11 June, 2012


Corporations licensed in Hong Kong need to assess whether changes relating to their ownership structures require pre-approval from the Securities and Futures Commission (SFC).
What is a substantial shareholder?
Any person (individual or corporation), either alone or together with any of its associates who has:
  • more than a 10% direct interest in an SFC licensed corporation, or
  • a 35% or more indirect interest
is considered a substantial shareholder.
Both the terms "substantial shareholder" and "associate" are defined in Section 6 of Schedule 1 of the Securities and Futures Ordinance (SFO) and need careful consideration.
How do I know if the change will require pre-approval from the SFC?
If the change in ownership will result in the licensed corporation having an additional (i.e. new) substantial shareholder, the new substantial shareholder will need to apply to the SFC for prior approval.
However, if the change in ownership will not result in any additional substantial shareholders, the licensed corporation will only need to notify the SFC within seven business days after the change takes place: no prior approval will be required.
What should a filing include?
If pre-approval is required
Various forms, a group structure chart (showing the current ownership and the proposed change) and a application fee will need to be submitted to the SFC, together with a cover letter describing the proposed change. 
Once approval is granted, a Form 5 and group structure chart (showing the ownership before and after the change) should be submitted to the SFC within seven days of the change taking place.
If pre-approval is not required
A Form 5 and a group structure chart (showing the ownership before and after the change) should be submitted to the SFC within seven days of the change taking place. 
Ongoing obligations for substantial shareholders
Each substantial shareholder is required to notify the SFC when there are changes in contact details, capital and shareholding structures or the substantial shareholder is engaged in any judicial or other proceedings. 
Although there are different filing deadlines for different purposes, we recommend that a policy of notifying within 7 business days be adopted.
Determination of a substantial shareholder can be complex and complying with the ongoing notification obligations can be burdensome if the licensed company has a large group structure. Failure to comply with the requirements may not just affect the substantial shareholders, but may reflect adversely on the fitness and properness of the licensed corporation.



For further information, please contact:


Elizabeth MacDonald, Deacons



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