Change to Hong Kong's Company Ordinance Could Affect Probes

The postponed changes to the Companies Ordinance in Hong Kong raise important considerations for corporate transparency and investigations into alleged misconduct, says AlixPartners, provider of financial advisory services.


The proposed changes echo a trend taking shape in mainland China where it is becoming more challenging to access corporate records filed with China's Administration for Industry and Commerce.


Hong Kong's government postponed the changes following a petition by journalists and business grups.


If adopted, Hong Kong's proposed rules could require investigators to cast a wider net to identify entities that may be of interest. This would make conducting investigations more difficult, time-consuming, and costly.


Opposition to the proposal stems from concerns that it could have an adverse effect on the transparency of business in Hong Kong. Part of sweeping changes to the law that were slated to take effect in 2014, the revised statute was intended to protect the privacy of personal data. However, by restricting access to this information, it has the potential to hinder investigations into companies and their executives.


For years, directors at Hong Kong companies were required to make personal information available under the Companies Ordinance. Currently, that information can be accessed online for a nominal fee.


Under the revised statute, such information as home addresses and identification and passport numbers will no longer be public, and directors will be allowed to state the company’s registered address instead of their home address.


"Regardless, the need to develop sophisticated approaches to obtain information will remain a priority, particularly in light of potential restrictions that could affect the ability to access records that may be critical to an investigation," says AlixPartners.



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