What is the Significant Controllers Register (SCR)?
The Companies (Amendment) Ordinance 2018 (“the Amendment Ordinance”) introduced new requirements on the keeping of Significant Controllers Registers by companies to enhance transparency of corporate beneficial ownership in order to fulfil Hong Kong’s international obligations. The Amendment Ordinance came into operation on 1 March 2018.
Which type of company has to keep a Significant Controllers Registers (SCR)?
Which type of company has to keep a Significant Controllers Registers (SCR)?
The requirement to keep a SCR applies to all companies formed and registered under the Companies Ordinance, namely locally incorporated companies, including –
– companies limited by shares
– companies limited by guarantee
– unlimited companies
Companies which have their shares listed on the Stock Exchange of Hong Kong are exempted from the requirement.
Where should the Significant Controllers Registers (SCR) be kept?
A company must keep its SCR at the company’s registered office or a place in Hong Kong.
What is a Significant Controller?
Significant Controller refers to:
– A registrable person who is a natural person that has significant control over the company.
– A registrable legal entity (eg. a company), which is a shareholder of the company that has significant control over the company.
A person (or an entity) has significant control over a company if one or more of the following 5 conditions are met –
– 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
– The person holds, directly or indirectly, more than 25% of the voting rights of the company
– The person holds, directly or indirectly, the right to appoint or remove a majority of the board of directors of the company
– The person has the right to exercise, or actually exercises, significant influence or control over the company
– 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
What should a company do to identify its significant controllers?
A company is required to take reasonable steps to identify the significant controller(s). The steps include reviewing the company’s register of members, articles of association, shareholders agreements or other agreements and issuing notice(s) to any person who is believed to be the significant controller and any person who is believed to know the identity of the significant controller.
What are the required particulars of its significant controllers?
The required particulars for a registrable person who is a natural person are…
− correspondence address (but not a post office box number)
− the identity card number or, if the person has no identity card, the number and issuing country of a passport the person held
− the date on which the person became a registrable person of the company
− the nature of the person’s control over the company The required particulars for a registrable legal entity are…
− the legal entity’s registration number or the equivalent in its place of incorporation or formation
− the address of its registered or principal office
− the legal form of the legal entity and the law that governs it
− the date on which the legal entity became a registrable legal entity of the company
− the nature of the legal entity’s control over the company
Who will have access to the Significant Controllers Registers (SCR)?
Law enforcement officers of the following authorities will have access to the Significant Controllers Register:
− Companies Registry
− Customs and Excise Department
− Hong Kong Monetary Authority
− Hong Kong Police Force
− Immigration Department
− Inland Revenue Department
− Insurance Authority
− Independent Commission Against Corruption
− Securities and Futures Commission
What is a Designated Representative?
A company must designate at least one person as its representative to provide assistance relating to the company’s SCR to a law enforcement officer.
− A company’s Designated Representative must be one of the following–
− A member, director or an employee of the company who is a natural person resident in Hong Kong
− An accounting professional, a legal professional or a Trust or Company Service Provider licensee as defined in the Anti-Money Laundering and Counter-Terrorist Financing Ordinance(“AMLO”)
If there is no significant controller in my company, do I need to keep the Significant Controller Register (SCR)?
Yes. A company must keep a SCR even if it does not have a registrable person or a registrable legal entity. If the company knows that it has no registrable person or registrable legal entity, it must state this fact in the SCR.
What are the types of business entity in Hong Kong?
The main types of business entity in Hong Kong are:
− Private limited company. This is by far the most common type of legal entity.
− Branch office
− Representative office
− Sole proprietorship
What are the restrictions on the name of the Hong Kong Company?
There are some restrictions on the registration of company names in Hong Kong. A company name will not be registered if:
− it is the same as a name already registered or established.
− its use could constitute a criminal offence, or is offensive or otherwise contrary to public interest.
Some names are specifically forbidden, as well as expressions and names which could the impression that the company is connected way with the PRC or Hong Kong governments.
Primasia Corporate Services Ltd. can carry out a name check for you.
Is there any special requirement on the name of the Hong Kong Company?
− A company name can be in traditional characters of Chinese or in English with Arabic numbers (1, 2, 3 etc.).
− A limited company must include the words “Limited Company” or “Limited” in its name.
− Some names may only be used if the requisite licence has been obtained, such as “Bank” or “Insurance”.
− The company name does not need to describe the business of the company.
Can I change the company name after setting up the company?
Yes. A company name can be changed at any stage. Primasia Corporate Services Ltd. can assist with changing the company name.
What are the minimum requirements for setting up a Hong Kong company?
Any individual or business entity may incorporate a Hong Kong company.
The minimum requirements for setting up a private limited company in Hong Kong are:
− One shareholder (corporate or individual at least 18 years of age) of any nationality.
− One individual director (at least 18 years of age) of any nationality.
− One Hong Kong based company secretary
− One local, physical registered address (P.O. boxes are not allowed)
Can the shareholder and director be the same person?
Yes. The shareholder and the director can be the same person, but if the company has a sole shareholder and director, that person cannot also act as company secretary.
What is the maximum number of directors and shareholders?
There is no maximum number of directors, but the maximum amount of shareholders allowed for a private company is 50.
Is the information of the directors and shareholders public?
Yes. The directors and shareholders of a Hong Kong company are on public registers.
Is it mandatory to have a Company Secretary for the Hong Kong company?
Yes. Every Hong Kong company must have a local company secretary.
The company secretary is an officer of the company who is responsible for ensuring that the company keeps its information up to date at the Companies Registry and maintains accurate and up to date corporate records. This includes:
• Preparing shareholders’ and of directors’ minutes;
• Updating for any change of name or registered address;
• Updating and reporting directors’ and shareholders’;
• Preparing and filing annual returns.
The company secretary must be resident in Hong Kong. A sole director cannot also be the company secretary.
It is advisable for an experienced company secretary, either an individual, or a company (such as Primasia), to be appointed to handle the work and to ensure compliance. Penalties for late returns are, in theory, unlimited and an inexperienced person can expose a company to such fines.
As for directors and shareholders, an individual company secretary must be at least 18 years old.
Is a physical address a must for setting up a Hong Kong company?
Yes. Hong Kong companies must have a physical address (not a PO box), and the registered office must be situated in Hong Kong. This is the company’s legal address for receiving notices and other official correspondence.
The registered address may be a different address than the business address (used for operations). This can be useful for continuity and to avoid having to register changes with the Companies Registry and with the Inland Revenue Department. Primasia includes a registered office address as part of its company secretarial service.
A residential address can be used as the registered address.
Can I change the registered office address later?
Yes. The registered office address can be changed at any time.
What is the share capital requirement?
There is no minimum capital requirement for Hong Kong companies. You can incorporate a company with a single share (no $ value required) issued.
However, it is common to incorporate a company with a capital of 10,000 shares to allow for flexibility to bring in additional shareholders later on.
Share capital may be in currencies other than Hong Kong dollars.
The share capital does not need to be verified.
Do I need to decide the nature of business of the Hong Kong company?
Yes. Your business nature will appear on the Business Registration Certificate.
You need to declare the nature of your business. This does not need to be too detailed, e.g. “Food Trading”, “IT consulting”, etc., and anyway there are space limitations (60 characters).
Because Hong Kong companies are allowed to operate any legal business whatever their business definition, the description does not greatly matter as far as the company registration is concerned. However, banks will require more detail in order to open an account for the company.
Do I need a licence to operate the Hong Kong company?
Some (but few) business activities require a licence in Hong Kong. For example, restaurants, employment agencies, insurance brokers, investment advisers and fund managers, schools, and banks, etc.
How long does it take to set up a Hong Kong company?
It takes about 4-5 working days to incorporate a company in Hong Kong, subject to receipt of necessary supporting documentation.
Do I need to be present for setting up the Hong Kong company?
Original, signed forms must be submitted to the Companies Registry, but you do not need to be physically present at the time of company incorporation. However, banks will likely require physical presence for bank account opening.
What documents do I need for setting up a Hong Kong company?
You will usually be asked to provide the following documents:
– Passport or ID copy of the shareholder(s) and director(s)
– Residential address proof copy such as utility bill, bank statement, etc. of the shareholder(s) and director(s)
– Completed incorporation details document, containing information about the proposed company, such as the company name, shareholders, directors, etc.
What are the annual filing requirements?
Filing the annual return for the Hong Kong Company Registry, and filing the annual tax return with the Inland Revenue Department of Hong Kong.
What are the requirements for opening a company bank account?
Opening a bank account in Hong Kong can be challenging, as indeed it can be in most countries.
To open a corporate bank account in Hong Kong, the directors of a company are generally required to meet with the bank in person. Different banks have different requirements. It is recommended to obtain expert advice as to which bank(s) to approach, for example, from Primasia.
What documents are required for opening a company bank account?
To satisfy the banks’ “KYC” (Know Your Client) requirements, applicants will be required to provide supporting documents. This will include original identity proof (i.e. Hong Kong identity card and/or passport), address proof (e.g. utility bills / mobile bills / bank statements) issued within 3 months (if they are not in English, certified translation must be provided), corporate documentation for the company for which the account is needed, and “proof of business”. The latter would include, for example business plans, brochures, catalogues, leaflets, MOUs or invoices or contracts, bank statements of your other company, accounts, etc.
What is the taxation system in Hong Kong?
Hong Kong has a simple and low-tax regime. Hong Kong uses a territorial or “source” basis for taxing personal or corporate income. Income “arising in or derived from” Hong Kong is taxable. Other income is not. In other words, profits derived from an offshore source are not taxable.
What is the profits tax rate in Hong Kong?
The profits tax rate is 8.25% up to HK$ 2 million of taxable profits and 16.5% thereafter.
When will I receive first profits tax return?
A company will normally receive its first profits tax return 18 months from the date of incorporation and will have 3 months to file the return together with its audited accounts. Every Hong Kong company, unless specifically exempted, must file an annual tax return.
What kind of entities will be exempted from submitting audited accounts with their profits tax return?
The following entities are exempt from submitting audited accounts with their profits tax return:
– If the gross income does not exceed HKD2,000,000 for the basis period, the entity can submit the profits tax return without its audited accounts. However, an audit is still required to have been carried out.
– Dormant companies (defined as having “no relevant accounting transactions” during a financial year)
– Companies incorporated in a jurisdiction whose laws do not require accounts to be audited
– The Hong Kong branch of a foreign company
How can I apply for the offshore tax status?
If a company wants to be regarded as “offshore” in Hong Kong, it must request the Inland Revenue Department (IRD) to grant this status. Each case will be decided on its merits. For example, if a company’s day-to-day business decisions are made outside Hong Kong, this will be a factor in support of the claim. Maintaining inventory outside Hong Kong will also be helpful, as will having non-Hong Kong customers and suppliers.
The application for profits tax exemption (or “offshore claim”) should be made when filing the profits tax return.
The Inland Revenue Department will review the application and will send a standard list of questions. These questions must all be answered, together with supporting documents (such as copies of contracts, e-mails, passport copies, etc.). Good document keeping is therefore highly recommended, as well as planning of key business decisions.
Follow-up questions will be asked until the Inland Revenue Department is satisfied and approves the application.
Primasia has handled many “offshore claims”, so far with a 100% success rate. We will provide a fee quote for (1) advising service on offshore claim planning and (2) handling service if IRD have queries on the offshore claim for your company.
If I want to work in Hong Kong, what type of visa should I apply for?
Hong Kong offers various visa options. The most common visas applied for by entrepreneurs and professionals are the investment, employment and dependant visas. Primasia can assist with different types of visa applications.
How can I apply for an investment visa?
For an entrepreneur who has set up a Hong Kong company, applying for an investment visa is likely to be the best choice. To apply for an investment visa, the Hong Kong company must be set up first. It is also required to nominate a local sponsor who can be either a company or an individual. The sponsor will guarantee repatriation in the event of the visa holder overstaying.
It is also required to submit with your application a business plan demonstrating your business’s viability and its likely contribution to Hong Kong. Note that there is no formal minimum requirement for investment, but Primasia’s suggestion is that an applicant be prepared to show upwards of HK$500,000 – 1,000,000 in available funding. The Immigration Department will assess, according to the business plan and other information you provide, whether the company can support its business operations.
Successful applicants will be granted a two-year visa, which will need to be renewed upon expiry.
Primasia can assist with investment visa applications.
How can I apply for an employment visa?
For an employment visa application there must be a confirmed offer of employment for a genuine job opening that matches your qualifications, skill set and experience and which cannot easily be filled locally. The applicant also needs to provide the remuneration package offered by the employer, in line with the prevailing market standards in Hong Kong. Where the employer is a newly set up company, it will be required to submit a detailed business plan including information on funding, projected sales, creation of local jobs, etc.
Successful applicants will be granted a two-year visa, which will need to be renewed upon expiry.
Primasia can assist with employment visa applications.
Can I apply for a visa for my spouse and children?
Applicants can apply for dependant visas for spouses and unmarried children under 18 years of age. Both visas are operated under the General Employability Policy.
What if I want to close my Hong Kong company?
Two ways that a company can be closed are “Liquidation/Winding Up” or “De-Registration”.
Deregistering a company is much simpler, quicker and less expensive than winding up or liquidation. Deregistration can take around 6 months.
A deregistration requires:
– Approval of all shareholders;
– No business operations for the 3 months before applying for deregistration;
– No outstanding debts, including government charges and taxes; and
– An NNO (Notice of No Objection) issued by the Inland Revenue Department.