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Privacy Flaws – South China Morning Post features commentaries by The Executive Centre’s CFO on the government’s proposals to restrict access to company director data

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Privacy Flaws Fears grow over proposals to restrict information on company directors Reports by Tara Loader Wilkinson SCMP, Business Services Directory, March, 2013 - As the government proposes restricting disclosure of company directors' identities, fears are mounting that the move could adversely affect Hong Kong's reputation as an international financial centre, and dampen its appeal for new businesses. The city is proposing to amend the Companies Ordinance to withhold directors' identity card numbers and residential addresses, with effect from next year. Critics of the new regime say restricting information on new company directors could open the door to financial criminals, fraudsters, money-launderers and even terrorists. In addition, those already listed, including the city's wealthiest and most powerful tycoons, would be able to hide their personal details in exchange for a fee. Without disclosure on directors, businesses could struggle to enforce crucial due diligence on companies, banks may find it harder to carry out credit checks and journalists investigating corruption may be impeded in their work. These issues could lead to another serious, long-term problem for Hong Kong - discouraging the very enterprises and global businesses that the city has strived to attract for so long. Experts say the new rules could also damage inflows of overseas investment, not to mention ward off foreign companies seeking a Hong Kong listing. Protests are already rolling out. Last month, corporate governance advocate David Webb published, before subsequently withdrawing, a database listing the ID card numbers of 1,100 company directors. His database included numbers for tycoon Li Ka-shing's sons and Sun Hung Kai Properties chairman Thomas Kwok Ping-kwong. The former registrar of companies, Gordon Jones, slammed the government's proposals, saying it could turn Hong Kong into a breeding ground for crime and low standards of corporation management. Now, heads of firms are adding their voices to the throng, suggesting that the rules could thwart Hong Kong's attempts to attract new business, so essential to its economy. "The new provisions could open up the door to abuse," says Alan Seigrist, chief financial officer of The Executive Centre, a serviced office provider. "Perhaps in their [the government's] view it will bring more money into Hong Kong, but what sort of money? Do you want to attract the people who have something to hide, or the ones that are open and public?" Seigrist says that the proposals could erode the high standards of transparency that Hong Kong prides itself on, on an international scale. He said that the city has one of the world's most open company legislatures, in some ways more transparent than that of Britain, the United States or Singapore. "Transparency is one of Hong Kong's biggest calling cards when it comes to attracting new companies to set up or list," he says. "Although you don't want to allow information to be overly accessible to allow for identity theft, transparency must be upheld." But others argue that although the public and the media would be hampered, the proposals would have a limited impact on banks and corporations, because officials can apply for special dispensation on a need-to-know basis. "The amendment should have only a small impact on the integrity of Hong Kong's sound legal system, which is a major attraction for foreign investors," says a marketing executive from a business servicing company in Hong Kong. "Since the amendments ensure law enforcement, institutes would still have authority to access the information." He says the proposals are unlikely to cause significant changes to the city's credit system for small and medium-sized enterprises (SMEs) and listed groups, because annual reports, in any case, must be signed by an identified director. But the marketing executive warns that the restrictions could be a harbinger of further clampdowns on public disclosure. "Hong Kong's reputation for business could be damaged if this projects the image of a longer-term declining public information policy, which leads to the long-existing debate between an individual's privacy and the public's right to be informed." Nevertheless, there are those who say the move could actually benefit Hong Kong's offering for SMEs. Agnes Chang, a senior executive at consultancy US Asia Tax & Business Services, says: "There needs to be an equilibrium. It may be discouraging for certain individuals to know that all of their personal information, including their home address and telephone number, is publicly available." That Hong Kong should find a happy medium between transparency and privacy if it wants to attract and retain business, is evident. But just how it will achieve that remains to be seen. Proposed amendments The personal data of more than 1 million directors and former directors in Hong Kong are available at the Companies Register. This includes their names, usual residential addresses and their full identification numbers. If the new Companies Ordinance goes ahead, only a name and correspondence address will be made public. Directors will still need to provide a usual residential address and an ID number, but addresses will not be published and only partial ID numbers will be shown (for example: A123***). For the 1 million existing entries in the register, their information will remain public unless they specifically apply and pay a fee to withhold their details "in light of the large volume of existing records", according to the Companies Registry website, without disclosing what the fee will be. In the interest of the public, if communication with a director at his or her correspondence address fails, the registrar will publish the director's usual residential address instead. This address will remain in the public domain for five years. And if all else fails, sections 52 and 59 state that a creditor of the company concerned, or any person with a good reason to access the information, including members of the public and media, may apply to the court for disclosure to the withheld information. A proposed provision is to only allow members of a company, public officers, public bodies and liquidators access to the protected information. This regulation will be submitted to the Legislative Council to decide upon in May this year. If agreed, the new rules are expected to take effect from some time next year. Please click here for the clipping.
About The Executive Centre

The Executive Centre is the leading premium serviced office provider in Asia Pacific with over 80 centres in 21 cities. Founded in 1994, it operates in Hong Kong, Beijing, Chengdu, Shanghai, Tianjin, Shenzhen, Guangzhou, Macau, Taipei, Tokyo, Seoul, Singapore, Jakarta, Bangalore, Chennai,Pune, Mumbai, Gurgaon, Brisbane, Perth and Sydney. The Executive Centre provides serviced offices, virtual office representation services, meeting and conference facilities, and business concierge services to multinational corporations, small and medium enterprises, and start-ups locally, regionally and internationally. Please visit our Web site at www.executivecentre.com

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