Hong Kong just became an even better place for company directors who value secrecy.
The Chinese territory, already ranked fourth in a list of 71 “secrecy jurisdictions” by the Tax Justice Network, has proposed new laws making it harder to identify the directors of non-public companies.
The territory already allows owners of private corporations to obscure their identities (for example by allowing “nominee” shareholders, who could be a firm hired for the purpose, to be listed as the owners). Concealing directors’ details too would deal a further blow to crime investigators or bankruptcy experts seeking to unravel the often long and convoluted chains of companies that white-collar criminals can set up to conceal stolen assets. Mapping relationships between corporate board members is a key method used to build a picture of a fraudster’s holdings.
Hong Kong’s move could well be political, and aimed at the legions of enterprising, investigative reporters who in recent months have combed Hong Kong company records to find out about the business dealings of mainland Chinese and Hong Kong politicians.
Bloomberg said it used the details of directors of Hong Kong companies to find out about the holdings and corporate positions of a group of powerful mainland Chinese politicians including Xi Jinping, the country’s incoming president. Hong Kong corporate records also revealed last year that development secretary Paul Chan was linked to a company that owned apartments in the city that had been partitioned illegally.
The Hong Kong proposal, available to read in full here (pdf), would allow company directors to obscure their residential addresses from corporate filings. That would prevent corporate liquidators, for example, finding out how to locate directors of bankrupt companies who may have stopped communicating with creditors. It would also make it harder to find out if the majority owner of a failed business owns valuable property in Hong Kong that creditors could try to seize.
Hong Kong markets itself as a leading financial center to rival London and New York. Its sizeable stock exchange makes that claim partly true. But if it fails to meet the basic standards of corporate transparency promoted by its Western rivals, it will find it harder to compete with them.