Hong Kong Significant Controllers Register 25% Test

Understanding the Hong Kong Significant Controllers Register 25% Test

A person who holds more than 25% of the issued shares or voting rights in a Hong Kong company is a significant controller. So is anyone who exercises significant influence or control over the company. That is the hong kong significant controllers register 25% test, set out in the Companies Ordinance (Cap. 622). It has applied to every Hong Kong incorporated company since 1 March 2018.

The SCR is not open to public inspection. Keep it at the company’s registered office or another prescribed place in Hong Kong. The company must appoint a designated representative to give law enforcement access to the register on request. The company secretary oversees maintenance of the SCR and ensures the 25% threshold is correctly applied when identifying significant controllers.

25% Threshold Significant Controller Hong Kong

The 25% threshold is the most common route to identification. A person meets it by holding, directly or indirectly, more than 25% of the company’s issued shares. Count shares held by the person themselves and shares held by any entity they control. An individual holding 30% of the issued shares is a significant controller and must be recorded in the SCR.

The same threshold applies to voting rights. A person who controls more than 25% of the voting rights is a significant controller even if their shareholding sits below 25%. Calculate voting rights by reference to the rights attached to shares, not the number of shares held. Where a company has multiple classes of shares with different voting rights, consider each class separately.

Hong Kong SCR Significant Influence Test

Control does not always come through shareholding or voting rights. The significant influence test captures those who direct the company’s affairs without necessarily holding shares or voting rights. That means its strategic decisions, financial policies, or operational management.

Examples include a person with power to appoint or remove a majority of the board, a person who controls the company through a contractual arrangement, or a person exercising de facto control over operations. The test is objective. Ask whether a reasonable person would conclude the individual has significant influence over the company. If yes, record that person in the SCR.

Hong Kong Significant Controller Definition

Cap. 622 defines a significant controller across two categories. A registrable person is an individual who holds more than 25% of the issued shares or voting rights, or who exercises significant influence or control. A registrable legal entity is a company or other legal entity that meets the same threshold and is itself required to maintain an SCR or equivalent register.

Being a director or employee does not, by itself, make someone a significant controller. The test looks at control, not employment. A director who also holds more than 25% of the shares or voting rights is a significant controller and must be recorded. The company must take reasonable steps to identify its significant controllers, including sending notices to persons it believes may be registrable.

Hong Kong SCR 25 Percent Shareholding

The 25 percent shareholding test catches both direct and indirect holdings. A person who holds shares through a nominee or a chain of companies remains a significant controller if their ultimate economic interest exceeds 25%. Look through the register of members to identify the ultimate beneficial owners.

If Company A holds 100% of the shares in a Hong Kong company, and Individual B holds 30% of the shares in Company A, Individual B is a significant controller of the Hong Kong company. They indirectly hold 30% of the issued shares. Record Individual B in the SCR, not Company A, unless Company A is itself a registrable legal entity.

Maintaining the SCR and the Company Secretary's Role

The company secretary ensures the SCR is properly maintained. That means identifying significant controllers, recording their particulars, and updating the register when changes occur. The SCR must contain the name, address, identity card or passport number, and the date the person became a significant controller. For a registrable legal entity, include its name, registered office address, and legal form.

Keep the SCR at the company's registered office or at another prescribed place in Hong Kong. If the register is kept elsewhere, file Form NR2 with the Companies Registry to notify the Registrar of the location. The register is not open to public inspection. Law enforcement authorities may request access through the designated representative.

The designated representative must be a member, director, or employee of the company who is ordinarily resident in Hong Kong, or a TCSP licensee. The company secretary often serves as the designated representative; this is not a statutory requirement. The designated representative must respond to law enforcement requests within one working day.

Practical Steps for Applying the 25% Test

Start with the register of members. Identify all shareholders and their respective shareholdings. For each shareholder holding more than 25% of the issued shares, determine whether the shareholder is an individual or a legal entity. If a legal entity, look through to the ultimate beneficial owners.

Also consider whether any person exercises significant influence or control without holding shares. Review the company's constitutional documents, board minutes, and contractual arrangements. Send a notice to any person the company believes may be a significant controller, requesting confirmation of their status. If the person fails to respond, record that fact in the SCR.

Update the SCR within seven days of any change in the company's significant controllers. Failure to maintain the SCR is an offence under Cap. 622. The company and its officers may be liable to a fine. The Companies Registry enforces the SCR requirement and may conduct inspections to ensure compliance.

Customer Due Diligence and TCSP Licence

Trust or company service providers that maintain SCRs on behalf of clients must also comply with customer due diligence requirements under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615). A TCSP must hold a licence from the Registrar of Companies and must verify the identity of its clients, including the significant controllers of any company for which it provides services.

The TCSP licence is valid for three years. Renew it before expiry. Carrying on a trust or company service business without a licence is an offence carrying a fine of up to HK$100,000 and imprisonment for up to six months. The register of TCSP licensees is public and searchable on the TCSP Licensee Register website.