HONG KONG: NEW LICENSING REGIME FOR TRUST AND COMPANY SERVICE PROVIDERS TO COME INTO FORCE ON 1 MARCH 2018

The Companies Registry announced on 25 January 2018 that a new licensing regime for trust and company service providers (TCSPs) will come into force on 1 March 2018 under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (AMLO).

A new regime requiring companies to keep and maintain Significant Controllers Registers will also come into force on 1 March 2018, following the passing of the Companies (Amendment) Bill 2017 on 24 January 2018.

The new TCSP licensing regime

Hong Kong trust companies have traditionally not had their own regulatory regime, except that registration via the Registrar of Companies is required in relation to the use of the word "trust" in a company's name. As part of that process, trustees were registered, but not regulated.

Introducing a licensing regime for trust companies was discussed as part of the public consultation on the review of the Trustee Ordinance (Cap. 29) in 2009-2010 but ultimately not implemented at that time.

However, under the new licensing regime introduced under the AMLO, TCSPs will be required to apply for licences from the Registrar of Companies and satisfy a "fit-and-proper" test before they can provide trust or company services in Hong Kong. TCSPs also have to comply with statutory due diligence and record-keeping requirements under Schedule 2 of AMLO.

Under this new regime, the Registrar has the power to grant, refuse to grant, renew, suspend or revoke a licence, and impose or vary any conditions in relation to a licence. A TCSP licence will generally be valid for three years. TCSP licensees are required to obtain prior approval from the Registrar before any person becomes an ultimate owner, a partner or a director of a licensee. Within one month of any change, TCSPs should also notify the Registrar of any changes of other particulars previously provided in connection with an application for the grant or renewal of a licence. A TCSP licensee who intends to cease to carry on the trust or company service business is also required, before the intended date of cessation, to notify the Registrar of that intention and the intended date of cessation.

Any person who carries on a trust or company service business in Hong Kong without a license after 1 March 2018 will commit an offence and will be liable on conviction to a fine up to HK$100,000 and imprisonment up to six months (subject to the transitional arrangements).

Transitional Arrangements

With effect from 1 March 2018, a person will be deemed to have been granted a licence to carry on a trust or company service business if immediately before 1 March 2018 (the commencement date) it was carrying on a trust or company service business in Hong Kong and held a valid business registration certificate for that purpose (deemed licence).

A deemed licensee will then have to apply for a licence during a 120 day transitional period, which will commence on 1 March 2018 and end on Thursday, 28 June 2018*. The deemed licence will cease to have effect on the expiry of the transitional period. If the deemed licensee applies for a licence during the transitional period, the deemed licence will generally cease to have effect when the application is granted, rejected or withdrawn or at the end of the transitional period.

Implementation of the licensing regime

To facilitate the implementation of the new licensing regime, the Companies Registry has set up a new office, the Registry for Trust and Company Service Providers (the Registry), to administer the licensing regime and regulate TCSPs. The Registry started operation with immediate effect and a new website (accessible here) has been set up to provide further information relating to the new licensing regime.

The Companies Registry has issued a circular on the new licensing regime for TCSPs as well as guidelines on the licensing of TCSPs, compliance with AML/CTF requirements for TCSPs and on the imposition of pecuniary penalties which can be downloaded from the Companies Registry's website here.

For further background on the guidelines issued by the Companies Registry to facilitate the implementation of the new regime please refer to our previous e-bulletin here.

Frequently asked questions about the new licensing regime and specified forms relating to the application for a TCSP licence, fit-and-proper statements and notifications to the Registry are also accessible on the new TCSP website. From 1 March 2018 applicants for TCSP licences will be able to submit applications electronically on the website.

Significant Controllers Register

Please also note that the Significant Controllers Register is also going to take effect on 1 March 2018 following the passing of the Companies (Amendment) Bill 2017 on 24 January 2018.

The new regime aims to enhance transparency of corporate beneficial ownership by requiring companies incorporated in Hong Kong to obtain and maintain up-to-date beneficial ownership information by keeping a Significant Controllers Register (the Register). The Register should be open for inspection by law enforcement officers on demand.

For further background on the Significant Controllers Register regime, please refer to our previous e-bulletins here and here and the Companies Registry's website here.

The Companies Registry will organise seminars to brief stakeholders on the new licensing requirements and the new regime regarding Significant Controllers Registers on 12, 13 and 14 February 2018. The invitation letter with further information and registration details for the seminars can be accessed here.

*Correction made on 27 February 2018: An earlier version of this blogpost misstated that the 120-day transitional period ends on Friday, 29 June 2018. In fact it ends on Thursday, 28 June 2018; the article has now been updated.