New | Hong Kong still competitive despite Li Ka-shing’s departure for Cayman Islands
“Compared with Hong Kong, Cayman has more tax free and flexible regulations for overseas companies to incorporate there. As such, it is cheaper and easier to carry out restructuring as a Cayman incorporated company than those in Hong Kong”
Billionaire Li Ka-shings’ decision to pitch his tent in the Cayman Islands because it is a more “convenient” place to set up his new firms has had the effect of stoking the question whether Hong Kong has lost its allure as an easy place to do international business.
Hong Kong Securities Association chairman Jeffrey Chan Lap-tak said while it is true the Caymans is a place where it is more convenient to incorporate a company, it does not mean Hong Kong cannot compete with the Caribbean islands known more as a tax haven for the wealthy and the infamous.
“Compared with Hong Kong, Cayman has more tax free and flexible regulations for overseas companies to incorporate there. As such, it is cheaper and easier to carry out restructuring as a Cayman incorporated company than those in Hong Kong,” Chan said.
“This is why over the past 10 years, a majority of Hong Kong listed companies are incorporated in the Caymans. But this does not hurt the competitiveness of Hong Kong as companies are still listing here. It is more important where they list than where they incorporate.”
Li, the richest man in Asia and chairman of blue chips Cheung Kong (Holdings) and Hutchison Whampoa, surprised the market last Friday when he announced the restructuring of the two flagship firms by turning them into two new entities. One will hold all his property assets while the other contains the rest. Both outfits will be incorporated in the Caymans instead of Hong Kong.
Li said he was not losing confidence in Hong Kong but just “following the trend” since more than 75 per cent of companies that have listed in Hong Kong in the past decade or so have incorporated in the Caymans, including a number of state-owned enterprises.
A Nomura report said the two firms’ incorporation in the Caymans is “necessary to facilitate the restructuring since, as explained in the announcement, the spin-off of CK Property would utilise a significant portion of Cheung Kong’s distributable reserves under Hong Kong regulations. By contrast, the Cayman company law permits distributions out of profits and out of the share premium account.”
