Phase 2 of the New Inspection Regime Comes Into Effect Today

Phase 2 of the New Inspection Regime Comes Into Effect Today

Phase 2 of the New Inspection Regime Comes Into Effect Today 600 400 Jade Tang
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Previously, any member of the general public can obtain, through a standard company search, information regarding the residential addresses and personal identification numbers of directors and company secretaries of Hong Kong-registered companies on the register of the Companies Registry (the “Register”).

In light of the growing concern about the availability and use of personal information, a new inspection regime to protect such personal information was included in the new Companies Ordinance (Cap 622) (“CO”). The Hong Kong government has now approved to bring this regime into full effect in three phases from 2021 to 2023 (23 August 2021, 24 October 2022 and 27 December 2023), allowing Hong Kong companies to limit disclosure to the general public certain personal information of both their directors and secretaries.

What is the new inspection regime?

The changes proposed by the new inspection regime aim to enhance protection of sensitive personal information while keeping up the transparency and usefulness of the Register by allowing the general public to continue inspecting the Register for legitimate purposes.

Under the new inspection regime, correspondence addresses instead of usual residential addresses (“URAs”) of directors and partial identification numbers (“IDNs”) instead of full IDNs of directors, company secretaries and other relevant persons would be made available on the Register for public inspection.

URAs and full IDNs (the “Protected Information”) will only be accessible by “specified persons” (as referred to below) upon application by the Specified Persons to the Companies Registry. Similarly, companies may withhold from public inspection the Protected Information on the statutory registers they have kept.

Disclosure of Protected Information to Specified Persons

The following designated types of Specified Persons can apply to the Companies Registry for access to Protected Information of directors and other individuals of companies:

  • a data subject
  • a person who is authorized in writing by a data subject to obtain the information
  • a member of the company (i.e. a shareholder of a company limited by shares)
  • a liquidator
  • a trustee in bankruptcy
  • a public officer or public body
  • a person specified in the Schedule to the Companies (Residential Addresses and Identification Numbers) Regulation (Cap. 622N) as a scheduled person
  • a solicitor or foreign lawyer who practices law in a Hong Kong law firm
  • a certified public accountant (practising)
  • a financial institution or designated non-financial businesses and professions

Further guidance on the application process can be found in the Companies Registry External Circular No. 5 /2022 and the pamphlet titled “How to Obtain Protected Information” published by the Companies Registry.

Supporting documents are required in each application, as stated in the publication titled “Additional Documents for the Application for Disclosure of Protected Information” published by the Companies Registry. The required supporting documents mainly relate to the identification document of the applicant, evidence of the capacity of the applicant and authorisation letter issued by the specified person in case the specified person is other than a natural person.

What do companies need to do from 24 October 2022?

To facilitate the implementation of Phase 2, the Companies Registry has revised 26 specified forms for public use starting from 24 October 2022 in order to simplify the reporting of correspondence addresses and identification numbers of officers and other relevant individuals. A “PI-sheet” is also added to each relevant form for reporting Protected Information which will not be made available for public inspection.

In filing prescribed forms with the Companies Registry from 24 October 2022, a Hong Kong company still has to provide the Protected Information, but only the correspondence addresses and partial identification numbers will be available for public inspection. The company must also include the correspondence addresses of its natural person directors in its own register of directors.

For a local company and a non-Hong Kong company registered before 24 October 2022, the Companies Registry records the company’s principal place of business in Hong Kong as the correspondence address of its natural person directors. After the commencement of Phase 2, a director’s correspondence address will be updated if a separate form to report such address is filed with the Companies Registry. Post office box numbers cannot be used as correspondence addresses of directors.

From 24 October 2022, the Companies Registry will only accept the revised forms for registration. Existing versions of the specified forms will no longer be accepted.

What are the implications of Phase 2 of the inspection regime?

Although the inspection regime aims to enhance the protection of sensitive personal information of directors and other individuals of companies, the following implications and difficulties in practice may arise:

  1. Legal Due Diligence: law firms who wish to conduct legal due diligence may require additional time and express consent from data subject to obtain the full URAs and IDNs in conducting their legal due diligence exercise. This may pose challenges for law firms who have tight turnaround deadlines to meet transactional deadlines between a purchaser and seller in a transaction, given the additional application procedure.
  2. Contentious Legal Proceedings: in preparing legal documents, law firms and interested parties may require additional time in obtaining the full URAs and IDNs of companies/individuals in question.
  3. Financial Institutions: financial institutions (such as banks) who are required to conduct their own due diligence on borrowers, guarantors and other parties as part of their internal due diligence procedures, will require more time and express consent in obtaining the full URAs and IDNs in conducting their due diligence due to the additional application procedure as a Specified Person.

 

Our team at Hugill & Ip has extensive experience in dealing with Corporate & Commercial matters – so kindly get in touch with us to find out how we can help.

This article is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice.

Jade Tang

Jade advises companies about corporate and commercial issues (JVs, M&As, private equity funds), including the compliance and governance aspects of business. She also deals with employment and immigration matters related to companies doing business in Greater China and the Asia Pacific region.

All articles by : Jade Tang
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