HK corporate disclosure criticised amid high fees and privacy fears

Michelle Price

* High charges make HK corporate registry global laggard

* New data privacy restrictions put users, reporters at

legal risk

* Other countries, UK, France, Japan move towards open data

* Poor corporate disclosure damaging HK companies, say

activists

HONG KONG, March 10 (Reuters) - Hong Kong is beefing up

corporate disclosure laws following the Panama Papers scandal,

but unlike many other financial centres it is not making it any

easier to access the information, transparency campaigners and

private investigators say.

Instead it charges high fees to access the territory's

corporate registry, a tool transparency activists say is vital

to prevent white-collar crime and promote a fair business

environment as it contains information on company directors,

shareholders and financial holdings.

The future of private company registries has been in the

spotlight this week at the Corporate Registers Forum in Hong

Kong, which gathers representatives of company registers

globally, along with the World Bank and the United Nations.

Since the Panama Papers exposed how opaque shell companies

can be used to conceal ill-gotten gains or avoid tax, several

countries including Japan, Israel, Bulgaria and France have

largely made their company databases freely available, while

Britain became the first country globally to provide free access

to data showing real company owners, rather than their nominees.

However, critics say Hong Kong is dragging its feet.

"At a time when an ever-increasing number of countries are

making their company registers available as free, open data,

it's saddening to see Hong Kong go against the direction of

travel and undermines confidence in Hong Kong companies around

the world," said Chris Taggart, chief executive of

OpenCorporates, an online database of corporate registries that

has been campaigning for company data transparency.

It scores Hong Kong 25 out of 100 in its global registry

rankings, placing the territory well behind rival financial hubs

London and New York, and even the likes of Russia, Niger, Samoa,

and Myanmar.

The Panama Papers showed Hong Kong was the most active

centre in the world for the creation of shell companies. In

response, Hong Kong quietly pushed through proposals on

anti-money laundering laws and company disclosure legislation,

including a requirement that companies reveal the identity of

their true owners.

NO DETERRENCE

But in Hong Kong, home to more than 1.3 million private

companies, access to the information comes at a cost.

Private investigators said the corporate registry fees make

it increasingly expensive to conduct investigations into

potential crimes amid increasingly complex corporate structures.

"The pay wall is cumbersome and expensive. For larger

investigations where a company may have hundreds of subsidiaries

or associated companies, the process can be prohibitively

expensive," said Jane Moir, director at Princedale Advisory, a

Hong Kong corporate investigations firm.

An investigation into a large company could easily rack up

fees of HK$100,000 ($13,333), a Reuters analysis shows.

A spokeswoman for the registry though said fees are

"minimal" and do not constitute a pay wall deterring the public

from conducting searches.

She said the fees are set on the basis that they can be

recovered as a business cost but David Webb, a corporate

governance activist, said there is no justification for

recovering costs for information searches.

In fact, the Hong Kong government could stop charging fees

for searching the registry and still make HK$166 million in

profit from fees it charges new companies to incorporate as

legal entities and make annual filings, his analysis shows.

Last Friday alone, 855 companies were incorporated in Hong

Kong, according to his eponymous Webb-site.com which tracks the

public part of the registry data.

Last year, the government also required users to declare a

reason for searching the registry - a move to protect the

privacy of company directors and shareholders.

However, the box-ticking declaration does not explicitly

include news gathering or publishing, making it legally risky

for some users such as journalists or others that publish

reports based on the information.

The move to protect privacy was seen by rights groups as

another example of creeping censorship in the former British

colony, under the influence of Beijing.

The aim of the privacy law though was to strike a balance

between upholding the freedom of the press and protecting

personal information, Hong Kong's privacy commissioner for

personal data, Stephen Kai-yi Wong, said in a statement.

Exemptions for news outlets may apply in certain

circumstances, he said.

Still, some see the move as an attempt by Hong Kong's rich

and powerful to suppress information on their affairs.

"There was nothing to suggest that privacy was a major

concern," said Moir. "The requirement did, however, seem to

coincide with a number of reports by investigative journalists

into the financial affairs of the political elite."

(Reporting by Michelle Price; Editing by Neil Fullick)