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The Highlight of Significant Controllers in the Companies Amendment Bill 2017

1. The Companies (Amendment) Bill 2017 provides that if an applicable company (a company other than a listed company) knows or has reasonable cause to believe, that a person is a significant controller who owns more than 25% of the equity interest in the company, or that a person possesses information relating to a significant controller, the company must send a written notice to the person containing the following information: (i) obtain from the addressee a confirmation that he is a registrable person; (ii) if the addressee confirms that the addressee is a registrable person or legal entity of the company, the addressee is required to confirm or correct the required particulars of the addressee that are included in the notice; and provide any required particulars of the addressee that are missing from the notice.

In addition, the applicable company must on the basis of the information collected from the addressee, establish a significant controller register, retain the communication in connection with the notice, keep the particulars of the registrable person or the legal entity in a current state, until the end of a 6-year period from the day the registrable person or legal entity ceases to hold more than 25% of the equity interest in the company. In this regard, the applicable company must take steps to investigate, obtain information, record and keep the information of what has been done for inspection by the law enforcement agents (who performs the specified function in future).

2. Designated representative

As per section 653ZC of the company amendment bill, an applicable company must designate at least one person as its representative to provide the assistance relating to the significant controllers of the company to an officer of the Companies Registry to facilitate ascertaining whether the applicable company has complied with the legal requirement, and to any other law enforcement officers to facilitate the officer’s performance under the law of Hong Kong of a specified function, including the officers of the Customs and Excise Department; the Hong Kong Monetary Authority; the Hong Kong Police Force; the Immigration Department; the Inland Revenue Department; the Insurance Authority; the Independent Commission Against Corruption; the Securities and Futures Commission; any department or agency of the Government.

 

The company must not designate a person unless (a) the person is a natural person resident in Hong Kong and is a director, employee or member of the company; or (b) the person is an accounting professional, a legal professional, or a TCSP licensee, as defined under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance.

 

There is a division of work between the Companies registrar (or his authorized employee) and other law enforcement agents (as defined above). The Companies Registrar checks whether an applicable company has complied with the requirement under the Companies Ordinance, including the creation of significant controller register (the Register) and keep the required information current. Other law enforcement agents come over to inspect the contents of the Register in the performance of their duties under the anti-money laundering laws, tax laws or other regulations. In addition, other law enforcement agents can enter the office premises without the need for a warrant granted by the court, and take photo copies of the register or part of it.

3. Company’s duty to investigate and obtain information

Section 653P(1) provides that an applicable company must take reasonable steps to ascertain whether there is any significant controller of the company; and if any, to identify each of them.

Sections 653P and 653Q provides that If the company knows, or has reasonable cause to believe, that a person is a significant controller of the company, the company must give written notice to the addressee within in 7 days:

(1) requiring the addressee to confirm whether or not the addressee is a registrable person or a registrable legal entity of the company;

(2) stating that (a) if in the positive, the addressee is required to confirm or correct the required particulars of the addressee that are included in the notice, and provide any required particulars of the addressee that are missing from the notice; and

(3) requiring the addressee to state whether or not the addressee knows the identity of another person who is a significant controller of the company; and if yes, providing to the company all the specified particulars of that person that are known to the addressee; and stating whether or not the particulars are provided with that person’s knowledge.

(4) stating that the addressee must comply with the requirements made under this section within 1 month from the date of the notice.

A notice, as mentioned above, must be given to the person within 7 days after the first of the following to happen: (a) the company first knows that the person is a significant controller of the company; (b) the company first has reasonable cause to believe that the person is such a controller.

 

Section 653P and 653R provides that if the company knows, or has reasonable cause to believe, that a particular person knows the identity of another person who is a significant controller of the company, the company must give a written notice:

(1) requiring the addressee to confirm whether or not the addressee knows the identity of another person who is a significant controller of the company; and

(2) stating that if the addressee confirms that the addressee knows the identity of such a person, the addressee is required to provide to the company all the specified particulars of that person that are known to the addressee, and state whether or not the particulars are provided with that person’s knowledge.

(3) The notice must also state that the addressee must comply with the requirements made under this section within 1 month from the date of the notice.

A notice, as mentioned above, must be given to the particular person within 7 days after the first of the following to happen: the company first knows that the particular person knows the identity of another person who is a significant controller of the company; or the company first has reasonable cause to believe that the particular person knows the identity of another person who is such a controller.

 

4. Addressee of notice to comply with legal requirements

If a requirement mentioned above is not complied with within 1 month from the date of the notice concerned, the addressee of the notice, and (if the addressee is a legal entity) every related person of the entity, commit an offence, and each is liable to a fine at level 4 (HK$25,000). If a person is charged with that offence, it is a defence for the person to prove that the requirement was frivolous or vexatious.

5. Section 653T provides for a registrable change.

(1) If the company knows, or has reasonable cause to believe, that there is a registrable change with respect to a person, the details of which are required to be contained in the significant controllers register of the company.

(2) The company must give a notice to the person to whom the registrable change relates within 7 days after the first of the following to happen: the registrable change first comes to the notice of the company; or the company first has reasonable cause to believe that the change has occurred.

(3) If subsection (2) is contravened, the company, and every responsible person of the company, commits an offence, and each is liable to a fine at level 4 (HK$25,000).

 

6. A person has right to inspect and request copy of register

A person whose name is entered in the significant controllers register of an applicable company as a significant controller of the company is entitled to inspect the register, and on payment of a prescribed fee, to be provided with a copy of the register, or a part of it.

7. Offence is imposed for giving false information

Section 653ZE imposes fines on false information.

(1) A person commits an offence if the person, in purported compliance with a notice given under this Division, knowingly or recklessly makes a statement or provides any information that is misleading, false or deceptive in a material particular.

(2) A person who commits an offence under subsection (1) is liable on conviction on indictment to a fine of $300,000 and to imprisonment for 2 years; or on summary conviction to a fine at level 6 and to imprisonment for 6 months.

8. The information about the significant controller register of an applicable company is not to be made available to the public.

Content provided by China Tax & Investment Consultants Ltd
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