Leung Chun-ying

Ex-Hong Kong leader declares two companies tied to China development are non-profit-making

Critics ask why he offered revelation after conflict-of-interest concerns arose

PUBLISHED : Friday, 29 September, 2017, 7:19pm
UPDATED : Friday, 29 September, 2017, 10:41pm

A former Hong Kong leader has declared to the government that his two companies tied to mainland development plans are non-profit-making, but critics are asking why he offered the revelation only after conflict-of-interest concerns arose.

On September 11, reports surfaced that Leung Chun-ying on August 31 was appointed a director of two companies that are related to, and named after, the “Belt and Road” and “Greater Bay Area” initiatives, both of which the central government backs to expand trade and economic activity.

As chief executive, he helped promote both, and was expected to continue promoting the plans as a vice-chairman of the Chinese People’s Political Consultative Conference, the mainland’s top advisory body.

Former Hong Kong leader CY Leung denies conflict of interest over ‘Belt and Road’ company directorship

Leung notified the government about his directorship at the two firms after the news broke, and denied accusations of a conflict of interest, claiming the roles were unpaid and the companies were non-profit-making.

According to the Companies Registry, the two companies, which have identical articles of association, each passed a special resolution on September 15 to add to the articles that the companies would operate “on a non-profit-making basis”. Leung was the sole member of the companies, and copies of the resolution and the amended articles were received by the registry on September 18.

If the company was established for non-profit-making objectives, why was this not mentioned in the initial articles of association
lawmaker Lam Cheuk-ting

Before the resolution was passed, the articles stated that the companies were “limited by guarantee” and that each member’s liabilities or contributions were capped at HK$100.

In the amended articles, it was specified that the companies were established for promoting cooperation and educating the public about the “Belt and Road” and “Greater Bay Area” initiatives.

The documents also enumerated 19 ways to achieve the objectives “on a non-profit making basis”, such as “to raise money by subscription and provision of education services”, and “to campaign for and receive” gifts.

In a statement, Democratic Party lawmaker Lam Cheuk-ting urged Leung to be forthcoming on several questions, such as whether he was trying to “mislead the public” and conceal the companies’ profit-making nature until he made the declarations.

“If the company was established for non-profit-making objectives, why was this not mentioned in the initial articles of association?” he asked. “Were the companies operating from August 31 to September 15? ... Will he change the companies’ nature to make a profit in the future?”

In response to Lam, a spokeswoman for Leung’s office said the two companies “were set up in the form of companies limited by guarantee, which is the usual form of non-profit making organisations”.

“The companies have never been engaged in any profit-making activities,” she added.

According to government guidelines, a former chief executive is subject to a control period of three years after leaving office and must tell the government of any appointment, whether paid or not, that he or she undertakes during the period.

Former Leung Chun-ying adviser Barry Cheung asks Hong Kong court for more time before plea on fraud charges

However, if the appointments relate to “charitable, academic or other non-profit-making organisations”, he or she does not need to seek the advisory committee’s advice, the guidelines state.

A spokesman for Chief Executive Carrie Lam Cheng Yuet-ngor’s office declined to comment on the amended documents. He noted the office had received written notification from Leung that he had accepted appointments, and said the government was “processing the case”.

Asked whether Leung had done anything wrong in his dealings with the companies, industrial sector lawmaker and lawyer Jimmy Ng Wing-ka would only say it was normal for articles of association to be amended from time to time.

Hong Kong leader CY Leung brushes aside Belt and Road scepticism, points to success stories

“Without shared capital, a company limited by guarantee cannot operate commercially,” he explained. “And since a company and its members are separate legal entities, the company’s money can only remain in its account and cannot be distributed to its members.”

Ng, who is also vice-president of the Chinese Manufacturers’ Association of Hong Kong, said Leung’s critics had confused “companies limited by guarantee” with companies acting as a guarantor for others, such as those obtaining bank loans.

Progressive Lawyers Group convenor Kevin Yam Kin-fung noted it was common for non-profit-making organisations to register as a company and be limited to a small amount of guarantee from its members.