Understanding whether your entity falls within the compliance scope is crucial to avoiding breaches of the Ordinance.
How to Identify a Significant Controller
To comply with the Significant Controllers Register (SCR) requirements, Hong Kong companies must take reasonable steps to identify individuals or legal entities that have significant control over the company. A significant controller is generally someone who holds more than 25% of the company’s issued shares, more than 25% of the voting rights, or has the right to appoint or remove a majority of the board of directors. It may also include a person or entity that exercises significant influence or control over the company’s decision-making.
Reasonable steps include reviewing the company’s register of members, articles of association, shareholder agreements, and other corporate documents. Companies must also issue formal notices to persons who are believed to be significant controllers, or to those who might know the identity of such controllers. In some cases, companies may need to consult with legal or professional advisors to properly assess complex ownership structures.
What Should Be Included in the SCR?
To comply with Hong Kong’s Companies Ordinance (Cap. 622), every applicable company must maintain a Significant Controllers Register (SCR) with specific and accurate particulars of each significant controller. This register must be kept up to date and made accessible upon request by law enforcement officers or the Companies Registry.
The SCR must include the following required information:
- Full name of each significant controller
- Correspondence address
- For individuals: Hong Kong Identity Card number or passport number (with issuing country, if applicable)
- For legal entities: Legal form, registration number, place of incorporation, and registered office address
- Nature of control: For example, holding more than 25% of shares or voting rights, or the right to appoint the majority of directors
- Date on which the individual or entity became a significant controller
In addition, the SCR must record any registrable changes, such as when a person ceases to be a significant controller or if the existing information becomes inaccurate or misleading. The register must also include details of the company’s Designated Representative, a person responsible for handling SCR-related communications with authorities. This representative must be a Hong Kong resident who is either a director, employee, or a licensed professional such as a company secretary, CPA, or solicitor.
If a company has no significant controllers, this fact must also be stated clearly in the SCR using the prescribed wording as required under Schedule 5C of the Companies Ordinance.
Maintaining a compliant SCR not only fulfills your legal obligations but also protects your company from penalties and supports Hong Kong’s commitment to corporate transparency.
Role of the Designated Representative
Under the Hong Kong Companies Ordinance, every company (except listed companies) must appoint a Designated Representative (DR) to assist in the administration and accessibility of the Significant Controllers Register (SCR). The DR plays a central role in ensuring compliance with legal obligations related to the SCR.
Who Can Be Appointed as a Designated Representative?
The designated representative must be one of the following:
- A natural person who is a resident of Hong Kong and also a director, shareholder, or employee of the company; or
- A professional service provider such as a licensed company secretary, certified public accountant (CPA), solicitor, or registered trust or company service provider (TCSP).
Firms offering professional corporate services, such as accounting or legal firms, can also act as the designated representative if they meet the eligibility requirements.
Key Responsibilities of the Designated Representative
- Liaison with Law Enforcement Authorities: The designated representative is the point of contact for inspection requests from law enforcement officers, including those from the Companies Registry, Police, and other government agencies.
- Maintain Accessibility of the SCR: The designated representative ensures the SCR is stored at the designated location and is accessible for inspection upon request.
- Ensure Ongoing Compliance: The designated representative helps keep the SCR up to date and accurate, playing a key role in meeting statutory requirements under the Companies Ordinance.
Appointing a qualified designated representative not only ensures regulatory compliance but also promotes corporate transparency and accountability.
Access to the Significant Controllers Register
The Significant Controllers Register (SCR) is a private register and not open for public inspection. Access is strictly regulated to protect the privacy of individuals while ensuring transparency to authorities.
Who Can Access the SCR?
Only the following parties are legally allowed to access the SCR:
- Law Enforcement Officers: Officials from government departments such as the Companies Registry, Hong Kong Police Force, Inland Revenue Department, and Securities and Futures Commission may inspect the SCR for investigation and regulatory purposes.
- Significant Controllers: Individuals or entities listed in the SCR have the right to inspect their own records and obtain copies of relevant entries.
- Designated Representative: The appointed DR must be able to access and produce the SCR promptly upon official request.
Companies are required to respond to access requests from law enforcement officers without delay. The SCR must be stored at the company’s registered office or a prescribed location in Hong Kong. Companies should keep the register updated within seven days of any change and ensure that the designated representative is aware of their duties regarding accessibility.
By maintaining strict control over who can access the SCR, Hong Kong reinforces its commitment to anti-money laundering efforts and enhances the integrity of its corporate regulatory regime.
Maintenance and Ongoing Compliance
Maintaining the Significant Controllers Register (SCR) requires continuous attention to remain compliant with Hong Kong’s Companies Ordinance. Companies must implement proper internal controls to ensure the SCR is consistently accurate and accessible.
SCR Location Requirements
The SCR must be kept at the company’s registered office or at a prescribed place in Hong Kong (disclosed using Form NR2). This location must be readily accessible to law enforcement officers upon request.
Timely Updates
Any change in the particulars of a significant controller must be reflected in the SCR within seven days. This includes:
- A new person or entity becoming a significant controller;
- An existing controller ceasing to meet the threshold;
- Updates to identification or control details.
Companies are also required to issue written notices to individuals or entities suspected of being significant controllers, typically within seven days of identifying such a relationship.
Best Practices for Ongoing Compliance
- Regular Reviews: Schedule periodic reviews to ensure information remains accurate.
- Internal Protocols: Establish internal reporting systems to detect changes in ownership or control.
- Periodic Audits: Conduct internal audits to verify the accuracy of the SCR and related records.
Penalties for Non-Compliance
Failure to comply with SCR requirements in Hong Kong can result in severe legal and financial consequences for both companies and responsible individuals.
Common Offences Include:
- Not maintaining the SCR at the registered office or declared location;
- Failing to appoint a Designated Representative;
- Not issuing notices to potential significant controllers;
- Delayed or missing updates to the SCR;
- Providing false or misleading information in the register.
Penalties for Non-Compliance:
- Failure to maintain SCR or comply with obligations: Fines of up to HK$25,000, plus daily penalties of HK$700 for ongoing offences;
- False or misleading statements in the SCR: Fines of up to HK$300,000 and imprisonment for up to two years;
- Failure to appoint a Designated Representative: Treated as a serious offence, leading to similar penalties.
Risks of Non-Compliance:
- Regulatory investigations;
- Loss of credibility with partners, investors, and regulators;
- Criminal liability for company officers and directors.
Benefits of Staying Compliant include:
- Ensuring transparency and good governance;
- Avoiding costly fines and reputational damage;
- Supporting smoother business operations and audits;
- Enhancing investor and stakeholder confidence.
Engaging a professional corporate services provider helps safeguard against regulatory pitfalls. By staying compliant, your company upholds legal integrity and positions itself for sustainable growth in Hong Kong’s corporate landscape.
Conclusion
Having to stay updated on the constantly changing and more and more complex regulation regime just adds to the stress of the operational compliance regime. Although it is not always easy to determine the responsible parties, it must be done and the regulatory requirements must be met.
Fastlane Group’s experienced Corporate Secretarial team will help you minimize the compliance burden by providing a detailed impact assessment report for your business regarding the Significant Controller Register legislation, drawing up a structured and accurate SCR, and complying with your statutory engagements on your behalf.
Talk to us now to arrange for your ready-made Hong Kong company’s SCR hassle-free.
Frequently Asked Questions
1. What companies must keep a Significant Controllers Register under the new law?
All companies incorporated or re-domiciled in Hong Kong (except listed companies) must identify their significant controllers and maintain a Significant Controllers Register accessible to law enforcement officers.
2. Who qualifies as a significant controller of a company?
A significant controller can be a natural person or a legal entity who meets one or more of the following: owns more than 25% of shares, holds more than 25% voting rights, has the right to appoint or remove a majority of the board, or exercises significant influence or control over the company or its trust/firm.
3. How should a company identify its significant controllers?
The company must take reasonable steps, such as checking registers, articles of association, shareholder agreements, and issuing notices to people likely to be significant controllers or who may know their identity.
4. What happens if a significant controller does not respond to the company’s notice?
If the person does not respond within one month, the company must note this in the register and may report the non-compliance to the Companies Registry.
5. Does the company have to include senior management, like CEOs or directors, in the register?
Only if those individuals have absolute decision-making power or veto rights that amount to significant influence or control. Their position alone doesn’t automatically qualify them.
6. What information must the Significant Controllers Register contain?
The register must include details of each significant controller (name, address, ID/passport details or company registration info), the nature of control, date they became a significant controller, and contact details of the company’s designated representative.
7. Can a company appoint a significant controller as its designated representative?
Yes, as long as the significant controller is either a Hong Kong resident natural person who is a director, employee, or shareholder, or a qualified professional such as an accountant, lawyer, or licensed trust company service provider.
8. Where must the Significant Controllers Register be kept?
It must be kept at the company’s registered office or another place in Hong Kong. If kept elsewhere, the company must notify the Companies Registry within 15 days.
9. Is a company required to submit the Significant Controllers Register to the Companies Registry?
No, the register does not need to be submitted for registration but must be kept accessible at the registered office or notified place in Hong Kong.10. Who can access the Significant Controllers Register?
Authorized law enforcement agencies such as the Companies Registry, Hong Kong Police, Inland Revenue Department, Customs and Excise Department, Hong Kong Monetary Authority, and others have access to the register upon request.
