sroom Government Increases HK Companies & Money Inspecti

Hong Kong came out new requirements for increasing companies and money inspections. All companies incorporated in Hong Kong are required to obtain and maintain up-to-date beneficial ownership information by way of keeping a Significant Controllers Register(SCR), it will officially take effect on March 1. 

Simply speaking, it requires Hong Kong companies to submit information of significant persons/entities to the government. And this information and data should be open for inspection by law enforcement officers UPON DEMAND.

 

What should you do?

Under the new requirements, a company incorporated in Hong Kong is required to fulfill the following obligations. 

More directly, these two steps you have to do now:

a.Firstly, to identify persons who have significant control over the company (“significant controllers”); 

b.Secondly, to maintain a significant controllers register (“SCR”) to be accessible by law enforcement officers.

 

How to identify persons who have significant control over the company?

A person has significant control over a company if one or more of the following 5 conditions are met – 

 

a.The person holds, directly or indirectly, more than 25% of the issued shares in the company or, if the company does not have a share capital, the person holds, directly or indirectly, a right to share in more than 25% of the capital or profits of the company.

b.The person holds, directly or indirectly, more than 25% of the voting rights of the company.

c.The person holds, directly or indirectly, the right to appoint or remove a majority of the board of directors of the company.

d.The person has the right to exercise, or actually exercises, significant influence or control over the company.

e.The person has the right to exercise, or actually exercises, significant influence or control over the activities of a trust or a firm that is not a legal person, but whose trustees or members satisfy any of the first four conditions (in their capacity as such) in relation to the company.

 

Examples of meeting the conditions for being a registrable person and a registrable legal entity who have significant control over the company:

 

What are the consequences of failure to comply with SCR?

Failure to comply with SCR or intentionally make any fake statement is a criminal offense. 

 

The company and every responsible person of the company are liable to a fine at level 4 (i.e. $25,000). Where applicable, there is a further daily fine of $700.

 

Be honest! If a person makes knowingly or recklessly makes a statement which is misleading, false or deceptive in any material particular in the SCR.

 

the person commits an offense and is liable –

a.on conviction on indictment to a fine of$300,000 and imprisonment for two years; or

 

b.on summary conviction, to a fine at level 6 (i.e. $100,000) and imprisonment for six months

 

SCR makes up loopholes in the safety of money transfer 

SCR is part of the governments' plan of anti-money laundering and counter-terrorist financing, it's the worldwide environment make business activities become intense. 

 

Since the Kong Kong joined Common Reporting Standard (CRS) in 2017, banks required its users to submit more documents to prove they are running a legal business, for those who fail to fulfill the obligation, the function of international transfer got shut down, or even bank accounts got canceled.

The implementation of SCR is a further support of CRS, previously, the government only required companies to submit basic information about shareholders.

 

Now the information or data about the business of Hong Kong company, auditing report, bank statement and balance of the Hong Kong bank account, secretary company, etc are all needed to be recorded. SCR makes the registrable persons/entities toaccordingly shoulder up responsibilities.  

 

"What documents should a company deliver to report the location of significant controllers register and how to submit?"

 

The new requirements are impossible to be interpreted in detail in an article, but you should be noticed and prepare for right now, and we can help on that.