HK SFC Financial Resources Rules (FRR)

What is FRR?

Section 4:  All SFC licensed corporation must maintain financial resources (paid-up share capital and liquid capital) at all times not less than the specified amounts according to FRR Rules

(a)Applies to all SFC licenses (Types 1 – 10)
(b)Paid-up Share Capital 
(c)Required Liquid Capital
(d)At all times (not intraday)
(e) Specified amounts according to Schedule 1

Paid-up Share Capital

•“Paid-up Share Capital” means “total amount ($) of capital provided by shareholders”
•In practice, it means ü $ registered with Companies Registry (e.g.  $ in Annual Return (NAR1)) 

How to Calculate Liquid Capital
Liquid Capital(LC) = Liquid Assets Ranking Liabilities [Definition: “Liquid Capital”]

Liquid Assets
•  Cash held by an authorized bank in Hong Kong [S. 20] 
•  Accounts receivable from clients if not outstanding for 2 weeks [S.23]  
•  Proprietary positions (blue-chip stocks) with reduced haircut amount [S. 27]
=>  Assets provided to others for security not included

Ranking Liabilities
•Accounts payable to clients (“AP”)         e.g. AP lingers for T+2/3 Settlement 
•Overdraft, Loans, Guarantee or other financial commitment 
#   Approved Subordinated Loans are not included    [S. 53 (2)(a)]

Important notes:
1. Accrued on a trade date basis [S. 8]
2. Back-to-Back Trades are considered separate [S.10]
3. Assets and Liabilities shall not be set-off with each other [S. 11]

What is Required Liquid Capital?

•Licensed Corp is required to maintain Liquid Capital more than the Required Liquid Capital  [S. 6]
•“Required Liquid Capital” means the higher amount of:
1. 5% of Basic Amount = Adjusted Liabilities (Variable Required Liquid Capital /“VRLC”) 
2.Minimum Required Liquid Capital (“MRLC”)

Variable Required Liquid Capital (VRLC) means:  

5 % of Adjusted Liabilities  [= “Basic Amount”]

Adjusted Liabilities” = •On-balance Sheet Liabilities (not Ranking Liabilities)  minus  (-) •Client Moneys minus (-)   •(Approved) Subordinated Loan

1.If $ of VRLC (= 5% of Adjusted Liabilities) is more than HK$3,000,000 (MRLC), then Liquid Capital needs to be more than VRLC. 
2.If not, then Liquid Capital needs to be more than HK$3,000,000. 

Subordinated Loans
•To manage financial resources, Licensed Corp may consider applying for Subordinated Loans.
=> Subordinated Loans are not included in the Ranking Liabilities
•Many lenders dislike as they are subordinate to other lenders in case of Licensed Corporation’s insolvency. 
•The Lender is the authorized bank in HK or parent company.
•The application needs to be approval by SFC
•Model Agreement provided by SFC

Monitoring and Reporting Requirement
• Daily monitoring (not intraday)
• Notification to the SFC [S. 53] 
1.LC falls below 120% of RLC
2.RLC deficit occurs, but Licensed Corp is regarded as complied with MRLC by virtue of section 6(3)
3.LC falls below 50% of the last reported LC
4.Any information in the previous returns become false or misleading
5.LC falls below the RLC if it did not have any approved subordinated loan
6.The Licensed Corp exceeds any borrowing limits, is unable to meet any repayment demands from lenders, or any lenders have liquidated or have notified an intention to liquidate any collateral security
7.The aggregate commitment etc or claims made against it, exceeds HK$5 million, or if deducted from its LC, would reduce it to below 120% of the RLC
8.If it has made any insurance claim under the professional indemnity insurance policy
9.Any commitment, including a guarantee, has been provided on its behalf by a group company to an exchange or clearing house.

Periodic Returns
•Monthly Returns 21st day of every following month  [s. 56 (1)]
•Quarterly Returns [s. 56 (1)]

Scenarios for Licensed Corporation with RA1 License – Financial Standings (Amount in HK$)

Scenario 1 [FRR Breach below MRLC]   

 Balance Sheet CalculationLiquid Assets
Client Assets2,000,000Nil
Licensed Corp’s Bank Balance2,400,0002,400,000
AR from Client (less than 2 weeks)3,000,0003,000,000
 Balance Sheet CalculationRanking Liabilities
AP to Clients5,500,0005,500,000
Rent Payment500,000500,000
Approved Subordinated Loan00
Liquid Capital
 5,400,000 (Liquid Assets) – 6,000,000 (Ranking Liability)
= – 600,000 (Liquid Capital)
What is the RLC in this case?
Higher of  
VRLCAL= = 6,000,000 (On-Balance Sheet Liabilities) – 2,000,000 (Client Assets) – 0 (Subordinated Loans) = 4,000,000 AL (4,000,000) x 5% = 200,000 = VRLC
ConclusionRLC = MRLC because MRLC (3,000,000) is higher than VRLC (200,000) => Because Liquid Capital is deficit (-600,000), Licensed Corp is in breach of FRR

Scenario 2 [FRR compliance using MRLC]

 Balance Sheet CalculationLiquid Assets
Client Assets2,000,000Nil
Licensed Corp’s Bank Balance10,000,00010,000,000
AR from other Brokers (less than 2 weeks)1,000,0001,000,000
AR from other Brokers (due more than 6 weeks)500,000Nil
 Balance Sheet CalculationRanking Liabilities
AP to Brokers2,000,0002,000,000
Approved Subordinated Loan00
Liquid Capital
 11,000,000 (Liquid Assets) – 2,500,000 (Ranking Liability)
= 8,500,000 (Liquid Capital)
What is the RLC in this case?
Higher of  
VRLCAL= 2,500,000 (On-Balance Sheet Liabilities) – 2,000,000 (Client Monies) – 0 (Subordinated Loans)
[- Rent payment] = 500,000 AL (500,000) x 5% = 25,000 = VRLC
ConclusionRLC = MRLC as MRLC (3,000,000) is higher than VRLC (25,000) => Because Liquid Capital (8,500,000) is above MRLC (3,000,000), Licensed Corp is in compliance with FRR => Because Liquid Capital (8,500,000) is above 3,600,000 (120% of MRLC), there is no reporting requirement under s 55(1)(a) of FRR.

Scenario 3 [FRR Compliance using VRLC]

 Balance Sheet CalculationLiquid Assets
Client Assets0Nil
Licensed Corp’s Bank Balance100,000,000100,000,000
 Balance Sheet CalculationRanking Liabilities
AP to Brokers61,000,00061,000,000
Approved Subordinated Loan00
Liquid Capital
 100,000,000 (Liquid Assets) – 61,000,000 (Ranking Liability)
= 39,000,000 (Liquid Capital)
What is the RLC in this case?
Higher of  
61,000,000 (On-Balance Sheet Liabilities) – 0 (Client Monies) – 0 (Subordinated Loans) = 61,000,000 AL (61,000,000) x 5% = 3,050,000 = VRLC
ConclusionRLC = VRLC as VRLC (3,050,000) is higher than MRLC (3,000,000) => Because Liquid Capital (39,000,000) is above RLC, Licensed Corp is in compliance with FRR => Because Liquid Capital (39,000,000) is above 3,660,000 (120% of VRLC), there is no reporting requirement under s. 55(1)(a) of FRR.

Scenario 4 [FRR Breach using VRLC]

 Balance Sheet CalculationLiquid Assets
Client Assets0Nil
Licensed Corp’s Bank Balance100,000,000100,000,000
 Balance Sheet CalculationRanking Liabilities
AP to Brokers95,450,00095,450,000
Approved Subordinated Loan00
Liquid Capital
 100,000,000 (Liquid Assets) – 95,450,000 (Ranking Liability)
= 4,550,000 (Liquid Capital)
What is the RLC in this case?
Higher of  
VRLCAL = 95,450,000 (On-Balance Sheet Liabilities) – 0 (Client Monies) – 0 (Subordinated Loans) = 95,450,000 AL (95,400,000) x 5% = 4,770,000 = VRLC
ConclusionRLC = VRLC as VRLC (4,772,500) is higher than MRLC (3,000,000) => Because Liquid Capital (4,550,000) is below VRLC (4,772,500), Licensed Corp is not in compliance with FRR

Scenario 5 [Use of Subordinated Loan]

 Balance Sheet CalculationLiquid Assets
Client Assets0Nil
Licensed Corp’s Bank Balance110,000,000
(10,000,000 Cash from Subordinated Loan)
 Balance Sheet CalculationRanking Liabilities
AP to Brokers95,450,00095,450,000
Approved Subordinated Loan10,000,000Nil
Liquid Capital
 110,000,000 (Liquid Assets) – 95,450,000 (Ranking Liability)
= 14,550,000 (Liquid Capital)
What is the RLC in this case?
Higher of  
VRLCAL = 105,450,000 (On-Balance Sheet Liabilities) 0 (Client Monies) 10,000,0000 (Subordinated Loans) = 95,450,000 AL (95,450,000) x 5% = 4,772,500 = VRLC
ConclusionRLC = VRLC as VRLC (5,000,000) is higher than MRLC (3,000,000) => Because Liquid Capital (14,550,000) is above VRLC, Licensed Corp is in compliance with FRR => Because Liquid Capital (14,550,000) is above 5,727,000 (120% of VRLC), there is no reporting requirement under s. 55(1)(a) of FRR.

Key Highlights on Hong Kong SFC Amended AML/CFT Guidelines (took effect on September 2021)

Key Highlights on SFC Guideline on AML/CFT issued September 2021

  1. Institutional risk assessment
  2. Due Diligence on cross-border correspondent relationship
  3. Third-party deposits and payments

1.  Institutional Risk Assessment

Financial Institution (FI) should: – 
(a) Consider all relevant risk factors before determining the level of overall risk and the appropriate level and type of mitigating measures to be applied (“Considering relevant risk factors”)
(b) keep the risk assessment up-to-date
(c) document the risk assessment
(d) obtain the approval of senior management of the risk assessment result
(e) have appropriate mechanisms to provide risk assessment information to relevant regulators (e.g. SFC, JFIU, the police, etc.) upon request

Standard for Institutional Risk Assessment[Para 2.4] In considering the institutional risk assessment, an FI should consider quantitative and qualitative information obtained from relevant internal and external sources (e.g. government or FATF guidance) to identify, manage and mitigate the risk.  We find this provision not very helpful. 

[Para 2.5] Nature and extent of institutional risk assessment procedures should be commensurate with the nature, size and complexity of the business of the FI
– FI’s business smaller in size or less complex => simpler risk assessment
– FI’s products and services are more varied and complex => more sophisticated risk assessment. 

Considering relevant risk factors
[Para 2.6] FI should holistically take into account relevant risk factors including (a) country risk, (b) customer risk, (c) product/service/transaction risk, (d) delivery/distribution channel risk, and (e) other relevant risks exposed to FI
=> Too broad  => BUT  Appendix A explains in detail about these risks with examples!

[Para 2.7]  Examples of Risks (helpful)
(a) Country Risk – jurisdiction in which the FI is operating or exposed to, either through its own activities or the activities of the customers.  Greater vulnerability due to (i) crime, corruption or financing of terrorism, (ii) general level and quality of jurisdiction’s law enforcement efforts related to AML/CFT, (iii) regulatory and supervisory regime and controls, and (iv) transparency of beneficial ownership
(b) Customer Risk – proportion of customers identified as high risk
(c) Product/Service/Transaction Risk – characteristics of the products and services that it offers and transactions it executes, and the extent of which these are vulnerable to ML/TF abuse.
(d) Delivery/Distribution Channel Risk – extent of which FI deals with customer, the extent of which it relies on third parties to conduct CDD or AML/CFT regulations.
(e) Other Risk – the review results of compliance, internal and external audits as well as regulatory findings.

Keeping risk assessment up-to-date 

[Para 2.9]  FI should review the institutional risk assessment at least every 2 years or more frequently upon trigger events with material impact on the firm’s business and risk exposure. 

Documenting risk assessment
[Para 2.9]  An FI should maintain records and relevant documents of the institutional risk assessment…   => Wolfsberg Questionnaire is a good starting point.

Two types of Questionnaires
Correspondent Banking Due Diligence Questionnaire (CBDDQ)
Financial Crimes Compliance Questionnaire (FCCQ)

  •  Due Diligence on cross-border correspondent relationship
[Para 4.20.1]  Correspondent Institution and Respondent Institution

“Cross-border correspondent relationships” refer to provision of services for dealing in securities…by an FI in HK (“Correspondent Institution”) to another financial located in a place outside of Hong Kong (“Respondent Institution”) where transactions effected on a principal (matched principal) or agency basis under the business relationships are initiated by the respondent institution.”

[Para 4.20.3] Vulnerability to AML/CFT risks

“ Where a Respondent Institution conducts business for or on behalf of customers through a cross-border correspondent relationship with an FI, the FI normally has limited information regarding underlying transactions and the nature or purpose of the  underlying transactions because it generally does not have direct relationships with the underlying customers of the Respondent Institution.”

“This will expose the FI to risks stemming from the lack or incompleteness of information about the underlying customers and transactions.” 

“FI must carry out CDD measures in relation to a customer including a Respondent Institution (special customer?).  Although an FI…(cannot) verify the identities of the beneficial owners (of the respondent institutions), FI should apply the following additional due diligence when it establishes a cross-border correspondent relationship (exception for existing Respondent Institution for 6 months grace period – end of March 2022)…”: 
(a) To understand the Respondent Institution’s business
(b) To determine the reputation of the Respondent Institution (based on public information)
(c) To determine the quality of the regulatory supervision over the Respondent Institution
(d) To assess AML/CFT controls of the Respondent Institution
(e) To obtain approval from senior management
(f) To understand FI’s AML/CFT responsibilities

[Para 4.20.6]  Risk Based Analysis (RBA) 

“FI should adopt an RBA in applying the additional due diligence measures stated above, taking into account relevant factors such as:

  • The purpose of the cross-border relationship, the nature and expected volume and value of transactions
  • How the Respondent Institution will provide services to its underlying customers through the account maintained by the FI for the Respondent Institution (“Correspondent Account”) 
  • The types of underlying customers whom the Respondent Institution intends to serve through the Correspondent Account and the extent of which any of these underlying customers and their transactions are assessed as high risk by the Respondent Institution
  • The quality and effectiveness of the AML/CFT regulation as well as supervision by authorities in the jurisdictions in which the Respondent Institution operates and/or is incorporated
[Para 4.20.7] Information to collect to understand the Respondent Institution includes the Respondent Institution’s: 

  • Management and Ownership
  • Financial Group
  • Major Business Activities
  • Target Markets
  • Customer Base
  • Location of Customers

Documenting risk assessment
[Para 2.18]  An FI should maintain records and relevant documents of the institutional risk assessment… 

 => Wolfsberg Questionnaire is a good starting point!

Two types of Questionnaires
Correspondent Banking Due Diligence Questionnaire (CBDDQ)
Financial Crimes Compliance Questionnaire (FCCQ)

  • Third-party deposits and payment (3/4)
[Para 11.3]
“Third-party deposits or payments should be accepted only under exceptional and legitimate circumstances and when they are reasonably in line with the customer’s profile and normal commercial circumstances”

Adequate policies and procedures (including risk management procedures) should be put in place, setting out;
(a) exceptional and legitimate circumstances under which third-party deposits or payments may be accepted and their evaluation criteria
(b) monitoring systems and controls for identifying transactions involving third—party deposits
(c) enhanced monitoring of client accounts involving third-party deposits or payments and the reporting of any ML/TF suspicions identified to the JFIU
(d) respective designated mangers or staff responsible for carrying out these policies and procedures

[Para 11.9] Delayed Due Diligence

“FI should perform due diligence on the source of the deposits before settling transactions with the deposited funds.

However, FI may, in exceptional situations, complete the third-party deposit due diligence after settling transactions with the deposited funds, provided that
(a) any risk of ML/TF arising from the delay in completing the third-party deposit due diligence can be effectively managed;
(b) it is necessary to avoid interruption of the normal conduct of business with the customer; andd
(c) the third-party deposit due diligence is completed as soon as possible after settling transactions with the deposited funds. 

[Para 11.11]  In case third-party deposit due diligence cannot be completed within the reasonable timeframe setout in the FI’s risk management policies and procedures, FI should refrain from carrying out further transactions for the customer.

How to utilize Hong Kong for Investment into China (Dated 18 February 2022)

These days, we often receive an inquiry from global business leaders: “what will happen to Greater China economy, when the China-US tension eases}. As geopolitics depend on various competing factors involving state actors, it is not possible to predict what will happen in the region in 2-to-3-year time.  Having mentioned this, in this article, while shying away from political sentiments and views, purely based on facts on the ground, we strive to analyze the prospect of the Greater China economy. Thereafter, based on the aforementioned analysis, we will introduce how to utilize Hong Kong as the best venue to conduct business for foreign enterprises in Greater China, and how to manage risks. 

The current situation in the Greater China and Hong Kong as follows: 

  • Greater China is the second largest economy in the world (although data to calculate GDP should be verified due to vastness of geography), and despite the economic deterioration, the economy is growing. 
  • Real estate bubble has burst, but the economy in the main cities have thrived and enough room for the central government to implement Common Prosperity in order to flat the disparity between the rich and poor (wealth distribution).   
  • Particularly, following US silicon valley, in Shenzhen has developed as a hub for AI and IOT technologies which attract investment activities, and it is expected to grow. However, a lot of western countries may not have access to the Shenzhen market.   
  • Fundamentally, China is based on the socialistic political system, although the measure of government depends on the elites in power. Such system is different from the Western Democratic system.  Due to the differing political ideologies, there are diplomatic tension between the Western countries and Japan.  In terms of relations with Taiwan, as of this stage, there are no specific policy which has been implemented. 

Hong Kong

  • The so-called Democratic movement has commenced in 2014, and the democratic movement has become active in 2019. Given the democratic movement was said to be influenced by foreign forces, the National Security Law was enacted which policed criminal acts involving incitement. Adding the spread of COVID and Omicron, the democratic movement has been placated.  
  • Based on the Joint Declaration entered with the United Kingdom under which “one country, two systems” is supposed to last until 2047, the political policies have been assessed. Many Hong Kong residents have moved to North America, United Kingdom, Europe, Japan or Taiwan just like the time back in 1997.  
  • Western Countries like Google may move out of Hong Kong or reduce the operation in Hong Kong, but many of the international financial institutions continue to station in Hong Kong, which supports the investment activities involving foreign investors from around the world. In addition, as contrary to Google and other IT related companies’ policies, the investment into Hong Kong based data center is increasing.  

This article does not take position on either way.  Based on the neutral view, the analytical result is as follows:

Based on purely on the trend infused by the international relations and feeling or sentiment affected by global social media, turning back on the second largest economy could be a questionable business strategies. 

Shenzhen being the hub for AI and IOT has been influenced by Silicon valley and Japanese technologies. However, to make the technologies on their own, the local custom and/or human resources have contributed the growth of such industry.  

The National Security Law is managed in the socialist national system, but the incitement or treason can be found in the criminal law in other countries.  Also, the judiciary and executive branches are categorically different.  However, the fact that there are no blessings from the Western countries, careful explanation in order to have common understanding may be needed. 

In early 1990’s, Hong Kong people and businesses have relocated to other countries ahead of 1997 HK Handover from the UK.  The current “exodus” follows the similar pattern. In the case of 1997 exodus, after the SARS crisis in 2003, around 2005, a lot of Hong Kong people returned and many businesses and talents returned to Hong Kong, which fueled the growth of Hong Kong economy.  If there are cycles for Hong Kong economy, statistically, 2019 could be the bust of the cycle, and economic growth may be expected in due course.  Once the international political tension or perception eases, people will return to Hong Kong, as the international finance city. 

There are people who believes such geopolitical risk a business chance.  The prominent US investor and found of hedge fund Bridge Water Associates, Mr. Ray Dalio has recently injected additional capital into Alibaba group.  Now may be the time to get closer to the Chinese business people who can return the investment in due course.

However, for ordinary investors and business people, geopolitical risks cannot be controlled. As such, we need to have a plan B when making business decisions in relations to China. To risk manage, Hong Kong is the ideal place as the gateway to China. In addition, utilization of offshore entity such as BVI, Cayman, Seychelles and Singapore) could be beneficial in case the situation in Hong Kong abrupt and drastic changes.  Such offshore entity can be registered as a foreign entity in Hong Kong, and bank account can be opened in Hong Kong.  But at the same time, such company should have a secondary bank account outside of Hong Kong, and funds should be periodically pooled in such third country’s bank account.   

We sincerely hope that the geopolitical tension eases soon.  For use of Hong Kong or offshore entities, please consult Visence Professional Services.

Hong Kong Company Chop

Here are the images of companies chops used in Hong Kong.

Whilst there are various ways to call them, 1 is called “Round Chop”, 2 is called “Square Chop”, and 3 is called “Common Seal”.

Legal Requirements

First, the Hong Kong Companies Ordinance does not require Round Chop and Square Chop, and a company can now choose to use the Common Seal after the 2014 Amendment to the Companies Ordinance. However, it is needed as a business practice in Hong Kong, so it is needed after all.

It is necessary for the board of directors to approve the seal as a company. Normally, approval is given by First Board Resolution when the corporation is established.

Use of Chops

Round Chop is mainly a seal which is stamped when there is a delivery. You may also be asked to seal your seal when submitting to a government agency. Some companies stamp invoices and receipts, but this is not a legal requirement.

Looking at the letters engraved on the Square Chop,

For and on behalf of Visence Professional Services Limited (corporate name)


                                                     Authorized Signator(ies) 

The person who has the authority to sign the corporation signs on the dotted line (—–). Therefore, Square Chop is often used for contracts. However, as mentioned above, it is required by Hong Kong business practices, not legal requirements, so if the contractor asks you to seal the Square Chop, we will do so. Under the Hong Kong Companies Act, if you write “For and on behalf of (corporate name)” and sign it, the representative of the corporation will be signing and you will be able to conclude a contract as a corporation. So be careful.

The Common Seal is required to issue a special deed called Deed. The company name is engraved on the inside of the iron tool, and it is printed by tightening the gold / red sticker and paper. By issuing a Deed, it is possible to maintain not only the rights of the contracting parties but also the contingency (I will explain at another time).


When the corporation is established, I ask a printing shop to create a green box, but it is inside the green box. If you need it, you can buy it at Ma Wah Lane in Sheung Wan.

Banks and financial institutions

For security reasons, some corporations may register a company chop (Square Chop) and a signature to prevent deposits and withdrawals without two requirements. However, if you have not registered, Company Chop is not required for banking transactions. However, please note that even in financial transactions, a company chop is required for pension (MPF) related notification forms.

HK Corporate Tax, Audit and Tax Filing

Hong Kong’s corporate tax rates are the lowest among the international financial city.
16.5%, if annual net profits are HK $ 2,000,000 or more.
8.25% if annual net profits are below HK $ 2,000,000.

In addition to the above, given that Hong Kong adopts a territorial taxation system, if a Hong Kong company’s source of income is originated from a source outside of Hong Kong, such company may apply for an offshore tax exemption. Upon Inland Revenue Department’s approval, part or all of it will be exempt from their corporate tax.

Audit obligations

All Hong Kong Limited Companies must undergo an annual audit by a licensed CPA. For completeness, such audit is not necessary for collective partnerships, partnerships, and sole proprietors.

Newly incorporates companies have exemption where such company may complete the audit within 18 months after the establishment.

Tax Return (Profits Tax Return)

Hong Kong corporations are required to file tax returns every year. A tax return (Profits Tax) will be sent to the registered address every year. The deadline for submission is one month after issuance in principle, but the deadline for submission varies depending on the accounting period.

If there is a settlement date between April 1, 2020 and November 30, 2020, “Code N”
If there is a closing date between December 1, 2020 and December 31, 2020, “Code D”
If there is a closing date between January 1, 2021 and the end of March 31, 2021, “Code M”

The deadline for submission for each code is as follows
Code N: Until June 15, 2021
Code D: Until August 30, 2021
Code M (if profitable) until January 31, 2022

If the annual gross revenue is HK$2,000,000 or less, the audit report does not need to be attached when the corporation submits a tax return.

Tax treatment when a Hong Kong corporation invests

When a Hong Kong corporation invests, there is no tax on the return on the investment if certain requirements are met. The Inland Revenue Department Tax Department determines various factors such as the business itself is not an investment business, the investment is long-term, and the return on investment is outside Hong Kong. The auditor should first decide whether or not investment income is subject to taxation.

HK Companies Registry – Protection of Personal Information

In the Circular issued by the Hong Kong Companies Registry on 16 August 2021, in order to strengthen the protection of personal information, in case the director or company secretary who is a natural person, he or she may choose not to disclose the Hong Kong ID (or passport) or residential address.

There will three phases to implement this new measures:

Phase 1 23 August 2021
Phase 2 24 October 2022
Phase 3 27 December 2023

After 23 August 2021 (i.e. Phase I), if you choose not to withhold disclosure of your Hong Kong ID, you will only need to include the first four letters of the Hong Kong ID or Passport. If you choose to withhold disclosure of your residential address, you may enter the registered address of the company it relates to director or company secretary.

However, as a condition for this new measure, the information must be strictly managed by the corporation, so it may be possible for police authorities to enter the subject of a money laundering investigation in the future. In addition, we cannot deny the possibility that an on-site inspection will be conducted on the corporation in order to confirm that it is being properly stored in the future.

When Phase 2 commences, it is possible to reserve the information itself instead of retaining the information. Instead, the legal entity will submit the information to the Companies Registry.

When Phase 3 starts, the owner of personal information can withhold disclosure by notifying the Companies Registry.

However, it is not clear how will financial institutions may verify their identities when information disclosure is withheld. Principals, agents, shareholders, trustees (bankrupt companies), investigative authorities, lawyers, certified accountants, and financial institutions can access the information by applying to the Companies Registry.

Notwithstanding the above, the names and addresses of shareholders will be stated in the annual report NAR1).

What is a Company Secretary?

In common-law corporate settings, in addition to shareholders and directors, there is a position called Company Secretary. Although the Company Secretary is not directly involved in management decisions, it is a core position that oversees back office operations in company management.

The general duties of a company secretary are:

  • Convening, holding, and proceeding with the Board of Directors (Board of Directors) or the General Meeting of Shareholders (Council)
  • Preparation and management of minutes and approval documents
  • Contact work with external experts regarding the creation and submission of registries
  • Accounting book preparation Contact work with accounting auditors, preparation and submission of tax documents Contact work with tax accountant
  • Creating a company manual
  • Compliance support (including anti-maneron and identity verification work)
  • Management of various legal documents
  • Providing meeting arrangements and interpreting services to management as needed
  • Other operations required by management in company management ・

The advantage is that the company secretary can supervises the clerical work, shareholders and directors can focus on essential part of the company management. In fact, appointing a company secretary may be statutory requirement in some jurisdictions. Due to the complexity that it requires, Company Secretaries tend to be lawyers and accounting professionals.