MORE than half the leading tycoons who last week launched the Better Hong Kong Foundation, a group designed to 'express and encourage confidence in Hong Kong', have made substantial use of companies in Bermuda, Panama, Liberia and other offshore centres. Among them is Henry Cheng Kar-shun, managing director of New World Development, who set up the foundation after reading a gloomy article about Hong Kong in a US business magazine. Over the past month, Mr Cheng's company has announced plans to list its hotels operation in New York using a company registered in Holland, and to change the legal base of its holding company for roads and other infrastructure projects, most of them in China, to a company registered in the Cayman Islands. It has also previously listed its China investment operations on the Irish stock exchange using a company registered in the Cayman Islands. The Better Hong Kong Foundation was launched by the most powerful line-up of self-made men the territory has seen. Taken together, their companies are worth more than $700 billion. Each contributed $5 million to the fund. Mr Cheng said they would take a 'pro-active approach' to show that Hong Kong is 'one of the best locations in Asia in which to invest and establish a business'. Many of the tycoons have mainland links and the foundation particularly stressed that it wanted to 'provide a better and more in-depth understanding . . . of China's commitment to Hong Kong and the 'one country, two systems' concept. Inspection of corporate records made public under the Securities (Disclosures of Interests) Ordinance, many of which have never been requested before, showed that of the 20 tycoons pictured in the photograph released to promote the foundation, 11 have used offshore companies to hold their personal wealth or their listed companies. Among them is Li Ka-shing, who in May was disclosed to be moving his stake in Cheung Kong (Holdings), worth $2.8 billion, to the Cayman Islands. Mr Li, 66, said he was doing this to avoid paying inheritance tax, estimated at $400 million. Similar offshore companies are used by Lee Shau-kee, whose shares in Henderson Land worth $46 billion are held via companies in the Isle of Man, British Virgin Islands and Panama. Sunday Money can disclose that Tsang Hin-chi, the Goldlion garments tycoon who is the only Hong Kong deputy on the Standing Committee of the National People's Congress, holds his personal stake in Goldlion via two companies registered in the tiny Pacific island of Nauru. No checks are possible on some of the companies backing the foundation because they are not listed. Specialists in the field point to three functions of overseas companies: To hold private wealth, typically to avoid death duties and achieve extra confidentiality. Use of overseas-registered companies for public companies listed on the Hong Kong stock exchange, similar to the move made by Jardines in 1984. Use of overseas-registered companies for public companies listed on foreign stock exchanges, such as the hotels group just created by Mr Cheng and the final Jardines move of 1994. A senior lecturer at City Polytechnic, Dr Lui Yu-hon, who studied 63 Hong Kong-listed companies that had announced a move from Hong Kong and fall into the second category outlined above, said the main reason was 'political insurance'. He pointed out that the Hong Kong Government loses the 0.6 per cent capital tax if a company is set up offshore. Peter Woo Kwong-ching, whose Lane Crawford stores group changed its domicile to Bermuda less than a year after June 4, 1989, said: 'Observe not in terms of these bookings, or accounting issues, but look at the real investments that people make.' Mr Woo's family has moved its shipping company from Hong Kong to Singapore this year. 'It is a business I have no interest in. OK, they're my relatives, but it's not my business,' he said. The third stage of moving offshore in many cases ends all ties with Hong Kong. A company is set up overseas and the shares are traded on an overseas stock exchange. As well as depriving the Hong Kong Government of death duties and capital tax, this also means it does without stamp duty on stock transactions - which are 0.3 per cent and a significant source of revenue for the Government Mr Cheng said his company floated its hotels arm in New York 'mainly because most of the assets or most of the hotels are based in the US and it is more recognised in the States'. 'It's not a case of the lack of confidence in Hong Kong,' he insisted. Leonie Ki, the foundation's executive director, said: 'This is a matter of choice which has always characterised Hong Kong business.' Like Mr Woo, she argued that it was not the territory in which a company was registered that matters, but where it was investing. 'These companies have chosen to domicile themselves in jurisdictions which have internationally recognised and established legal and regulatory systems, and continue to use Hong Kong as their main business base and where the bulk of their investments and reinvestments are made.' This view is not universally held. When similar moves were made by Jardine Group, they were branded as 'very irresponsible' by staff of Xinhua (the New China News Agency). New World's Henry Cheng denied that his company was, in effect, doing what the Jardine Group had done. 'I don't know exactly what their moves were, and how they structured it, but to my understanding our case is completely different,' he said.