In the ever-evolving landscape of corporate governance, Hong Kong companies face new obligations under the Company (Amendment) Ordinance 2018. Since March 1, 2018, every Hong Kong company has been mandated to establish and maintain a Significant Controllers Register (SCR) and appoint at least one designated representative. This requirement serves a vital purpose in enhancing transparency and accountability within corporate structures. Here’s a detailed exploration of what the SCR entails and the obligations it imposes on Hong Kong businesses.
- What is the SCR?
The Significant Controllers Register (SCR) is a comprehensive record containing essential information about legal entities or individuals exercising control over a company. For significant controllers, the following information is required:
- Name of the legal entity or person
- Starting date of being a significant controller
- Nature of control exercised over the company
- For companies: legal form, registration number, place of registration, and registered office address
- For individuals: address and HKID number (or passport origin and number if no HKID is available)
- Designated representative’s name and contact details
- Defining Significant Controllers and Designated Representatives
A significant controller is an individual or legal entity that holds control over the company. Criteria for being a significant controller include owning more than 25% of shares or voting rights, having the power to appoint or dismiss the majority of the company’s Board of Directors, or exerting significant influence or control over the company’s activities.
A designated representative, on the other hand, aids in providing SCR information during investigations. They must be a shareholder, director, or employee of the company, a resident of Hong Kong, or a licensed professional (e.g., accountants, lawyers) with relevant expertise.
- Obligations and Compliance
Hong Kong companies are obligated to:
- Maintain the SCR: The register must be kept at the company’s registered office or another location within Hong Kong, either in physical or intangible form. Notification to the Company Registry is required if the SCR is kept elsewhere.
- Identify Significant Controllers: Companies must diligently identify their significant controllers and inform those individuals/entities. If no response is received within one month, specific notations indicating non-compliance must be added to the SCR.
- Keep the SCR Updated: Ensuring the SCR’s accuracy and timeliness is paramount. Failure to maintain updated records may result in penalties and sanctions.
In conclusion, the Significant Controllers Register (SCR) is a pivotal tool in Hong Kong’s corporate governance framework. By maintaining an accurate SCR, companies not only fulfill their legal obligations but also enhance transparency, fostering trust among stakeholders. Adhering to the SCR requirements not only ensures compliance with the law but also demonstrates a commitment to ethical and transparent business practices, which are fundamental in the contemporary global business landscape.
