Anti-Money Laundering Initiatives Affecting Hong Kong Companies: A Guide to the Significant Controller Register
The Financial Action Task Force ("FATF"), the global body responsible for setting standards to combat money laundering, has long been concerned that corporate vehicles can be used to disguise and convert the proceeds of crime and has advocated the disclosure to law enforcement authorities of the true identity of the natural persons who benefit from or are responsible for the economic activities of such vehicles. To this end, FATF has established standards for transparency and in March, 2018, the Hong Kong Government introduced a new significant controller registry regime for Hong Kong companies to comply with these standards.
Under the regime, every Hong Kong company (other than a company listed on the Stock Exchange of Hong Kong) must take reasonable steps to ascertain whether there is any significant controller of the company and if so, to identify them and to keep a register of them. The company must make the register available to an officer of the Companies Registry or a law enforcement officer in prescribed circumstances.
Identifying Significant Controllers
A "significant controller" of a company broadly comprises 2 classes of persons, namely (i) natural persons who fall into one of the categories below, or (ii) legal entities, such as corporations and partnerships, who are shareholders of the company and fall into one of the categories below:
Persons Controlling Significant Capital - a person who holds, directly or indirectly, more than 25% of the issued share of the company (in the case of a company with share capital) or a right or rights to share in more than 25% of the capital or, as the case requires, the profits of the company (in the case of a company without share capital);
Persons Controlling Significant Voting Rights - a person who holds, directly or indirectly, more than 25% of the voting rights in the company;
Persons Controlling Board - a person who holds, directly or indirectly, the right to appoint or remove a mjaority of the board of directors of the company;
Persons Exercising Significant Influence - a person who has the right to exercise, or actually exercises, significant influence or control over the company;
Persons Exercising Control Over Trustee or Firm Controller - a person who has the right to exercise, or actually exercises, significant influence or control over a trust or firm where (i) under the law governing the trust or firm, the person is not a legal person, and (ii) the trustees or members in their capacity as such fall into one of the above categories of persons.
A natural person who falls into one of the above categories in respect of a company is not regarded as a significant controller of that company where that person holds or has rights in the company through another company whose shares are listed on the Stock Exchange of Hong Kong.
Keeping the Register
The register of significant controllers must contain, for each significant controller, the person's name and address together with details to identify the person legally and details of the nature of the person's control. A Hong Kong company has the duty to confirm all information before it is entered into the register and has a duty to confirm any update to any such information where it has reasonable cause to believe that such information has changed.
Providing Access To Law Enforcement
A Hong Kong company must appoint a designated representative to serve as the contact point to facilitate inspection of the register of significant controllers. An inspection may be undertaken by an officer of the Companies Registry for the purpose of ascertaining whether the company is complying with significant controller register requirements or by a law enforcement officer for the purpose of enabling the officer to prevent, detect or investigate suspected money laundering or terrorist financing.
A designated representative must meet eligibility requirements. A holder of a Trust and Corporate Services Provider license under the Anti-Money Laundering (Financial Institutions) Ordinance is eligible.
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Timothy Loh Corporate Services has experience in identifying significant controllers, maintaining registers of significant controllers, serving as the designated representative and complying with statutory requirements for access to the register by law enforcement agencies.