City may lose out on billions because of offshore companies: experts

The widespread practice of registering companies overseas by Hong Kong's richest, most powerful people raises questions about their corporate governance, transparency and the possibility that the city may be losing out on billions in city tax revenues, according to experts on corporate finance.

They were reacting to the release of data collected by the non-profit International Consortium of Investigative Journalists (ICIJ) showing that Hong Kong residents held stakes or directorships in more than 14,500 offshore companies, the vast majority in the British Virgin Islands (BVI), as of 2010.

For example, Henry Cheng Kar-shun, chairman of the Hong Kong conglomerate New World Development, is a director of at least 110 offshore companies, according to the documents.

Richard Li Tzar-kai, the youngest son of Hong Kong's richest man Li Ka-shing, is a shareholder in at least 15 offshore companies and director of at least 28, the ICIJ data reveals.

Cheng could not be reached for comment. A spokeswoman at Cheung Kong Infrastructure, the Hong Kong-listed infrastructure firm controlled by Li Ka-shing, said: "All our companies fully comply with regulatory, tax and legal requirements of the countries in which they operate."

A spokesman for Richard Li had no immediate comment.

Registering a company offshore is legal and hundreds of thousands of people have registered countless companies in the British Virgin Islands. But because it is difficult to trace the ownership of companies in the islands, individuals may register there to avoid paying taxes or to conceal business activities, said Hugo Williamson, managing director of the Risk Resolution Group, a London consultancy.