Nominee shareholder and director in Hong Kong

A nominee arrangement here starts from a fact that surprises people. The Companies Registry states that a share held by a nominee for another person is regarded as held by that other person, so the arrangement changes the share register and nothing else.

Setting the company up is company registration in Hong Kong; our Hong Kong page carries the rest, and the service in general sits at nominee shareholder and director.

Who counts as a significant controller

A person qualifies by holding, directly or indirectly, more than a quarter of the issued shares or votes; by holding the right to appoint or remove a majority of the board; or by exercising significant influence. Direct and indirect holdings are added together.

Three ways to hold, and what each shows

In your own name

The share register and the controllers register name the same person. Nothing is hidden and nothing needs explaining.

Through a nominee

The share register names the nominee. The controllers register still names you: the law attributes the shares to the person they are held for.

Through a holding company

The chain is traced upward. Someone reaching more than a quarter through intermediate entities is registrable just the same, and the entity above may be too.

The register the company keeps itself

Almost every locally incorporated company keeps a significant controllers register, in English or Chinese, at its registered office or another place in Hong Kong. It records the required particulars of each controller and a designated representative's contact details.

Particulars go in within seven days of confirmation. If the register sits away from the registered office, Form NR2 tells the Registrar within fifteen days. Failure is criminal: the company and every responsible person face a level four fine of HK$25,000, and HK$700 for each further day.

Who may act, and the licence behind it

The designated representative must be a shareholder, director or employee who is a natural person resident here, or an accounting professional, a legal professional, or a licensed trust or company service provider.

That licence is the part most often skipped. Acting as a nominee shareholder by way of business falls inside the definition of a trust or company service, and carrying it on unlicensed is an offence under section 53F of the money laundering ordinance: HK$100,000 and six months. The application costs HK$3,440 plus HK$975 per person put through the fit and proper test, runs three years, and is renewed sixty days before expiry.

The director still owes eleven duties

The Registry publishes eleven principles, and two decide whether this structure works. A director may not delegate powers without proper authorisation and must exercise independent judgement. Under section 465 the duty is reasonable care, skill and diligence, measured against a reasonably diligent person in that role and against what this director knows.

Sources: attribution of nominee shares, the control tests, register contents, the seven and fifteen day periods and the level four fine — Companies Registry, significant controllers register and pamphlet PAM 35E; licensing, fees and section 53F — Guideline on Licensing of Trust or Company Service Providers; duties — A Guide on Directors' Duties.