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OLN Marketing

Safeguard the Board from Email Scam: Asset Recovery and Protections

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OLN’s partner Anna Chan, and associate, Jonathan Lam were invited by the Hong Kong Institute of Chartered Secretaries to present on the topic of “Safeguard the Board from Email Scam: Asset Recovery and Protections” on 10th April 2017. The 1.5-hour seminar drew over 180 attendees and they were given an overview on various remedial measures and protection procedures in view of the increasing prevalence of email scam. The seminar also touched on protection of board and company secretary, a topic which is of major concern to the attendees as professional company secretaries.

Email us at marketing.oln@oln-law.com to receive a copy of the presentation slides.

Is your personal data at stake because of the increased transparency in tax administration through Automatic Exchange of Information (“AEOI”)?

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It is an inevitable trend under the international tax reform that countries will be working together to promote transparency in tax administration. Hong Kong, as a responsible international citizen and a leading financial centre, has recently put in place domestic legislation in relation to Automatic Exchange of Financial Account Information (“AEOI”).

1. What is AEOIs?

AEOI is a new system that involves the transmission of bank account holders’ financial information from Hong Kong to an overseas tax jurisdiction with which Hong Kong has entered into an AEOI agreement (or known as an “AEOI Partner”).

The transmission of the information would involve the following steps:-

What sort of information will be furnished and exchanged?

  • Name, address, jurisdiction of resident, tax identification no., the date and place of birth (in case of individuals)
  • Account number
  • Account balance or value as at the end of the specified information period or other appropriate reporting period
  • Interest income, dividend income, other income generated from the financial assets, gross proceeds from the sale or redemption of financial assets

Whom will the IRD exchange information with?/ Who are our AEOI Partners?

  • From 2018 onwards: Japan, United Kingdom for information of the preceding year
  • From 2019 onwards: Korea
  • Timeframe to be determined (legislation in progress): Belgium, Canada, Guernsey, Italy, Mexico, Netherlands

Additional jurisdictions will be added to the list upon signing of the following agreements with Hong Kong:-

  • A comprehensive avoidance of double taxation agreement (“CDTA”) or tax information exchange agreement (“TIEA”); and
  • A competent authority agreement (“CAA”)

2. Which account holders will be reported?

  • Account holders (both individuals and entities) who are subject to taxation as a resident in other jurisdictions.
  • Hong Kong taxpayers who are not tax residents of any territory outside Hong Kong will not be reported.

How will the reporting financial institutions identify the accounts held by tax residents of other jurisdictions?

The Inland Revenue (Amendment)(No.3) Ordinance 2016 provides the reporting financial institutions with the legal basis to collect the required information from account holders:-

(1) For accounts opened on or after 1 January 2017

Reporting financial institutions should request a self-certification from the account holder.

(2) For pre-existing accounts

If a reporting financial institution has doubts about the tax residence of an account holder, it can seek a self-certification from the account holder to verify its tax residence.

Will the account holders be sanctioned?

As a self-certification is a formal declaration that the account holder makes in connection with his / her tax residence, if the account holder has doubts about his / her tax residence, professional advice should be sought.

An account holder who knowingly or recklessly provides a statement that is misleading, false or incorrect in a material particular in making a self-certification to a reporting financial institutions is liable on conviction to a fine at level 3 ($10,000).

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

OLN Sponsors the ALB In-House Counsel Summit

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On Tuesday the 12th of September 2017, OLN sponsored the ALB In-House Counsel Summit held at the Conrad Hotel. Big thank you to our Partners Richard Healy, Chris Hooley and Anna Chan; as well as Senior Associate Carmen Tang, Associate Jonathan Lam and Consultants Adelina Wong and Gary Wong for volunteering and representing OLN.

This was a great opportunity for OLN to increase our brand presence among in-house counsels and other legal practitioners — as well giving our members the chance to network and be a part of the various workshops.

There were approximately 500 attendees that registered for the different workshops throughout the day; with heavy foot traffic passing our booth situated outside the Grand Ballroom. We were in contact with a variety of guests; many of which were interested in our practice areas and particularly our mints and golf tees!

We hope to build on the success of this event for the upcoming 2017 In-House Congress Hong Kong on the 10th of October 2017 at the Marriott Hotel where Partner, Anna Chan will be delivering a presentation on “Cybersecurity and Data Privacy”. More details to follow.

Legal Assistance for Fintech Start Ups

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Hong Kong’s “start ups” have seamlessly moved away from “dot.com” to “Fintech”, but irrespective of the actual business of the “start ups” and irrespective of the “APP” or the “tech solution” involved, there are still a number of basic business rules that should apply and which will assist in reducing Founder risk and in making the business as attractive as possible to Investors.

OLN’s Corporate Commercial Practice Group can assist with strategizing on each aspect of the “start-up”, whether that is “pre” start up when looking for initial funding, when the start up is operational, or when there is business growth and the need to look for additional funding or investment.

All these aspects will invariably require clarity of thought and in having documentation that is properly tailored to the operational and business needs of the company.

In this respect, are you aware of all the different types Hong Kong Government funding that could potentially be available to you: https://www.gov.hk/en/business/supportenterprises/funding/. OLN can assist in all procedures and applications for trying to secure such funding.

OLN’s Corporate Practice Group has extensive knowledge, not only acting for Founders, but also acting for private equity investors, so OLN can assist and provide all background information to move forward with the tailored drafting of:

  • Non disclosure agreements;
  • The Term Sheet or Memorandum of Understanding;
  • The commercial terms for the Founders to enable them to put a Shareholder Agreement in place;
  • The Employment Contracts for staff members;
  • All protections to enable relevant intellectual property to be registered;
  • Privacy Policies and in ensuring that data protection principles are understood and dealt with; and
  • Corporate compliance procedures, which will need to be upheld at operational level.
  • We can also assist and advice on the strategy for the use of block chain, smart contracts and cryptocurrencies and in ensuring that all regulatory guidelines are adhered to and or approvals obtained on any aspect of the intended business, especially where data privacy and data protection is involved.

 
OLN’s ongoing work with the Trade and Industry Department and with the Hong Kong Science Park enables us to have a clear understanding of what “start ups” and SMEs practically need.
OLN’s services are tailored to be as practical and pragmatic as possible, so that each client receives proper input and advice relevant to their actual business and needs.

OLN Supports Action Asia Kayak Event

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It was all smiles on Saturday at the annual Action Asia Kayak ‘n’ Run event with many children from Hong Chi Winifred Mary Cheung Morninghope School being excited to be taken out on a kayak course with experienced instructors for short little races around Deep Water Bay. They all thoroughly enjoyed the outdoor experience and the rare taste of nature, before enjoying lunch at a nearby restaurant. OLN has supported Action Asia for many years and thank you to those that volunteered on the day.

Too Big To Fail, Too Big To Be A Pyramid Scheme?

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In 2012, Bill Ackman, founder and CEO of U.S. hedge fund, Pershing Square, made a US$1 billion trade “against” Herbalife, a global multi-level marketing (“MLM”) company, listed on the New York Stock Exchange, by “shorting” its shares. 


He also alleged that Herbalife’s market practices effectively made it a global pyramid scheme, where distributors were misled by illusions of great returns, but where the reality was a product that would not sell on the open market and distributors who regularly lost money.


Herbalife’s response was to restate the fact that they offered healthy products and an opportunity to “change one’s life” by becoming a distributor.


Herbalife’s “distribution” structure had already attracted investigation by many entities, most recently by the U.S. Federal Trade Commission (“FTC”). That resulted in a 2016 settlement, with Herbalife being fined US$200 million and agreeing to change its business model.


After the “short” on Herbalife, several other investors, notably Carl Icahn went “long” on Herbalife stock, attacking Ackman’s short position, showing that Herbalife had much support, not only from its investors, but also self-servingly from its own distributors.


MLMs tend to do well where there are minority communities, with people within a community selling to each other and trying to recruit each other.


It seems that in an MLM structure, it is only the top-level that gets huge profits, and such a structure disturbs “normal” economic order and affects social stability. This is the rationale from the Chinese government as to why MLMs were banned in China, in 2005.


The visible enforcement of this prohibition in China is shown by the fact that only recently have there been large-scale coordinated raids by Chinese police and local government officials, where over 1200 people have been arrested on suspicion of having links to a pyramid scheme in southern China, involving over US$50 million.

In Hong Kong, MLMs do legally exist and conduct business, but consumer protection comes from the Pyramid Schemes Prohibition Ordinance (Cap. 617) (the “Ordinance”). The Ordinance provides a legal definition of a “pyramid scheme”, such a scheme requiring the following characteristics:


i) New participants must make a payment to existing participants or promoters of the scheme;
ii) New participants are being represented regarding the prospects of receiving payment once they join the scheme (the “recruitment payment”); and
iii) The “recruitment payment”, as its name suggests, is entirely or substantially derived from the new participants finding further new participants to join the scheme.


Typically, the practical difficulty will be in deciding whether a “legitimate” MLM actually has “pyramid” scheme elements.


Section 5(2)(a) of the Ordinance provides the offence of “participating” in a pyramid scheme, so the risk is to identify whether each MLM business model is actually legitimate.


In various common law jurisdictions, there have been investigations and prosecutions for involvement in pyramid schemes, but as yet no one has targeted any listed MLM claiming that it is a pyramid scheme, although self-servingly people who lose money in those MLMs often make such claims.


Caution needs to be exercised when making any investment, and when deciding to participate in any marketing scheme.