Regulatory Reminders

December 2023
 

Under section 64ZZD of the Insurance Ordinance, a licensed insurance broker company is required to notify the IA regarding relevant changes of its directors and controllers¹, as follows:

Section 64ZZD of the Insurance Ordinance (Cap. 41)

Duty to notify the Insurance Authority of change of directors or controllers for licensed insurance broker company

• Within 1 month after the date on which a person becomes, or ceases to be, a director or controller of a licensed insurance broker company, the company must notify the IA in writing of that fact.
• A licensed insurance broker company which, without reasonable excuse, fails to notify within the time specified, commits an offence and is liable to a fine at level 5.

Changes in controller and directors can be infrequent and infrequency can lead to forgetfulness, so it is important a broker company has the right process or checklist in place to which reference can be made when a change occurs, so the notification requirement is complied with. 

The following are examples of practices broker companies can implement to ensure timely notification to the IA:

• Controls and Procedures: The personnel/department in a broker company who is responsible for the onboarding/appointment procedures of the director to the company, should be sensitive to the need to notify the regulator of the change and should include in that process a checklist, that includes a reminder to notify the IA.

If the broker company is within a group of companies, it should implement procedures with its holding company(ies) so that its holding company(ies) can provide information of any changes of control which amount to the broker company having a new controller or ceasing to have a controller. An internal documented process requiring the holding company to notify such changes within 2 weeks of the change, can give the broker company a further 2 weeks to make the requisite notification to the IA.

• Notify the IA and the Companies Registry at the same time: Given that broker companies are required to make statutory filings to the Companies Registry under the Companies Ordinance (Cap. 622) for appointment or cessation of directors and controllers, it would be a good practice for companies to make relevant notification to the IA and the Companies Registry simultaneously. Again, both requirements can be included in a convenient checklist that can serve as a reference for when changes happen.
• Keep Proper Notification Records: A broker company should properly keep past notification records for all of its directors and controllers. The internal record should be stored in a way that the record will be easy to retrieve e.g. filed in a centralized folder. By doing this, a broker company can always check and locate relevant notifications record when needed.

To notify the IA of any changes in directors and controllers, a broker company should submit Form N5 “Notification of Change in Partners, Directors or Controllers of a Licensed Insurance Agency or Licensed Insurance Broker Company” (https://www.ia.org.hk/en/infocenter/forms/files/Form_N5_Notification_of_change_in_partners_directors_or_controllers_Eng.pdf) together with the supporting documents as stated in the Form.

Notes:

¹ Section 64F of the IO defines a “controller” of a company to be a person who (i) owns or controls, directly or indirectly, including through a trust or bearer share holding, not less than 15% of the issued share capital of the company; (ii) is, directly or indirectly, entitled to exercise or control the exercise of not less than 15% of the voting rights at general meetings of the company; or (iii) exercises ultimate control over the management of the company.