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Legal Update: Disclosure Obligations for Non-Hong Kong Companies effective from 1 August 2019

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Non-Hong Kong companies as defined under the Companies Ordinance (Cap. 622), in brief, those having a place of business in Hong Kong, should be aware of the new set of disclosure rules under the Non-Hong Kong Companies (Disclosure of Company Name, Place of Incorporation and Members’ Limited Liability) Regulation (Cap. 622M) (the “Regulation”), which will come into operation on 1 August 2019.

Important Changes under the Regulation

Important changes introduced by the Regulation include, inter alia,

  • sections 3(1) and (2): A non-Hong Kong company must clearly display its name and its place of incorporation at every business venue of the company in Hong Kong and they must be positioned on the premises in a way easily seen by a visitor.
  • Sections 4: A non-Hong Kong company must clearly state in legible characters its name and place of incorporation in every communication document and transaction document of the company in Hong Kong.
  • Section 5: if the liability of the members of a non-Hong Kong company is limited, the company must (a) exhibit a notice to that effect at every business venue of the company and (b) state this fact in legible characters in every communication document and transaction document in Hong Kong.
  • Section 6(2): if the non-Hong Kong company is in liquidation, it must in every of its advertisement (a) state in legible characters its name and place of incorporation and (b) where applicable, state in legible characters that the liability of its members is limited.
  • Sections 6(3) and (4): A non-Hong Kong company in liquidation, when displaying or stating its name, must  (a) if its name is in a language other than Chinese, add “(in liquidation)” after the name; (b) if its name is in Chinese, add “(正進行清盤)” after the name; or (c) if its name is in Chinese and in a language other than Chinese, add “(正進行清盤)” after the name in Chinese; and add “(in liquidation)” after the name in that other language.

Pursuant to section 8 of the Regulation, when there is a breach of any of the above requirements, the company, every responsible person of the company, and every agent of the company who authorizes or permits the contravention, commit an offence and each breach is liable to a fine at level 3.

In light of the above, it is advisable that non-Hong Kong companies in Hong Kong should begin preparing and taking necessary steps to comply with the new disclosure rules.

OLN provides a full range of company law services.  If you have any questions on the above or on any company law issues, please contact one of the members of the Company Law team or the Corporate and Commercial Law team.

Will US continue to treat Hong Kong as a separate territory from China from the trade and economic perspectives?

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Introduction

Very recently, US Senator Ted Cruz has introduced a bill to amend the US-Hong Kong Policy Act 1992 (the “Amendment Bill”), posing threats to trade and finance ties between Hong Kong and the US.

The purpose of this article is to explore, from a legal point of view, the US-Hong Kong Policy Act 1992 (the “Policy Act”), the Amendment Bill, as well as the potential impact to Hong Kong if any of the Amendment Bill is passed.

Background of the Policy Act

Handover of Hong Kong from Great Britain to China in 1997

Following the Sino-British Joint Declaration of 1984 (“Joint Declaration”), the US government passed the Policy Act where it is stated that in recognition of the Joint Declaration and the freedoms and rights guaranteed therein, the US shall seek to form bilateral ties and enter into agreements with Hong Kong in inter alia economic, trade and financial areas.

The legal significance of the Policy Act are as follows:-

  • declaring the official position of US vis-a-vis the status of Hong Kong pre and post 1997;
  • imposing a duty on the US Secretary of State to report to the two US congressional bodies on the conditions of Hong Kong in certain years; and
  • endorsing the Joint Declaration and seeking assurances that the Joint Declaration would be implemented both in spirit and letter.

The Policy Act

Key provisions

The Policy Act is divided in four main parts: (1) the Findings and Declarations, (2) Policy, (3) the Status of Hong Kong in US Law and (4) Reporting Provisions.

(1) In Findings and Declarations, the Act declared inter alia the continuation in force of existing agreements with Hong Kong, ICCPR and ICESC as of date of handover, the support for the Joint Declaration, and the constitution of the Hong Kong Legislature by elections.

(2) In Policy, the US guarantees the continual ties with Hong Kong in various areas of cooperation including trade, commerce, transportation, cultural and educational exchanges and in particular the recognition of passports and travel documents issued after June 30 1997 by the Hong Kong Special Administrative Region.

(3) In the Status of Hong Kong in US Law, the Policy Act declared the continual application of US laws with respect to Hong Kong as was the case prior to the handover, approving the continuation of force of all treaties and international agreements entered into between the US and Hong Kong.

(4) In Reporting Provisions, there is a requirement of reporting Hong Kong conditions to congressional committees which may affect US interest in Hong Kong. The reporting period is defined as “not later than March 31 2019, and annually thereafter through 2024”.

Apart from the above, an important point to note is that the Policy Act made provision for a Presidential Order such that the President of the US is given the power to issue an Executive Order suspending the application of the Policy Act or any part thereof if he or she determines that Hong Kong is not or has become not sufficiently autonomous.

The Amendment Bill

Timeframe for a bill to become a Law in the US

The Amendment Bill would need to undergo the following process before it becomes a Law in the US:-

  • Review by a committee before the bill is to be sent to the House or Senate floor for debate.
  • Congress debates and votes: Member of the House or Senate is to debate on the bill and propose changes or amendments before voting.
  • Presidential Action: If President signs and approves the bill, the bill is law.

While there is no set timeframe in relation to each step, with currently thousands of bills being introduced in the House and the Senate, it is expected the Amendment Bill will not be passed and implemented very shortly.

Potential implications if the Policy Act has been revoked or if there has been any amendments to the Policy Act

Hong Kong has currently been given a special status under the Policy Act to be treated separately from China including the following:-

  • The US should treat Hong Kong as a separate customs territory.
  • The US should treat Hong Kong as a separate territory in economic and trade matters, such as import quotas and certificates of origin.
  • The US should continue to support access by Hong Kong to sensitive technologies so long as the US is satisfied that such technologies are protected from improper use or export.
  • The continuation of all treaties and other international agreements entered into between the US and Hong Kong or entered into before 1 July 1997 between the US and the United Kingdom and applied to Hong Kong, unless or until terminated in accordance with the applicable law.

Without the shield of the Policy Act, Hong Kong could potentially be affected by the US-China trade war such as the implications of China-specific tariffs on goods exported from Hong Kong to the US:-

  • With the US being the Hong Kong’s second largest trading partner in the world accounting for US$42 billion or 9% of the total value in 2017 and having substantial inward direct investment in Hong Kong (the position of inward direct investment from the US amounted to US$40.5 billion at market price as at the end of 2016), the impact of the revocation of the Policy Act or any amendment to the Policy Act from the economic perspective would be far-reaching.
  • For instance, tariffs of exporting goods from Hong Kong to US could potentially face the same penal rate at 25% as applicable to exported Chinese goods in the US at present. This would hit badly on industries such as electrical machinery, telecommunications, sound recording and reproducing equipment, jewelry, and apparel, which represents Hong Kong’s major export items to the US in 2017.
  • Technology companies and companies required advanced technology from US may also take a toll as cloud-based technology,
  • Artificial Intelligence and powerful computer ships may stop being exported to Hong Kong.

Conclusion

It remains to be seen whether the Amendment Bill will be passed. Nevertheless, as the consequences of its implementation would have far-reaching detrimental impact on Hong Kong economy at least in relation to the US, close attention should be paid to its continual development.

OLN provides a full range of tax and advisory services. If you have any questions on the above or other tax questions, please contact a member of the Tax Advisory Team.

Injuries and death occasioned by burn-out at work – is compensation available?

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A medical condition or an occupational phenomenon?

Responding to increasing worldwide concerns over deteriorating mental well-being of workers in the workplace, the World Health Organization (WHO) has recently clarified that “burn-out” (過勞) is an occupational phenomenon (職業現象)but not a “medial condition” (病況) and officially categorising it so under its 11th Revision of the International Classification of Diseases (ICD-11).

According to the WHO, “burn-out” is defined as: –

“a syndrome conceptualized as resulting from chronic workplace stress that has not been successfully managed. It is characterized by three dimensions:

  • feelings of energy depletion or exhaustion;
  • increased mental distance from one’s job, or feelings of negativism or cynicism related to one’s job; and
  • reduced professional efficacy.

Burn-out refers specifically to phenomena in the occupational context and should not be applied to describe experiences in other areas of life.”

For Hong Kong, similar concerns have been voiced by the general public over occupational health issues over the past few years. Statistics compiled by the Labour Department shows that from the year 2013 to the end of the third quarter of the year 2018, there were a staggering number of 635 non-accidental deaths at work – how many of which were caused by wholly or partially burn-out situations, we do not know.

The statistics may shed light on the reasons for such high numbers of death: employees in Hong Kong consistently rank top in the world in terms of weekly work hours, reaching 44 hours per week between May and June 2017. Among the 3.04 million employees in Hong Kong, 25% had work hours over 51 hours per week in the said period.

In view of the recognition by the WHO of burn-out as an occupational health hazard, does this have any impact or effect on Hong Kong courts’ decision on or the extension of an employer’s duty of care towards injuries or occasioning death of its employee caused by burn-out at the workplace?

The present laws

Employees’ compensation is statutorily provided for in the Employees’ Compensation Ordinance (Cap. 282) (“ECO”). Under section 5 of ECO, an employer is liable for the employee’s injury or death resulting from accident in the course of employment subject to certain provisos, for instance, the injury is inflicted by deliberate self-injury or the accident is directly attributable to the claimant’s addiction to drugs.  

On the other hand, the Occupational Safety and Health Ordinance (Cap. 509) (“OSHO”) imposes on the employer a general duty of care towards the employees to ensure their safety and health at work and Section 6 of OSHO provides a non-exhaustive list of situations under which an employer is deemed to have failed in exercising its duty of care, including a failure to maintain the workplace or a working environment in a condition that is safe and without risks to health. Alongside with the OSHO, the Factories and Industrial Undertakings Ordinance (Cap. 59) (FIUO”) provides regulation and imposes duties on proprietors for the safety and health protection to persons employed in the industrial sector.  

Common law also recognises an employer’s duty of care towards the safety and health of its employees and it supplements the statutory laws by extending the scope of duties based on case laws.

Is “burn-out” relevant?

As mentioned, ECO covers “accident” causing injuries or deaths of employees in the course of employment. Adopting WHO’s definition of burn-out, it is hard to argue that chronic workplace stress per se constitutes an “accident” under ECO which in turn causes the burn-out symptoms as “injuries”. This is because the temporal element of an accident, which is invariably almost instantaneous (such as accidentally falling off a ladder or being hit by a falling crane during work), diametrically opposes the chronic nature of chronic workplace stress causing burn-out. It is also difficult to characterise the mental effects of burn-out, such as energy depletion and reduced professional efficacy as “injuries”.

The “injury” sustained must be one that incapacitates the claimant from earning full wages at work or results in partial incapacity of a permanent nature under section 5(2) of the ECO. In the case where the employee dies from burn-out alone, it is still difficult to argue that ECO applies as burn-out is not currently one of the occupational diseases listed in the Second Schedule of ECO which entitle a claimant to compensation if death or injury results therefrom.

Nevertheless, if the burn-out syndrome facilitates an injury or death, it is compensable. An archetypal example is a tired and overworked driver getting hit by another vehicle on the road due to his diminished attention to the road conditions caused by his depleted energy level and stamina, thereby resulting in injury such as fractured bones or head traumas or even death from the collision. That would be compensable under ECO.

Although there may still be grey areas under ECO, the provisions in OSHO and FIUO might still assist to the extent that the burn-out (which subsequently caused injury or death) is due to the failure of the employer in ensuring the safety and health at work of the employees so far as reasonably practicable.   For instance, if an employee was assigned with several shifts of work non-stop so rendering the employee did not have sufficient rest time and became physically fatigue and exhausted and lost attention, causing injury, this would be a breach of the OSHO.  An employer who fails to comply with the foregoing under section 6(1) of OSHO intentionally, knowingly or recklessly commits an offence and is liable on conviction to a fine of $200,000 and to imprisonment for 6 months.

Although it is clear that the employer and employee relationship gives rise to a duty of care on the employer under common law, currently, there is no case precedent in Hong Kong which grants the claimant damages for burn-out injuries or deaths.

Nonetheless, there have been court cases in Hong Kong in which the courts have granted damages to the claimant where he/she was injured or died from a workplace accident which might have been facilitated by burn-out.

A notable example is the case of Ting Siu Yan v Menzies Aviation (Hong Kong) Limited (HCPI 861/2005) where the employee suffered injuries from an accident while working in the course of employment at the Hong Kong International Airport as a “Ramp Service Agent” and sued his employer for damages. The employee worked in excess of two hours to complete unloading and loading part of an aircraft and shortly before he reached to the tractor to tow objects away, he tripped on a damaged expansion joint and fell heavily, striking his knees against the rear wheel axle of the tractor. In a letter to the Commissioner of Labour written by the employee, the employee contended that he had tripped over the uneven surface due to his exhaustion from overwork. Although the judge did not accept that the cause of the accident was contributable to the fatigue, the judge nonetheless ruled in favour of the employee and granted him damages.

Tips to Employers

Hong Kong employment laws are far from adequate in that they currently do not seem to cover burn-out as a cause for accident compensation. However, the new WHO’s definition and categorization of burn-out may shine an optimistic light on future court’s decisions and legislative reforms in this regard. We believe that as time goes, the Hong Kong courts would be more willing to take a liberal approach in considering burn-out leading to injuries and deaths as a cause for compensation to adapt to societal changes. 

It is therefore prudent for all employers, apart from the constant supervision to ensure the safety and health at workplace, to revisit the arrangements of work allocation and work hours for employees.

If you have any questions regarding any compliance issue in relation to the provision and maintenance of a healthy and safe work environment or on any other employment issues, please contact one of the members of the Employment Law team.

Ronald 0 – Ireland 1

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By French Practice Department

On the 11 January 2019, the Cancellation Division of the EU Intellectual Property Office decided to revoke the trademark “Big Mac” owned by McDonald’s for lack of “genuine use”. It is followed on from the application revocation by the Irish company Supermac, not surprisingly a direct competitor of Ronald McDonald and its fast food restaurant. McDonald’s has long been the owner of the famous word “Big Mac” for various products and services in classes, 28, 30 and 42 of the Nice Classification including sandwiches and restaurant services.

McDonald’s submitted little evidence including advertising and packaging (brochures, affidavit of McDonald’s representatives, print out of McDonald’s website and Wikipedia entry) but overlooked to provide third-party evidence and it seems their brochure did not provide enough information. Oh dear. As the authorities pointed out, it would have been nice and even necessary to provide in Wikipedia and affidavits “other pieces of concrete evidence”. The EUIPO suggested that there was insufficient evidence put forward – now whether this was just bad preparation or the reality is that it was not used sufficiently remains to be seen.

Two points to be noted. First of all, no matter how notorious your trademark is, when it comes to proof you have to prove its genuine use. In this case, McDonald’s certainly undervalued the importance of the evidence. Such evidence could not establish the place, time and extent of the trademarks for foods and services registered and the evidence lacked independence in the event of a dispute. Therefore, don’t forget to obtain independent evidence, whose value cannot be challenged on the suspicion of any personal interest. Secondly, let this be a lesson to brand owners who sometimes, if not always, overreach in terms of classes of goods and services for which they register their mark. Here, for example, McDonald’s couldn’t prove the use of Big Mac trademark for the services that were registered, such as restaurant services. Get it right.  See a lawyer.  See OLN!

Google Fined the Amount of Its Petty Cash Account.

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By French Practice Department

In January 2019 the French Government – never slow to see an opportunity to levy fines, taxes and other impositions, levied a fine of €50 million through its French data protection authority on Google for violating the EU General Data Protection Regulation in France.  This is the first French sanction against US tech giants for violation of the GDPR guidelines.

GDPR came into force on 25 May 2018 and regulates the European Union’s data protection and overhauls the European Union’s data protection.  It establishes a uniform framework for data protection across the EU and regulates the way businesses process and manage personal data in order for citizens to recover control over the use of their personal data.

GDPR applies any business that processes personal data whether automated or manual, whether directly or on behalf of other parties and which is based in the EU or any foreign company which is offering goods and services to individuals within the EU.  In short, GDPR applies to almost any country and company whose business is somehow linked to Europe.

What is personal data?  Just about any piece of information that relates to an identified or identifiable individual:  Name, address, location, income, banking information, health, religion, sexual orientation, race, political belief or Trade Union membership.

There is rarely action of a company in its everyday business activities that don’t include some data processing, collecting email address, consulting a database, sending promotional emails, posting pictures of people on social media etc.  Now, of course, GDPR mandates that data collection be fair and transparent and for a specified and legitimate purpose based on the following grounds;

1. The consent of the concerned individual, 2. contractual obligation between the company and the individual, 3. provision to protect the vital interests of the individual and 4. to carry out a task that is in the public interest.

One of the major challenges to this regulation is to obtain the proper consent of each individual in order to collect and use such personal data.  It should be freely given, specifically informed and without any ambiguity and by an affirmative act such as ticking a box or signing a form.

The French data regulator has fined Google for not being transparent about its policies, for failing to provide information retention provisions in some cases and for failing to obtain proper consent from users for personalized ads.

Of course, Google could have had it much worse – the maximum penalty under the GDPR is 4% of global revenue which in Google’s case is more than US$4 billion.  Still, it shows that the EU authorities are starting to bite down.  Compliance with GDPR is going to be one of the EU challenges for the following years, pushing EU and international companies dealing with the EU to comply with such regulations.  Don’t hand over well-earned money by way of fines to France or any other EU country because you are in breach of GDPR.  Do it right.  Get a lawyer.  Get OLN.

Napoleon must be turning in his grave.

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by French Practice Department

No matter what side of the channel whether North of South of France, Napoleon is generally regarded as having had a rather full and accomplished life. One of his less violent accomplishments was a Napoleonic code which is 1804 passed with a view to give written and accessible law to all citizens and was a major step in replacing the previous patchwork of feudal laws.  At last, one could consult a book about the law which applied to everyone, there was a certain implicitly introduced. Now, of course, the French legal system has morphed into one of the more complex and sometimes quite unpalatable and unfathomable system of laws, decrees, ancillary legislation, rules and procedures. Nowhere is that more obvious than in employment law. Figuring out what is precisely the status of a contracting party appears to be more and more tricky and more and more difficult. Both sides of the Channel, Uber drivers who regarded themselves as independent contractors suddenly found themselves as being employees with of course all the benefits that go with such. In November 2018 a case “Take Eat Easy” court ruled that delivery drivers of Take it Easy, were found to have been in an employment relationship.

Even more recently, in January Uber drivers, no doubt attracted by the basket of benefits to be had as a French employee went to the Paris Court of Appeal. The issue of the case was to decide whether an Uber driver was an employee and therefore protected and with the benefits of French employment law of a freelancer, surprise surprise, following the Take it Easy case law the Paris Court of Appealed that the driver was an employee of Uber.

Now to be registered as an Uber driver the claimant had to obtain a professional driver’s card and register as a freelancer to the French Professional Authorities. After having performed more than 2000 trips for Uber, the drivers Uber account was permanently disabled at the request of Uber management for reasons which are not important here. According to the claimant, however, he was actually an employee of Uber and as such couldn’t be fired from the company this way.

For somebody to be considered an employee under French law, it has to be shown that 1. he was financially compensated, 2. that there was a job to perform, that 3. he was in a subordinate employment relationship, i.e., he took orders from his employer. In the past, the burden of proof to demonstrate the professional subordination was upon the claimant. This has been turned around by showing more than the lack of independence of the driver. Lack of independence is much easier to bring as the driver appears to be subordinated to the Uber app platform, and is therefore considered an employee.

In the decision, the Court pointed out that the driver is forced to register with the French Professional Authorities to become an Uber driver. Besides that, when performing a trip that the Uber platform prohibits Uber drivers to accept, non-Uber passengers, or to directly contact Uber passengers at the end of the trip or to keep any of their details. According to the Court, this, therefore, deprives the drivers of the opportunity to establish contacts and thus develop any personal clientele. In addition, the Court notes that the price is set by Uber without any consultation of the driver. Surprisingly the fact that the driver was able to choose days and hours of work does not in itself exclude a subordinate relationship. 

So is this an isolated case or will it lead to cascading?  Can it lead to tens of thousands of French Uber drivers suddenly finding they are Uber employees with all the benefits such involves?  Are we going to see Uber suddenly finding itself with 20,000 employees?

France has started discussions with online platforms, parliament and trade unions to define a new legal universe adapted to the user’s digital platforms. However, pending this new regulation, it is up to anybody wishing to enter into a commercial relationship with self-employed persons to be extra careful in the contract drafting and performance at the risk of being an employment agreement. Hire smartly, legally.  See a lawyer. Get OLN.

Napoleon as an employer’s armies had a much simpler termination provision.