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Third Party Arbitration Funding given green light in Hong Kong

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On 14th June 2017 the Hong Kong Legislative Council passed the third reading of the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance. Whilst the Ordinance has not yet come into effect, it is expected to be gazetted and become effective later this year.

This legislation will permit the legalization of the third party funding in relation to arbitration and mediation proceedings in Hong Kong and is expected to provide a considerable boost to Hong Kong’s position as an international arbitration centre.

Hong Kong has been careful to ensure that the legislative change is accompanied by relevant safeguards to protect the system from potential abuse and we believe it is a welcome development and will help Hong Kong to maintain its status as one of the world’s leading dispute resolution centres.

Clients should now be considering the use of dispute resolution clauses adopting Hong Kong arbitration in commercial contracts, given the prospect of litigation funding being available for the resolution of such disputes by arbitration as opposed to proceeding through the court system.

If you would like further information regarding this legislation or any of the issues referred to in this article, please feel free to contact our Richard Healy.

GL4: Guideline on ‘Fit and Proper’ Criteria

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The Provisional Insurance Authority ( the ‘PIA’) is already in action and has just written to the Chief Executives of all authorized insurers (‘Insurers’). The communication covers two Guidance Notes ( previously ‘GN’ and now ‘GL’). Here we will focus only on one in summarizing what the PIA had to say in their letter.

GL4: Guideline on ‘Fit and Proper’ Criteria

New section 14A of the Insurance Ordinance will be effective on 26 June 2017. Section 14A sets out a list of matters that the Insurance Authority (the “IA”) must have regard to when determining whether a person is ‘fit and proper’. This is a new section which is applicable to controllers, directors, key persons in control functions and appointed actuaries of all Insurers. GL4 sets out the minimum standard of suitability requirements for these persons.

Transitional Arrangements for Key Persons in Control Functions:

Some Insurers may currently maintain one or more control functions and certain individuals may have been responsible for one or more of these control functions prior to 26 June 2017.

The IA shall introduce the following transitional arrangements effective 26 June 2017:

  1. For individuals who are responsible for any of the control functions of an Insurer before 26 June 2017 and within the definition of ‘key persons in control functions’ (the “Appointed Individuals”), relevant Insurers are required to submit applications for the IA’s approval of their proposed appointments on 26 June 2017. Such applications must be submitted to the IA during the period from 26 June 2017 to 30 September 2017.
  2. They should be provided in the prescribed Form A1
  3. Application fees: HK$18,000 will be waived in respect of applications of the Appointed Individuals.
  4. The IA will consider and will notify the insurers of the application results as soon as practicable.

Transitional arrangements apply to the Appointed Individuals only. If an Insurer wishes to appoint an individual as a key person in any control function(s) on or after 26 June 2017, it must obtain the IA’s prior approval.

For controllers, directors and appointed actuaries of Insurers who have already been duly appointed prior to 26 June 2017 in accordance with the relevant requirements, they are not required to seek the IA’s re-approval. However, if an Appointed Individual assumes a dual role of both an appointed actuary and a key person in the actuarial function, approval will still be required.

‘Shake & Bake’ OLN Fundraiser for the Child Welfare Scheme

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OLN staff supported the Child Welfare Scheme’s ‘Shake & Bake’ fundraising event on June 1st.

Several members of staff baked a variety of delicious sweet and savoury treats for the charity lunch held at our offices. Everyone paid HK$100 donation for the buffet and all monies raised will support children in Nepal to receive a safe and effective education; thereby remaining in school longer, protected longer and with improved prospects of future employment.

At long last – transparency in the beneficial ownership of Hong Kong companies?

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Background

In October 2014, a paper entitled “Transparency and Beneficial Ownership” was published by the Financial Action Task Force (“FATF”).

Although that paper did not mention Hong Kong by name, the relevant recommendations stated were expressed to be “recognised as the global anti money laundering and counter-terrorist financial standard”.

FATF has consistently stated that there must be adequate, accurate and timely information on the beneficial ownership and control of legal persons that can be obtained or accessed by the competent authorities and attaches considerable importance to this in the ongoing and highly publicized international fight against money laundering and against other unlawful activities.

In order to achieve such a statutory regime, the Hong Kong Government now intends to amend the Companies Ordinance (Cap 622 of the Laws of Hong Kong) so as to require all Hong Kong companies to obtain and hold up to date beneficial ownership information available for public inspection.  Listed companies will be exempted from this requirement as they are already subject to other strict disclosure requirements under the Securities and Futures Ordinance.

As a result of the October 2014 FATF paper, Hong Kong’s Financial Services and Treasury Bureau (the “Bureau”) issued, in early January this year, a “Consultation Paper” to enhance the transparency of the beneficial ownership of Hong Kong companies, including requiring Hong Kong companies to maintain a register of persons with significant control (a “PSC Register”) for each company.  Such a register would be open to the general public for inspection.
 

What does beneficial ownership actually mean
Any person who satisfies one or more of the following will be affected:

(a) directly or indirectly holds more than 25% of the shares;
(b) directly or indirectly holds more than 25% of the voting rights;
(c) directly or indirectly holds the right to appoint or remove a majority of directors;
(d) otherwise has the right to exercise, or actually exercising, significant influence or control; or
(e) has the right to exercise, or actually exercises, significant influence or control over the activities of a trust or a firm whose trustees or members satisfy any of the first four conditions.
 

PSC Register
The Bureau proposes that each Hong Kong company be required to identify and keep a register of people falling into one or more the above categories.  This requirement will extend to legal entities with significant control over the company.  This is intended for individuals who exercise control through a holding company or other structures.  To enable a Hong Kong company to maintain its PSC Register, each company will be obliged to take reasonable steps to ascertain its registerable individuals and legal entities.  

Companies will also have to enter on their individual PSC Register details of an authorised person responsible for providing such information and for providing further assistance to law enforcement agencies, as and when required.  
 

Public Inspection of PSC Register
Each Hong Kong company will be required to make its PSC Register available for inspection by any shareholder without charge or by any member of the public on payment of a fee.  

A company must notify the Registrar of Companies where its PSC Register is kept, if not kept, at its registered office.
 

Timetable 
The consultation period ends on 5th March 2017.

Assuming that the Hong Kong Government does introduce legislation into the Legislative Council, it is likely that the Hong Kong Government will want to enact legislation prior to the next FATF evaluation visit to Hong Kong, which is scheduled for October and November 2018.

Reduced Official Fee for Trademark Registration in China

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With effect from 1 April 2017, the China Government has reduced official fees concerning trade mark registrations by 50% as follows: –
 

ItemNew Fee
Trade Mark Application (up to 10 items of goods/services)RMB300
– each additional item beyond 10RMB30
Re-issue of Trade Mark Registration CertificateRMB500
Trade Mark AssignmentRMB500
Trade Mark RenewalRMB1000
Trade Mark Renewal (Additional Fee for Late Renewal)RMB250
Trade Mark ReviewRMB750
Change of Owner’s DetailsRMB250
Obtaining Certified Copy of Registration CertificateRMB50
Trade Mark Application (Certification Mark)RMB1500
Trade Mark Application (Collective Mark)RMB1500
Trade Mark OppositionRMB500
Trade Mark CancellationRMB500
Recordal of Trade Mark LicenseRMB150

Comments:

Bad faith trade mark filing is considered one of the major problems plaguing the China trademark system. It is expected that the reduction of official fees will encourage bad faith filers to file more applications. Unlike many other jurisdictions, China is a first-to-file jurisdiction. All trademark owners should consider filing their trademark in China as soon as possible to protect themselves and avoid becoming a victim of bad faith trademark registration.

Are you getting any Candies from the Hong Kong budget 2017?

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With a forecast budget surplus of HK$92.8 billion for 2016-2017 attributed mainly by land sales and stamp duty, Financial Secretary Paul Chan Mo-po has followed his predecessor’s path to hand out “candies” totaling HK$35.1 billion. But are you getting any of them? Please check out the list below:-

  • Reduction on profits tax, salaries tax and tax under personal assessment by 75% for 2016-2017 subject to a cap of HK$20,000.
  • Widening of the marginal bands for salaries tax from the current HK$40,000 to HK$45,000.
  • Raising of the disabled dependent allowance from the current HK$66,000 to HK$75,000.
  • Raising of the dependent brother/sister allowance from the current HK$33,000 to HK$37,500.
  • Extension of the entitlement period for the tax reduction for home loan interest from 15 years of assessment to 20 years.
  • Raising of the deduction ceiling for self-education expenses from the current HK$80,000 to HK$100,000.
  • Waiving of government rates for four quarters of 2017-2018 subject to a cap of HK$1,000 per quarter.

Support for Small and Medium Enterprises (“SME”)

  • Continuation of the Dedicated Fund on Branding, Upgrading and Domestic Sales in furthering business development in the Mainland.
  • Continuation of the special concessionary measures under the SME Financing Guarantee Scheme to help enterprises tide over their liquidity needs.
  • Strengthening of the underwriting capacity of the Hong Kog Export Credit Insurance Corporation (“ECIC”) to provide Hong Kong exporters with insurance protection against non-payment risks by raising the cap on the contingent liability of ECIC under contracts of insurance from HK$40 billion to HK$55 billion.
  • Continuation of the Technology Voucher Programme to provide each eligible SME with funding of up to HK$200,000 to promote the effective use of technological services and solutions among SMEs for better operation efficiency.

With the aim to enhance Hong Kong’s overall competitiveness, new measures will also be introduced to nurture certain emerging industries:-

Aircraft Leasing Business

A dedicated tax regime has been proposed [Note: not the law yet] which would result in an effective tax rate of 1.65% (i.e., 20% x 8.25%) [as opposed to the 16.5% general tax rate] for qualifying transactions in order to attract aircraft financing and leasing business to Hong Kong. Details are as follows:-

  • Qualifying aircraft lessors and qualifying aircraft leasing managers for offshore aircraft leasing transactions in Hong Kong (with non-Hong Kong aircraft operators as lessees) can enjoy half payment of the prevailing HK corporate income tax rate of 16.5% (i.e. 8.25%); and
  • For qualifying aircraft lessors, only 20% of the profits (excluding tax depreciation) generated from the leasing of an aircraft to a non-Hong Kong aircraft operator will be regarded as HK source and subject to Hong Kong tax.

Fund Industry

To facilitate Hong Kong’s development into a full-fledged fund service centre, the Government proposes to extend the profits tax exemption for qualifying offshore funds and offshore private equity funds to onshore privately-offered open-ended fund companies.  

Other measures include:-

  • The First Registration Tax exemption for electric vehicles which was introduced to promote a wider use of electric vehicles to replace diesel and petrol vehicles will be revised and the First Registration Tax waiver for electric private cars will be capped at HK$97,500 from 1 April 2017.
  • The Government will issue a second batch of Silver Bond in 2017-2018 which targets at Hong Kong residents aged 65 or above who are looking for investment products with steady returns.
  • Waiving the licence fees for tourism-related industries including restaurants and hawkers and fees for restricted food permits for one year.

For a deeper discussion or any enquiry, please contact one of our members of the Tax Advisory team.