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ACGA features in FT article, “Hong Kong set to allow corporate directors to obscure their identity”

Directors will be able to obscure their identities in Hong Kong’s corporate database under new rules proposed by the government. Crucial unique identifiers, such as ID card numbers and home addresses, will be withheld from public view, undermining company research, due diligence and investigative journalism.  

Obscuring director identities fundamentally limits the accuracy of information on market players. Quality and precise information is a prerequisite for any basic check on the legitimacy of a deal or the bona fides of directors. There is a clear demand for such information, from individual investors monitoring everyday transactions to IPO sponsors, banks and professional advisers who now face criminal sanction under stringent money laundering law if their due diligence falls short.

The government’s proposal was first mooted in 2013 and was met with strong opposition. Privacy grounds were purportedly behind the move but at the time no strong evidence was submitted to show company directors were the subject of abuse. Indeed the former Companies Registrar Gordon Jones noted at the time that he had received no complaints about invasion of privacy during his 15 years at the helm. Even small to medium sized local businesses voiced opposition to the move, preferring to keep an accurate eye on the identity of trading partners.

The new Companies Ordinance was enacted in 2014 with draft sections that provided for these identifier details to be withheld from the public. They were never brought into force. Now the government seeks to do so. Again the government is citing privacy concerns without evidence of systemic abuse. Meanwhile other jurisdictions are moving in the opposite direction: directors’ details with identifiers are free of charge in jurisdictions such as the UK. Details of beneficial ownership are also made public, while in Hong Kong only regulators and law enforcement have access to this data.

There will always be individuals and corporates who prefer their affairs to be secret. But there is a quid pro quo for company directors who enjoy the legal protections afforded by limited liability-- and that is transparency. Shrouding their details from public scrutiny is a huge step backwards and compromises a disclosure-based regime which relies on openness and the free flow of information.

To read the full story, please visit the Financial Times.