• Tue
  • Oct 21, 2014
  • Updated: 9:36pm
Monitor
PUBLISHED : Wednesday, 20 February, 2013, 12:00am
UPDATED : Wednesday, 20 February, 2013, 5:09am

Hong Kong just following mainland in rejection of transparency

If Hong Kong conceals company directors' ID card numbers, it will merely assist criminal activities among officials and businessmen

In proposing to conceal the identity card numbers of company directors from the public, the Hong Kong government is taking a major backwards step away from transparency.

But in doing so, it is merely following the mainland's lead.

The Hong Kong government's plan, under which directors would no longer have to disclose their identity card numbers in the Companies Registry, is ostensibly driven by a concern for their privacy.

Strangely, that concern was not a big factor in the initial consultations on the rule, which argued that "misuse of identification numbers is not perceived to be a major problem in Hong Kong".

On the other hand, the consultation papers warned that "restricting access to identification numbers may deprive the public of a means of uniquely identifying individuals, and might make it easier for the dishonest to escape creditors or otherwise engage in fraudulent activity".

This conclusion was supported by the former registrar of companies, who declared "the proposal to withhold key information on directors will hinder third parties from identifying and contacting the directors of companies … If enacted, the new provisions will undermine the principles of accountability and transparency which lie at the heart of Hong Kong's company law and will very adversely affect Hong Kong's image as a major international business and financial centre".

Given additional opposition from professional bodies such as the Law Society, the Institute of Certified Public Accountants and the Association of Banks, it might be hard to understand why officials are so set on going ahead and embracing opacity.

But in turning its back on commercial transparency, the Hong Kong government is merely following a trend that mainland government officials adopted years ago.

By proposing to conceal company directors' identity card numbers, the Hong Kong government is rolling out the welcome mat to ... corrupt officials, crooked businessmen and large-scale money launderers

The latest example of this rejection of openness came with the news this week that mainland cities, including Guangdong, have slapped restrictions on public searches of local property registers.

The ban follows a spate of media reports about bureaucrats acquiring multiple properties with values many times in excess of their official salaries.

Property registers aren't the only sources of information that have been closed to the public recently. Fund managers report that over the past two years it has become far more difficult, even impossible, to obtain detailed financial information filed by mainland companies to the State Administration for Industry and Commerce (SAIC).

At the same time, third-party companies selling databases of information gleaned from SAIC filings have been shut down, with employees arrested for "exploiting" the data.

The clampdown appears to be aimed at short sellers in the United States, who commonly pointed to discrepancies between data filed to the SAIC and to US regulators as evidence that Chinese firms listed on American exchanges were lying to investors about their financial health and exaggerating their corporate profits.

There is an obvious pattern here. Rather than tackle the underlying problems of official corruption and corporate fraud, the mainland authorities have chosen instead to block public access to the information that brought the abuses to light in the first place.

The worry now is that by slavishly following the same path, the Hong Kong government will simply facilitate corruption and criminality by hiding from the public basic information that could help to expose crooks' activities.

By proposing to conceal company directors' identity card numbers, the Hong Kong government is rolling out the welcome mat to the only people who can possibly benefit: corrupt officials, crooked businessmen and large-scale money launderers.

It's a lousy idea.

tom.holland@scmp.com

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jandajel
Why should a director of a publicly owned company have any expectation of privacy regarding his identity? These people want the jobs and are well compensated for their "work". If personal privacy is really so important, why not just be an anonymous, passive investor?
impala
Granted, I don't see any merit in or need for the withholding of individual directors' ID numbers and/or addresses. It is a strange proposal that indeed smacks of facilitating cronyism, corruption or worse. But on the other hand, you are at best stirring a storm in a teacup. Anybody with director interest in a Hong Kong company who has something to hide only needs to go through the minor effort and negligible expense of using a corporate director with a nominee to keep his name off the register completely. The identity of individual directors of a BVI (or many other jurisdictions) company is not public information at all. Hence, anybody with privacy concerns, or even just a sliver of criminal intent, is in all likelihood already using such opaque layering for their Hong Kong corporate entities' directors and shareholders. If implemented, the effect of this new proposal on corporate transparency will be largely irrelevant.
 
 
 
 
 

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