- Designated Representative: Maintains Significant Controllers Register for regulatory compliance.
- Company Secretary: Broader role in corporate governance, administration, and shareholder communication.
Both are legally mandated. Company Secretary can also be the Designated Representative for efficiency.
The designated representative handles the Significant Controllers Register (SCR), ensuring accurate records of the company's real owners and controllers.
The company secretary manages a broader range of tasks, including corporate governance, annual maintenance, record keeping, and shareholder communication.
The SCR is a register listing the names of individuals or entities with significant control over the company. It is not available to the public.
It is legally permissible for one individual to serve as both the designated representative and company secretary, which can be efficient for smaller companies.
Running a business in Hong Kong? Then, you need to know the roles of a designated representative and a company secretary, as it requires navigating various regulations and ensuring proper governance.
Though they might sound alike and might suggest some overlap, they have different jobs.
The Roles of Designated Representative
A designated representative is at least one person appointed by a Hong Kong company (as mandated by Section 653ZC of the Companies Ordinance) to specifically handle matters related to the Significant Controllers Register (SCR), also known as Register of Ultimate Beneficial Owners (UBOs).
In essence, they keep track of the company's real owners, those with the most control.
This involves maintaining an SCR.
The designated representative updates the company's Significant Controllers Register and is the contact point of authorities if needed.
Any legal person or natural person resident in Hong Kong can be a designated representative.
This could include a director, employee, or shareholder of the company who lives in Hong Kong.
Additionally, qualified professionals such as an accounting professional, a legal professional, or a person licensed to carry on business as a trust or company service provider (TCSP) can also take on this role.
What is a Significant Controllers Register?
The Significant Controllers Register identifies those with significant control over a company, promoting clear ownership. It exists in Hong Kong, but also in most countries nowadays.
A significant controller, in the context of Hong Kong's Companies Ordinance, is a natural person or company that exercises significant influence or control over a company.
This influence or control can be established through various means. It includes holding a certain percentage of the company's shares or voting rights or the ability to influence the company’s main decisions.
It helps prevent money laundering and terrorist financing by revealing true company owners.
Also, SCR clearly informs investors about who controls the company and encourages good practices by requiring companies to keep the register updated.
Lastly, it helps authorities enforce ownership regulations, with penalties for non-compliance.
Important: the SCR is not available to the public and not registered with the competent authorities. It is a private document of the company.
The Role of Company Secretary
Unlike the designated representative's specific focus, the company secretary handles a broader range of tasks to ensure the company runs smoothly and follows all regulations.
All Hong Kong private companies incorporated must appoint a company secretary within six months of their incorporation.
The key responsibilities of a company secretary are:
- Corporate Governance: The company secretary makes sure the company follows best practices for good governance. This includes overseeing the board's composition, compliance with decision-making procedures, and maintaining transparency.
- Legal Compliance: They ensure the company complies with all relevant laws and regulations. This involves keeping up with legal changes and advising the company on meeting its legal obligations.
- Record Keeping: The company secretary keeps important company records, such as meeting minutes and member and director registers, and files statutory documents with the Companies Registry.
- Shareholder Communication: They act as a connection between the company and its shareholders. This includes managing communication, organizing meetings, and providing updates on the company's performance and important decisions.
In some situations, the company secretary may also act as a contact point with various authorities, including government agencies or a law enforcement officer.
Designated Representative vs. Company Secretary: What's the Difference?
The main difference between designated representatives and company secretaries is what they focus on.
A designated representative ensures the company follows regulations, especially regarding the Significant Controllers Register.
Meanwhile, a company secretary keeps the company running smoothly, including legal compliance, record keeping, and shareholder communication.
Another difference is that only the designated representative can handle the Significant Controllers Register.
And while anyone can be a designated representative, having a law or accounting background is a plus.
The company secretary role often benefits from a strong understanding of corporate governance principles and legal regulations.
Can They Be the Same Person?
Hong Kong law doesn't require different people to take on the role of a designated representative and a company secretary.
A company secretary can also be the designated representative, which can be efficient and save money for smaller companies.
This approach can help keep information organized and improve communication, especially if the company secretary services are provided by a company service business that can ensure proper handling of both roles.
Appointment and Removal
Designated Representative
Process of Appointment
- Board Resolution: The appointment of a designated representative typically requires a resolution passed by the board of directors. This formal decision-making process ensures that the individual selected has the board's approval.
- Legal Documentation: Once the board resolution is passed, the company must prepare the necessary legal documentation to formalize the appointment. This includes an official letter of appointment and any requisite filings with regulatory bodies.
- Regulatory Filings: Depending on the jurisdiction and the nature of the company's operations, the appointment of the designated representative may need to be filed with regulatory authorities. This ensures compliance with local laws and transparency in the company's operations.
Grounds for Removal or Replacement
- Board Decision: The board of directors has the authority to remove or replace the designated representative. This can occur for various reasons, including performance issues, conflicts of interest, or changes in the company's strategic direction.
- Resignation: The designated representative can choose to resign from their position. In such cases, the company must ensure a smooth transition and appoint a new representative promptly.
- Legal and Compliance Issues: If the designated representative fails to comply with legal and regulatory obligations, they may be subject to removal to safeguard the company's compliance and reputation.
Documentation and Notification Requirements
- Official Notification: Once the designated representative is appointed or removed, the company must notify relevant stakeholders, including regulatory bodies, partners, and shareholders. This is often done through formal letters and filings.
- Updating Records: The company must update its internal records and statutory books to reflect the change. This ensures that all official documents accurately represent the current structure of the company's management.
- Public Disclosure: In certain jurisdictions, changes to the designated representative may need to be publicly disclosed, especially if the company is publicly listed. This enhances transparency and maintains investor confidence.
Company Secretary
Process of Appointment
- Board Resolution: Similar to the appointment of a designated representative, the appointment of a company secretary requires a board resolution. This ensures that the board is in agreement with the choice of the individual or corporate body to fulfill the role.
- Legal Documentation: The company must prepare an official appointment letter and other necessary legal documents. This formalizes the appointment and outlines the company secretary's responsibilities and terms of service.
- Regulatory Filings: The appointment of a company secretary must be filed with the Companies Registry within a specified period (usually 15 days). This is a statutory requirement under the Companies Ordinance in Hong Kong.
Grounds for Removal or Replacement
- Board Decision: The board of directors has the authority to remove or replace the company secretary. This can be due to performance issues, changes in the company's needs, or strategic realignment.
- Resignation: A company secretary may resign by providing written notice to the board. The company must then initiate the process of appointing a new secretary to ensure continuous compliance.
- Non-Compliance: If the company secretary fails to fulfill their legal duties or breaches regulations, the board may decide to remove them to protect the company’s compliance status and reputation.
Documentation and Notification Requirements
- Filing with Companies Registry: Any change in the company secretary must be reported to the Companies Registry using the appropriate form (e.g., Form ND2A) within 15 days of the change. This ensures that the company's records with the Registry are up to date.
- Internal Records Update: The company's internal records and statutory books must be updated to reflect the new company secretary. This includes updating the register of secretaries and any other relevant documents.
- Informing Stakeholders: The company should inform relevant stakeholders, such as banks, business partners, and other regulatory authorities, about the change. This maintains transparency and ensures smooth operational transitions.
Interactions and Overlaps
Situations Where Roles Intersect
- Compliance and Reporting: Both the designated representative and the company secretary play crucial roles in ensuring the company's compliance with legal and regulatory requirements. They may collaborate on preparing and submitting reports to regulatory bodies, ensuring that the company adheres to statutory deadlines and standards.
- Communication with Authorities: The designated representative often acts as the point of contact with regulatory authorities, while the company secretary ensures that all necessary documentation is in order. Together, they facilitate smooth communication and maintain the company's good standing with regulators.
- Board Meetings and Resolutions: The company secretary organizes and records the minutes of board meetings, where decisions involving the designated representative's actions may be discussed. The designated representative may also be present at these meetings to provide insights and updates on regulatory matters.
Collaborative Responsibilities
- Governance and Strategy: Both roles contribute to the company's governance framework. The designated representative ensures that the company's activities align with legal requirements, while the company secretary advises the board on governance practices and ensures that the company's policies and procedures are properly documented and followed.
- Risk Management: In collaboration, the designated representative and company secretary identify and mitigate risks related to regulatory compliance and corporate governance. They work together to develop and implement policies that safeguard the company against potential legal and operational risks.
- Stakeholder Communication: Effective communication with stakeholders, including shareholders, employees, and external parties, often requires the joint efforts of both roles. The company secretary manages the dissemination of information and the designated representative ensures that communications are legally compliant and accurate.
Potential Conflicts and Resolution Mechanisms
- Role Clarity: Potential conflicts can arise when the boundaries between the designated representative and the company secretary's responsibilities are not clearly defined. Establishing clear role descriptions and responsibilities can prevent misunderstandings and ensure smooth cooperation.
- Decision-Making Authority: Conflicts may occur if there is ambiguity over who has the final decision-making authority in certain situations. Defining a hierarchy of authority and ensuring that both roles understand their limits can mitigate such conflicts.
- Regular Communication: Regular meetings and open lines of communication between the designated representative and the company secretary can help address issues before they escalate. Establishing a protocol for regular updates and discussions ensures that both parties are aligned on key matters.
- Conflict Resolution Policies: Having formal conflict resolution policies in place can provide a structured approach to resolving disputes. These policies should outline the steps to be taken when conflicts arise, including mediation or escalation to higher management or the board of directors.
Final Words on Designated Representative vs. Company Secretary
Understanding the distinction between a designated representative and a company secretary is crucial for Hong Kong businesses.
Combining these roles can be a cost-effective solution for smaller companies. However, the workload and potential conflicts of interest must be considered.
In need of a digital secretary? Ready to register your company?
Reach out to Air Corporate today, and we'll help you set up your company 100% online.
FAQs
In Hong Kong, a company's legal representative is typically the director(s). The directors are responsible for managing the company's affairs and representing it in legal matters. The company secretary also plays a crucial role in ensuring compliance with legal and regulatory requirements but is not considered the legal representative.
A director of a Hong Kong company can be any individual who is at least 18 years old. There are no residency or nationality requirements for directors. However, a director must not be an undischarged bankrupt or have been disqualified by the court from being a director. Corporate directors (i.e., companies acting as directors) are also permitted, except for private companies, which must have at least one individual director.
- Director: A director is an individual appointed to manage the company's affairs. They make strategic decisions and are legally responsible for ensuring the company meets its statutory obligations.
- Person with Significant Control (PSC): A PSC is an individual or entity that holds significant influence or control over the company. This could be someone who holds more than 25% of the shares or voting rights, has the right to appoint or remove the majority of the board of directors, or otherwise exercises significant influence or control over the company. A director can also be a PSC if they meet any of these criteria.
To change the company secretary of a Hong Kong company, the following steps must be taken:
- Board Resolution: The board of directors must pass a resolution to approve the appointment of a new company secretary and the resignation/removal of the current one.
- File with Companies Registry: Form ND2A (Notice of Change of Company Secretary and Director) must be filed with the Hong Kong Companies Registry within 15 days of the change.
- Update Internal Records: Update the company's internal records to reflect the change.
- Inform Other Stakeholders: Inform banks, business partners, and other relevant parties of the change if necessary.
No, a Hong Kong company cannot have two company secretaries. According to the Companies Ordinance (Cap. 622), a Hong Kong company can only appoint one company secretary at any given time. The company secretary can be either an individual or a corporate body, but not both simultaneously.
