Hong Kong updates Companies Bill

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On 23 June 2017, Hong Kong published the Companies (Amendment) Bill 2017 in the Government Gazette.

The bill reflects ongoing efforts of the Hong Kong government to bring Hong Kong in line with the international standards promulgated by the Financial Action Task Force, of which Hong Kong has been a member since 1991, to enhance Hong Kong’s regulatory regime on combating money laundering and terrorist financing. The Bill aims to introduce new laws to improve transparency in the beneficial ownership of Hong Kong incorporated companies.

Key changes proposed to be made pursuant to the bill include the following:

  • Applicable companies will be required to maintain a register of significant controllers;
  • Applicable companies have the obligation to carry out investigations, obtain information about its significant controllers and keep the information accurate and updated
    at all times.

An applicable company will be required to keep and maintain a register for persons who have significant control over that applicable company. The Significant Controllers Register must contain the prescribed contents and be kept at the registered office of the applicable company, or a prescribed place.

A Significant Controller in relation to an applicable company means either:

  • (Subject to exceptions) a natural person or specified entity that has significant control over that company; or
  • A legal entity that is a member of, and has significant control over, that company.

The following is a summary of the key duties of an applicable company:

  • Duty to keep a Significant Controllers Register whether or not the company has any Significant Controllers;
  • Duty to carry out investigation and obtain information about its Significant Controllers.
  • Duty to keep information on the Significant Controllers Register up to date including recording any registrable change arising from: (1) any person ceasing to be a Significant Controller; (2) any other change that results in any particulars for any person entered in the Significant Controllers Register being incorrect or incomplete; or (3) any required update on the prescribed additional matters noted in the register;
  • Duty to notify the Registrar of Companies of the place at which the Significant Controllers Register is kept, and any change in the place at which the register is kept, subject to certain exceptions.

In carrying out its duties to investigate, obtain information and keep information up to date about its Significant Controllers, an applicable company is required to give notices to the relevant persons if it knows, or has reasonable cause to believe that:

  • That person is a Significant Controller;
  • That person knows the identity of another person who is a Significant Controller; or
  • There is a registrable change with respect to that person, the details of which are required to be contained in the Significant Controllers Register.

There are exempted circumstances where some of the notices are not required. The bill was introduced into the Legislative Council for first reading on 28 June 2017. If passed, it is expected to come into force on 1 March 2018. It is unclear whether the Companies Registry will issue guidelines to help applicable companies to comply with the new requirements, and in particular whether an applicable company will be given any transitional period to set up the Significant Controllers Register, and to take all necessary actions required to comply with the new law after it comes into force as of the proposed commencement date.

Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by emailing: Danian Zhang at danian.zhang@bakermckenzie.com, or for general enquiries contact Anand Ramaswamy at anand.ramaswamy@bakermckenzie.com