YYC Legal LLP

YYC Legal LLP is pleased to announce Mr. Philip Ng has joined our firm as a Consultant on 1 April 2025. Philip has more than 30 years’ experience in the legal profession. Previously, he had practiced in reputable law firms and had headed the Hong Kong legal and compliance departments in several major Chinese investment bank. He possesses unparalleled extensive insights of the business and regulatory environment of the Hong Kong securities industry. His principal expertise includes securities, corporate finance, mergers & acquisitions, private equity, asset and wealth management, as well as regulatory advisory advice. Mr. Ng will bring in extensive industry-specific knowledge and professional perspectives to our firm. At the same time, he will work closely with our associated firm, East & Concord Partners, to further develop legal services for clients in Mainland China. Content supplied by YYC Legal LLP

The Guangdong-Hong Kong-Macau Greater Bay Area (GBA) initiative creates a highly integrated economic and business hub by connecting nine cities in Guangdong province with the Hong Kong and Macau Special Administrative Regions. Introduction of the Standard Contract for the Cross-boundary Flow of Personal Information within the GBA (GBA SCC) marks a new milestone for cross-border data transfer. While adoption of the GBA SCC is voluntary, it provides an alternative route facilitating cross-border data flow. Background Mainland China’s Personal Information Protection Law (PIPL). The PIPL (effective from 2021) stipulates three main methods for transferring personal data abroad (subject to exemptions): Companies not classified as critical information infrastructure operators processing personal information below a specified quantity threshold can use Standard Contractual Clauses (China SCCs) issued by the Cyberspace Administration of China (CAC) to transfer personal information abroad. A personal information protection impact assessment (PIPIA) must be conducted and filed with the local CAC authority before using the China SCC. Companies can obtain personal information protection certification from authorised certification institutions, verifying that their data processing complies with relevant standards. Companies that: (1) are classified as critical information infrastructure operators; (2) have processed personal information exceeding a specified quantity threshold; and (3) the transfer of certain types of data outside mainland China must undergo a mandatory government-led security assessment review. Hong Kong’s Personal Data (Privacy) Ordinance (PDPO). Hong Kong’s primary data protection legislation, the PDPO (effective from 1996), does not explicitly restrict cross-border data transfers. Companies intending to transfer data outside Hong Kong should generally observe the Data Protection Principle 3 under the PDPO, which requires data users to inform data subjects about the purpose of data collection and classes of transferees, and obtain prescribed consent from them if the transfer is for a new purpose. The Office of the Privacy Commissioner for Personal Data of Hong Kong (PCPD) also issued two guidelines, in 2014 and 2022, on Recommended Model Contractual Clauses. These guidelines assist data processors and users in complying with the PDPO for cross-border transfers of personal data. GBA SCC data transfer Territorial scope - The GBA SCC applies to cross-border transfers of personal information among the nine cities and two special administrative regions within the GBA: Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen, Zhaoqing, Hong Kong and Macau. Types of data - All types of personal information can be transferred under the GBA SCC, except for “important data” designated as such by GBA authorities. No onward transfers outside the GBA - The GBA SCC is not applicable in situations requiring onward transfers of personal information outside the GBA. PIPIA - The PIPIA is an assessment of the legality, necessity and security risks of the data transfer, which must be completed by the personal information processor three months before the date of filing the GBA SCC with relevant authorities. Filing requirement - The signed GBA SCC, a letter of undertaking, the authorised representative’s identity document and other supporting documents must be filed with the relevant authorities within 10 working days. Governing law & dispute resolution - The GBA SCC can be governed by either mainland China or Hong Kong law. Disputes can be resolved through courts or arbitration in mainland China or Hong Kong. Compliance & enforcement - Regulatory authorities can request rectification if there are security risks or incidents. Parties can file complaints either at the CAC, Guangdong’s CAC, the Innovation, Technology and Industry Bureau in Hong Kong, the Office of the Government Chief Information Officer in Hong Kong, or the PCPD if any obligations under the GBA SCC are not met. Implication takeaways Increased compliance requirements for Hong Kong entities - Under the PDPO, there is no requirement for government filings for any cross-border data transfer, unlike the requirements in mainland China under the PIPL. With the introduction of the GBA SCC mechanism, data processors and data recipients in both regions are required to file the GBA SCC with their respective authorities within 10 working days of the contract’s effective date. Further, Hong Kong-based entities are now required to conduct a PIPIA before engaging in cross-border data transfers within the GBA, adding a new compliance requirement for Hong Kong-based businesses. Reduced compliance burden for mainland China entities - Compared to the China SCC under the PIPL, the GBA SCC imposes less stringent requirements. For instance, there is no volume threshold that would trigger a security assessment for data exporters in the GBA, and the scope of the PIPIA is narrower. Strengthened Hong Kong status as data hub - The GBA SCC mechanism provides a legal framework for the transfer of personal data within the GBA that aims to facilitate data flow within the region. Availability of the GBA SCC also makes Hong Kong an attractive location for companies seeking to establish regional data centres or hubs to support their operations across the GBA, which could strengthen Hong Kong’s position as a data hub within the GBA. Authors: Sam Wu and Beverly Fu at YYC Legal LLP

Hong Kong does not have statutory requirements on critical infrastructure cybersecurity. However, critical infrastructure around the world is at risk of cyberattacks and the repercussions of such malevolent action can be extremely severe. In recent years, legislation to protect the security of computer systems of critical infrastructure has been enacted in mainland China, Australia, the UK and the EU. Following in these footsteps, Hong Kong proposes to enact a new legislation tentatively titled the Protection of Critical Infrastructure (Computer System) Bill. Regulation targets The proposed legislation seeks to regulate the operators of critical infrastructure that are necessary for: The continuous delivery of essential services in Hong Kong across eight sectors (energy, information technology, banking and financial services, land transport, air transport, maritime, healthcare services, and communications and broadcasting); Maintaining important societal and economic activities in Hong Kong, like major sports and performance venues, and research and development parks. The new law will regulate only computer systems that are related to the normal functioning of critical infrastructure, regardless of their physical location, but not the operators’ other systems. The legislation will not apply to essential services operated by the government – like water supply, drainage and emergency relief – as the government already has comprehensive internal information technology security policies and guidelines. Consequently, government departments will continue to be regulated by the existing administrative framework. Administration A new commissioner’s office will be established under the Security Bureau, to implement the proposed legislation. Designation Whether a piece of infrastructure is designated as a critical infrastructure will depend on factors such as whether it provides essential services or maintains important societal and economic activities in Hong Kong, its reliance on information technology, and the severity of societal impact in the event of damage, loss of functionality or data leakage. Operators The commissioner’s office will expressly designate certain operators as critical infrastructure operators (CIOs). These operators will mostly be large organisations but the list of designated CIOs will not be made public to protect their critical infrastructure from potential cyberattacks. Designated CIOs will be required to fulfil three types of obligations: To maintain an address and office in Hong Kong; to report changes in the ownership and operation of the critical infrastructure; to set up a computer system security management unit with professional knowledge (may be outsourced) supervised by a dedicated supervisor of the CIO. To inform the commissioner’s office of material changes to their critical computer systems like design, configuration, security and operation; to formulate and implement a computer system security management plan; to conduct a computer system security risk assessment at least once every year; to conduct a computer system security audit at least once every two years; to adopt measures to ensure that third-party service providers comply with relevant statutory obligations. Incident reporting and response. To participate in a computer system security drill at least once every two years; to formulate an emergency response plan; to notify the commissioner’s office about computer system security incidents (activities carried out without lawful authority on or through a computer system that jeopardise or adversely affect its computer system security) : (a) within two hours of becoming aware of a serious computer system security incident (one that has a major impact on the continuity of essential services, large-scale leakages of personal information), and (b) within 24 hours of becoming aware of other computer system security incidents. Sector regulators Certain essential service sectors are already comprehensively regulated by statutory sector regulators. These regulators can monitor the discharging of CIOs’ organisational and preventive obligations. At this stage, it is proposed that: The Hong Kong Monetary Authority will be the designated authority to regulate service providers in the banking and financial services sector; and The Communications Authority will be the authority responsible for regulating service providers in the communications and broadcasting sector. Nevertheless, the commissioner’s office will fully grasp any incident and the response arrangements of all CIOs to co-ordinate, investigate and prevent incidents from spreading to other CIOs. Code of practice The commissioner’s office will issue a code of practice with requirements such as: reporting of material changes to critical computer systems; independent computer system security audits; computer system security risk assessments; computer system security management plans; and incident response obligations. Way forward The government plans to present the proposed legislation to the Legislative Council by the end of 2024. After the bill is passed, the commissioner’s office will be established within a year. The legislation will come into effect within the following six months. …READ FULL ARTICLE Author: Rossana Chu at YYC Legal LLP Note: This material has been prepared for general informational purposes only and is not intended to be relied upon as professional advice. Please contact us for specific advice.  

The HKSAR Government and the Ministry of Commerce signed the Agreement on Trade in Services under the framework of Closer Economic Partnership Arrangement (“CEPA”) in November 2015 to basically achieve liberalisation of trade in services between the Mainland and Hong Kong. The parties signed an agreement in November 2019 to amend the Services Agreement and add new liberalisation measures that have been implemented since June 2020. To further enhance liberalisation and facilitate trade in services in response to the aspirations of the Hong Kong business community for greater participation in the development of the Mainland market, the parties agreed to make further amendments to the Services Agreement and signed the new agreement (“Amendment Agreement II”) on 9 October 2024. The Amendment Agreement II will come into effect on 1 March 2025. Contents of Amendment Agreement II The Amendment Agreement II introduces new liberalisation measures across several service sectors where Hong Kong enjoys competitive advantages, such as financial services, construction and related engineering services, testing and certification, telecommunications, motion pictures, television and tourism services. The liberalisation measures take various forms, including removing or relaxing restrictions on equity shareholding and business scope in the establishment of enterprises; relaxing qualification requirements for Hong Kong professionals providing services; and easing restrictions on Hong Kong's exports of services to the Mainland market. Most of the liberalisation measures apply to the whole Mainland, while some of them are designated for pilot implementation in the nine Pearl River Delta municipalities in the Guangdong-Hong Kong-Macao Greater Bay Area (“GBA”). The details are as follows: Construction and related engineering services: To allow Hong Kong general practice surveying enterprises to provide professional services in Guangdong Province through filing of records; and to allow Hong Kong engineering construction consultant enterprises that have completed filing of records to bid for consultancy services projects in joint venture in compliance with the laws in the nine Pearl River Delta municipalities in the GBA; Motion pictures: To remove the restriction on investment in enterprises engaging in film production by Hong Kong service suppliers; and to allow enterprises established by Hong Kong service suppliers and approved by the relevant Mainland authorities to operate distribution of imported buy-out Hong Kong motion pictures; Television: To remove the quantitative restriction on Hong Kong people participating as principal creative personnel in online television dramas; and to allow imported dramas produced in Hong Kong to be broadcast during prime time in television stations on the Mainland after obtaining approval from the National Radio and Television Administration; Tourism services: To optimise the implementation of the 144-hour visa-exemption policy for foreign group tours entering Guangdong from Hong Kong through increasing the number of inbound control points and expanding the stay areas to the whole of Guangdong Province, and to provide facilitation for Mainland travel agents when receiving group tours at West Kowloon Station of the High Speed Rail; and to support cruise companies to arrange international cruise itineraries involving port-of-call in the Mainland cruise ports in accordance with the laws. In respect of Mainland visitors participating in such cruise itineraries, they can travel to Hong Kong in transit to join all sorts of cruise itineraries, by presenting their passports and confirmation documents of the relevant cruise itineraries; and Financial services: To remove the asset requirement of not less than US$2 billion as at the end of the most recent year for Hong Kong financial institutions investing in shares of insurance companies; to remove the restriction prohibiting foreign bank branches established by Hong Kong service suppliers from conducting bank cards services; to consider extending the scope of eligible products under the mutual market access programme by including REITs (Real Estate Investment Trusts); to continuously promote and enhance the Cross-boundary Wealth Management Connect Pilot Scheme and the Mainland-Hong Kong Mutual Recognition of Funds scheme; and to continuously promote the cross listing arrangement of the Mainland and Hong Kong ETF (open-ended index-tracking exchange-traded funds) as well as enhance Southbound Trading and Northbound Trading under Bond Connect. In addition, the Amendment Agreement II brings institutional innovation and collaboration enhancement, including: Addition of "allowing Hong Kong-invested enterprises to adopt Hong Kong law" and "allowing Hong Kong-invested enterprises to choose for arbitration to be seated in Hong Kong" as facilitation measures for Hong Kong investors, supporting Hong Kong-invested enterprises registered in the pilot municipalities of the GBA to adopt Hong Kong law or Macao law as the applicable law in their contracts; as well as supporting Hong Kong-invested enterprises registered in the nine Pearl River Delta municipalities in the GBA to choose Hong Kong or Macao as the seat of arbitration. The measures provide flexibility and convenience for Hong Kong enterprises, facilitating their investment and business development on the Mainland; Addition of commitments regarding domestic regulation to ensure transparency, predictability and efficiency of regulations on trade in services, so as to align with high-standard international economic and trade rules, cutting red tape and lowering trade costs when enterprises render their services in a market to facilitate trade in services; and Removal of the period requirement on Hong Kong service suppliers to engage in substantive business operations in Hong Kong for three years in most service sectors, allowing Hong Kong start-ups to enjoy the preferential treatment under CEPA in a shorter time and attracting enterprises and talents from around the world to establish a presence in Hong Kong and explore the Mainland market, thus increasing local employment, promoting Hong Kong's economic development and giving full play to Hong Kong's roles as a "super connector" and "super value-adder". Benefits deriving from Amendment Agreement II The benefits of the Amendment Agreement II to Hong Kong are reflected in three areas. First of all, …READ FULL ARTICLE Author: Roy Chiang at YYC Legal LLP

Hong Kong is taking significant strides towards establishing a comprehensive regulatory framework for stablecoin issuers.The Financial Services and the Treasury Bureau (“FSTB”) and the Hong Kong Monetary Authority (“HKMA”) jointly issued a consultation paper on 27 December 2023 on the proposed regulatory regime for stablecoin issuers in Hong Kong (“Consultation Paper”) and jointly published the consultation conclusions on 17 July 2024 (“Consultation Conclusions”) following the end of the two-month consultation period. This article summarises the key aspects of the legislative proposal, including the scope and coverage of the proposed regulatory regime, the licensing criteria and conditions and the powers granted to the HKMA. Scope and Coverage Definitions of “stablecoin” and “fiat-referenced stablecoin” (“FRS”) In the Consultation Paper, “stablecoin” is defined as a cryptographically secured digital representation of value that, among other things, — is expressed as a unit of account or a store of economic value; is used, or is intended to be used, as a medium of exchange accepted by the public, for the purpose of payment for goods or services; discharge of a debt; and/or investment; can be transferred, stored or traded electronically; uses a distributed ledger or similar technology that is not controlled solely by the issuer; and purports to maintain a stable value with reference to a specified asset, or a pool or basket of assets. “FRS” is defined as a stablecoin where the specified asset is one or more fiat currencies. The respondents to the Consultation Paper generally agree to the proposed definitions. The proposed exclusion of certain financial instruments that are already covered by existing regulatory regimes (such as deposits, authorised collective investment schemes, authorised structured products, float stored in stored value facilities, etc.) from the definition of “stablecoin” has also received broad consensus. Considering that the proposed regulatory regime intends to primarily focus on representations of value which rest on ledgers that are operated in a decentralised manner, it is concluded in the Consultation Conclusions that limb (d) of the definition of “stablecoin” will be amended to specify that the stablecoins subject to the proposed regulatory regime are those “operated on a decentralised distributed ledger or similar technology”. A “decentralised distributed ledger” refers to a distributed ledger in which no person has the unilateral authority to control or materially alter its functionality or operation. Scope of regulated activity It is proposed in the Consultation Paper that the regulatory regime will prioritise regulation of FRS issuance activity, considering that FRS has a higher potential to be used as a commonly acceptable means of payment, as compared with other types of virtual assets. A significant majority of respondents agree with this approach. With regard to what constitutes an “issuance” activity, it is clarified in the Consultation Conclusions that it is generally decided on a case-by-case basis with respect to specific facts and circumstances. Further guidelines will be issued upon the implementation of the regulatory regime to provide further guidance to the industry. Regulatory Framework In the Consultation Paper, it is proposed that under the proposed licensing regime for FRS issuers, no person shall: issue, or hold oneself out as issuing, an FRS in Hong Kong; issue, or hold oneself out as, issuing a stablecoin that purports to maintain a stable value with reference to the value of the Hong Kong dollar; or actively market its issuance of FRS to the public of Hong Kong; unless it is a company that holds an FRS issuer licence granted by the HKMA. “Actively market” may include frequently calling on members of the Hong Kong public and marketing their services and running a mass media programme or Internet activities targeting the Hong Kong public, etc. The proposed scope of the regulatory regime is generally agreed. On the question of how to determine whether a person is “actively marketing” an issuance of FRS to the Hong Kong public, it is clarified in the Consultation Conclusions that the HKMA will take into account multiple factors such as the language used in the marketing messages, whether the messages are targeted at people that resides in Hong Kong and whether a Hong Kong domain name is used for its website, etc. Licensing Criteria and Conditions Under the proposed regulatory regime, any person who issues FRS in Hong Kong will be required to obtain a licence from the HKMA.  Some of the key licensing criteria and conditions as proposed in the Consultation Paper (and modified in the Consultation Conclusions, if applicable) are broadly summarised below: Full backing: The FRS issuer must ensure that the value of the reserve assets backing an FRS is at least equal to the par value of the FRS in circulation at all times. Investment limitations: The reserve assets must be of high quality and high liquidity with minimal market, credit and concentration risk. Segregation and safekeeping of reserve assets: The FRS issuer must ensure that the reserve assets are segregated from other assets and are available to satisfy FRS holders’ redemption as well as their legal right and priority claim of the reserve assets in the event of the FRS issuer’s insolvency. Risk management and controls: The FRS issuer must formulate adequate policies, guidelines and controls for the proper management of all investment activities associated with the management of the reserve assets. …READ FULL ARTICLE Author: Sam Wu at YYC Legal LLP

The Hong Kong government has announced that it will make a law to enable non-Hong Kong companies to redomicile in Hong Kong. This will help strengthen the city’s position as a global business and financial hub, enhancing its reputation as an open and competitive economy. Upon redomiciliation, the company’s legal entity, contracts, properties, rights and obligations will remain in effect. The redomiciliation mechanisms for open-ended fund companies and limited partnership funds introduced in 2021 were a welcome move. Leveraging on such momentum, the government consulted the public on an even wider regime in 2023. Upon receipt of overwhelming support, the Financial Services and the Treasury Bureau announced, in July 2024, that the government will proceed with the legislation to allow the redomiciliation of non-Hong Kong companies. Through the redomiciliation, foreign companies already with operations in Hong Kong will no longer have to comply with two different sets of regulations indefinitely. This regime does not allow outward redomiciliation of Hong Kong-incorporated companies to redomicile to another jurisdiction. Like Australia and Singapore, Hong Kong will only consider an inward regime for now. Company types Four types of companies may redomicile to Hong Kong, namely: (1) private companies limited by shares; (2) public companies limited by shares; (3) private unlimited companies with a share capital; and (4) public unlimited companies with a share capital. The companies will not be allowed to change their company type through the re-domiciliation. Eligibility There will be no economic substance tests. That essentially means that even small companies can redomicile to Hong Kong. However, the applicants must comply with certain legal, financial integrity and other documentary requirements, such as: As of the application date, the applicant’s first financial year end since its incorporation has passed; The company type to be applied for redomiciliation is the same or substantially the same as the applicant’s type of company in its original domicile; The redomiciled company will not be used for unlawful purpose or purposes contrary to public interest; If neither the law of the original domicile nor the application’s constitutional documents require members’ consent, an applicant should obtain such consent by a resolution duly passed by at least 75% of eligible members; The applicant is able to pay its debts as they fall due during the 12 months after the application date; The applicant is to provide its financial statements as of a date no more than 12 months prior to the application date (and such financial statements are to be audited only if the auditing is legally required in its original domicile); The application is made in good faith and not intended to defraud existing creditors of the applicant; The applicant is not in liquidation. No receiver or manager is in possession of any of its properties. No compromise or arrangement between it and another person is be administered; and A legal opinion of a legal practitioner who practices the law of the original domicile is required to confirm that the proposed redomiciliation is allowed under the law of the original domicile. A legal opinion is also to cover the applicant’s due registration in the original domicile, company type, members’ consent and solvency. Amendments will be proposed to the Insurance Ordinance (chapter 41 of the Laws of Hong Kong), the Banking Ordinance (chapter 155 of the Laws of Hong Kong), and relevant subsidiary legislation to ensure that insurers and authorised institutions which redomicile to Hong Kong will be regulated and supervised as if they were locally incorporated. Foreign insurers and financial institutions seeking to redomicile will be required to approach their respective regulators in Hong Kong before making the redomiciliation application, such that assessment of their capacity in fulfilling the Hong Kong regulatory requirements can be conducted in advance. Effects of redomiciliation A redomiciled company in Hong Kong will be granted the same rights as any locally incorporated company of the same kind under the Companies Ordinance (chapter 622 of the Laws of Hong Kong) and shall comply with READ FULL ARTICLE   Author: Rossana Chu at YYC Legal LLP

Mr. Jason Lin (林泽军), a Director of the Greater Bay Area Management Committee of East & Concord Partners (also a registered foreign lawyer of YYC Legal LLP),commenting on the traditional service model of assisting the Chinese enterprises in just landing business overseas by partnering a law firm in China with a law firm from the host country is no longer sufficient.  Jason tells Thomson Reuters ALB in an interview: This wave of Chinese enterprises "Go Global" also urges for a completely new legal service model. We must tailor-make a fully organised and competitive cross-border legal, financial, tax and organisational structures for the Chinese enterprises according to the requirements of multinational companies. Specifically, for a multinational company, it is important to carefully evaluate the centralisation and location of a holding platform comprising operational, financial, supply chain networks, human resources and IP, and how well-positioned the company in different jurisdictions for global expansion before making the move. Then, determine the feasibility of landing in the host country such as understanding the legislative and regulatory environment in that host country and how to align with the holding platform are concerned.  Furthermore, the advantages of fundraising, costs of future exit and other potential issues should also be considered. Jason also pointed out that Hong Kong has always been an irreplaceable choice for Chinese enterprises to set up "Go Global" holding platforms, and the role it plays will become increasingly important. Especially since 2023, Hong Kong has released a series of policies to attract Chinese domestic enterprises to settle down, such as an introduction of tax incentives for family offices and the "patent box system”. To this end, East & Concord Partners (GBA Offices) has pulled together a team of “Go Global” consisting of 8 partners and more than 20 legal professionals, and currently serving “Go Global” projects in various practice areas and jurisdictions. In addition, starting from 2023, East & Concord Partners (GBA Offices) promoted comprehensive legal, commercial, financial and tax services to its clients and well-equipped for the “Go Global” practice indeed. To read the full An interview with Jason Lin, please visit: https://china.legalbusinessonline.com/features/华南地区报告：企业“出海”及相关法律服务 (ZH/EN)  

On 31 August 2024, our Partner Ms. Rossana Chu as one of the speakers presented in a forum jointly organised by the Lingnan Impact (岭南影响力), Alumni of Faculty of Law of Sun Yat-sen University and East & Concord Partners (GBA Offices) in Guangzhou on the theme “Framework for Chinese Enterprises Going International: Taxation” Forum.  Topics covered included "China tax regulatory compliance and practices (中国税务监管下的合规要求及应对实践)", "Building an efficient tax structure to help Chinese domestic capital and businesses expand overseas (搭建高效的税务架构，助力中国民营资本出海、业务出海)" and “Common investment structures and family offices in Hong Kong (香港常见的投资架构及家族办公室)”. The topic presented by Rossana was “Common investment structures and family offices in Hong Kong”.  During the talk, she compared the features of private companies, funds and segregated portfolio companies as three common investment structures in Hong Kong. She then introduced the functions of family offices and the Hong Kong tax concession for family-owned investment holding vehicles. This was followed by the “patent box” tax incentive applicable to qualifying profits sourced in and derived from eligible intellectual properties created through research and development (R&D) activities in Hong Kong. Her presentation ended with an introduction of the Hong Kong tax certainty enhancement scheme for onshore disposal gains meeting specified conditions are to be regarded as capital in nature and not chargeable to profits tax. The other two topics were presented by Ms. Zhang Yun (张云) and Ms. Charming Chen (陈玉鸣), senior consultants of East & Concord Partners (GBA Offices). The forum was well attended and met with enthusiasm. The three speakers shared their valuable experiences on questions raised and received positive feedback.  

Our Partner Ms. Rossana Chu is featured in the latest issue ALB Asia August 2024 “A conversation with Rossana Chu” – ALB Conversation is an in-depth Q&A with leaders of law firms across Asia. In the Q&A, Rossana shares some of her firm’s work highlights and development strategies.  She also touches on the importance of high-quality services and innovative solutions that set YYC Legal stood out from other law firms in Hong Kong. To read the full interview A conversation with Rossana Chu, please visit:  https://www.legalbusinessonline.com/sites/default/files/e-magazines/ALB-AUGUST-2024-(ASIA-EDITION)/20/ - Page 21  

The Stock Exchange of Hong Kong (SEHK) proposed enhancing corporate governance of its 2,600 listed issuers on the Main Board and GEM in a mid-summer consultation paper titled Review of Corporate Governance Code and Related Listing Rules. The consultation period ended in mid-August and, based on market feedback, the revised code and listing rules are expected to take effect on 1 January 2025, with transition periods for certain proposals. This article outlines key revisions as a point of reference. Designating a lead independent non-executive director (INED) Where the chairperson is not an INED and/or the chair and chief executive is the same individual, the listed company should designate a “lead INED” to serve as an intermediary for the other directors and shareholders. Any listed company not complying with this expectation must provide explanations. Mandatory director training Currently, a listed company must disclose how its directors participate in continual professional development. The exchange proposes to require directors to receive mandatory continuing professional development annually on specified topics (including directors’ responsibilities, environmental and social governance [ESG], risk management and industry-specific updates). Also, first-time directors and those who have not served as directors of listed companies for a period of three years or more must complete a minimum of 24 hours’ training within 18 months of appointment. Board performance review The current recommended best practice is proposed to be upgraded to a code provision (on a “comply or explain” basis) requiring the board to conduct an evaluation of its performance at least once every two years, with specific disclosures to be made in the listed company’s Corporate Governance Report. Board skills matrix. A listed company will be expected to maintain a board skills matrix and disclose in its Corporate Governance Report: the board’s existing skills; how the combination of skills, experience and diversity of directors serve the company’s purposes, values, strategy and desired culture; and details and plans to acquire further skills. The current practice of simply listing the directors’ qualifications and experience is considered insufficient by the exchange. Overboarding INED and directors’ time commitment The exchange proposes to add a listing rule that each INED can only serve as a director of up to six listed companies. Also, the nomination committee of a listed company is required to annually assess and disclose each director’s time commitment and contribution to the board. INED serving for more than nine years Currently, the listing rules impose no limit on the tenure of INEDs, although a listed company should put the appointment of a long-serving INED (i.e. serving the board for more than nine years) as a separate shareholders’ resolution, explain why such an INED is still regarded as independent, and appoint a new INED at the forthcoming annual general meeting. Now a hard cap of nine years is proposed, i.e. from 1 January 2028 onwards a director will no longer be considered independent after serving as an INED for nine years or more. Board and workforce diversity At present, the board must have a board diversity policy and annually review its implementation and effectiveness. At least one director of a different gender must be appointed to the board no later than 31 December 2024. The Corporate Governance Report must include details such as gender ratio in the workforce, how the board’s gender diversity is achieved, and mitigating factors in achieving gender diversity.  The exchange now proposes that: …READ FULL ARTICLE Note: This material has been prepared for general informational purposes only and is not intended to be relied upon as professional advice. Please contact us for specific advice. Author: Rossana Chu at YYC Legal LLP

Background In 2020, there was a case where John Wiley & Sons UK2 LLP (“UK LLP 2”) (as a transferor) and Wiley International LLC (“US LLC”) (as a transferee),applied to the Collector of Stamp Revenue for stamp duty relief in relation to the transfer of the shares in John Wiley & Sons (HK) Limited (“HK Company”) (see the transaction structure below). The law related to stamp duty relief Pursuant to section 45(2) of the Stamp Duty Ordinance (Chapter 117 of the laws of Hong Kong) (“SDO”), stamp duty relief is available for the transfer of Hong Kong stock or immovable property from one associated body corporate to another. To fulfil the relief condition, the test for “associated”, which is “beneficial owner of not less than 90 per cent of the issued share capital of the other”, has to be satisfied. The assessment by the Stamp Office The Collector of Stamp Office rejected the section 45 stamp duty relief application on the grounds that the John Wiley & Sons UK LLP (“UK LLP 1”) and the UK LLP 2 did not have “issued share capital”, and as such, US LLC could not be a “beneficial owner of not less than 90% of the issued share capital” of UK LLP 2 for the purpose of section 45(2) of the SDO. US LLC and UK LLP 2 then appealed to the District Court in January 2021. The judgment by the District Court In July 2022, the District Court held that UK LLP 2 and US LLC were entitled to stamp duty relief for an intra-group transfer of shares of a Hong Kong company. The District Court construed “issued share capital” according to the ordinary and natural meaning and did not interpret “share capital” as meaning that the capital must necessarily be divided by way of a denomination into standard units called “shares” that are required to be registered, or are evident by share certificates in the manner the Collector contended for.  Rather and in the District Court’s view, it would amount to “share capital” so long as the capital of that body corporate is divided into quantifiable portions (or shares in the ordinary use of that word, such as 1/3 share and 1/2 share or a percentage share), whether expressed in terms of monetary value or in term of proportions, and all such shares together make up 100% of the total value of the capital; and as said, such organization of its capital is legally recognized. The Collector of Stamp Office applied for appeal at the Court of Appeal. The case was heard before Court of Appeal on 26 April 2024 and the judgment was handed down on 5 July 2024. The judgment by the Court of Appeal In 2024, the Court of Appeal ruled that UK LLP 2 and US LLC were not entitled to stamp duty relief. The Court of Appeal considered the object/purpose and context of section 45 of SDO, the language used by the legislature and the offshore legal opinion produced by US LLC and UK LLP 2. The Court of Appeal agreed that the legislative intention for section 45 relief is available only to associated companies which satisfy the 90% issued share capital requirement, but not to other kinds of corporate entities. Further, the legal opinion produced by US LLC and UK LLP 2 stated that “[w]hilst unlike a body corporate within the meaning of the Companies Act 2006, an LLP does not, and cannot, issue and allot share capital”. As such, the Court of Appeal ruled that no shares (in the sense of discrete or standard units) in the capital of UK LLP 2/UK LLP 1 ever existed, and no such shares have ever been issued to their respective members. Hence, no capital paid by the members to UK LLP 2/UK LLP 1 could be regarded as the “issued share capital” of UK LLP 2/UK LLP 1 within the meaning of section 45 of SDO. This material has been prepared for general informational purposes only and is not intended to be relied upon as professional advice. Please contact us for specific advice. Author:  Beverly Fu, Associate at YYC Legal LLP

Regulatory investigations in Hong Kong cover enquiries, interviews or raids by regulators or enforcement authorities in relation to corruption, corporate fraud, white-collar crime, breach of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and market misconduct in the securities market governed by the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the “SFO”). In this article, we examine some of the core issues in relation to regulatory investigations which both corporations and individuals should be aware of so that they could be well prepared in the face of a regulatory investigation.  Commencement of a regulatory investigation A regulatory investigation usually commences when the regulator detects some irregularity concerning a regulated corporation or individual, but occasionally it can also be the result of proactive reporting by a corporation to its regulator when it detects non-compliance or as a result of a whistleblower complaint. In fact, failure to notify the regulator upon discovering non-compliance may have serious ramifications, as millions of dollars of fines could be imposed on corporations for failing to report non-compliance to the regulator in a timely manner. For example, pursuant to paragraph 12.5 of the Securities and Futures Commission (“SFC”)’s Code of Conduct, licensed persons are required to report to the SFC immediately for any material breach, infringement or non-compliance. Therefore, regulated corporations should always bear in mind that it is their responsibility to take initiative to report non-compliance or suspected non-compliance to its regulator promptly and that they should not wait until the regulator comes knocking on its door.  Importance of seeking legal advice At the outset, a corporation or individual should always seek legal advice when faced with a regulatory investigation. A corporation or person subject to a regulatory investigation has obligation to provide information to the regulators. At the same time, they are also entitled to certain rights. Seeking legal advice will ensure that they are fully aware of what such rights are and that they will not accidentally waive them during the course of a regulatory investigation.  Even in the face of a regulatory investigation, a corporation or person should be fully advised that there are certain information or documents which they need not hand over to the regulators. For instance, they need not hand over information or documents which are subject to legal professional privilege (“LPP”). Under common law, LPP includes both legal advice privilege and litigation privilege.   Legal advice privilege covers communications between lawyers and their clients created for the dominant purpose of obtaining or giving legal advice. Litigation privilege, on the other hand, covers communications between lawyers and their clients, or lawyers or their client and a third party, created for the dominant purpose of litigation which is either in progress or in contemplation. A corporation or person should be careful not to hand over documents which are subject to LPP to the regulator. In practice, many corporations often instruct their lawyers to review all potential documents to be handed over to a regulator in order to ensure that they do not accidentally waive LPP.  In Hong Kong, the doctrine of limited waiver of privilege has been considered by the Court of Appeal in Citic Pacific (No 2) v Secretary for Justice [2012] 2 HKLRD 701. As a result, documents subject to LPP may be handed over to a regulator on a “limited waiver” basis, meaning that privileged documents can be provided to the regulator solely for the purposes of its investigation and the regulator cannot transfer or disclose the document to third parties for a derivative purpose. In certain circumstances, it is possible for a regulator to offer leniency to a corporation which is willing to waive privilege over its documents.  In certain types of regulatory investigations, the right of silence may not be available. For instance, the SFO requires any person who is subject to or assisting in an investigation to answer any questions raised by the SFC in the interviews and/or to produce any documents as specified by it. Refusal to answer questions or produce documents is a criminal offence. Accordingly, there is no right to silence under the SFO. However, a person subject to an investigation under the SFO can make a claim to the privilege against self-incrimination when providing answers and/or documents to the SFC. Upon making such a claim, the answers and/or documents produced by such person will not become admissible in evidence in criminal proceedings against the person.  The above are some of the obligations imposed on, and rights available to, a corporation or person subject to a regulatory investigation. As such, it is important for one to receive legal advice at the outset and during the course of a regulatory investigation so as to be fully apprised of one’s obligations and rights.  The secrecy obligation A person assisting in or subject to an investigation is usually subject to the secrecy obligation. A regulated corporation and its employees should be careful not to disclose details relating to the regulatory investigation to any other person. For example, section 378 of the SFO imposes a secrecy obligation on persons subject to an investigation under section 183 of the SFO. The secrecy obligation is subject to limited exceptions, such as disclosure to employers, insurers and legal advisers, or disclosure of the fact that a person is bound by the secrecy obligation.  Searching premises During some regulatory investigations, the regulator may wish to conduct a surprise raid at a corporation’s place of business. The regulator will need to obtain a search warrant issued by a magistrate to enter and search such premises. When the regulator arrives with a search warrant, it is important for the corporation’s representative or legal advisors to check the search warrant to ensure that: …READ FULL ARTICLE  This memorandum was prepared for general purposes only. It is not intended to be comprehensive in its scope and it is recommended that a client seeks professional legal advice.    By Valarie Fung, Partner at YYC Legal  6 August 2024 

Regulatory investigations in Hong Kong cover enquiries, interviews or raids by regulators or enforcement authorities in relation to corruption,corporate fraud, white-collar crime, breach of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and market misconduct in the securities market governed by the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the “SFO”). In this article, we examine some of the core issues in relation to regulatory investigations which both corporations and individuals should be aware of so that they could be well prepared in the face of a regulatory investigation. Commencement of a regulatory investigation A regulatory investigation usually commences when the regulator detects some irregularity concerning a regulated corporation or individual, but occasionally it can also be the result of proactive reporting by a corporation to its regulator when it detects non-compliance or as a result of a whistleblower complaint. In fact, failure to notify the regulator upon discovering non-compliance may have serious ramifications, as millions of dollars of fines could be imposed on corporations for failing to report non-compliance to the regulator in a timely manner. For example, pursuant to paragraph 12.5 of the Securities and Futures Commission (“SFC”)’s Code of Conduct, licensed persons are required to report to the SFC immediately for any material breach, infringement or non-compliance. Therefore, regulated corporations should always bear in mind that it is their responsibility to take initiative to report non-compliance or suspected non-compliance to its regulator promptly and that they should not wait until the regulator comes knocking on its door. Importance of seeking legal advice At the outset, a corporation or individual should always seek legal advice when faced with a regulatory investigation. A corporation or person subject to a regulatory investigation has obligation to provide information to the regulators. At the same time, they are also entitled to certain rights. Seeking legal advice will ensure that they are fully aware of what such rights are and that they will not accidentally waive them during the course of a regulatory investigation. Even in the face of a regulatory investigation, a corporation or person should be fully advised that there are certain information or documents which they need not hand over to the regulators. For instance, they need not hand over information or documents which are subject to legal professional privilege (“LPP”). Under common law, LPP includes both legal advice privilege and litigation privilege. Legal advice privilege covers communications between lawyers and their clients created for the dominant purpose of obtaining or giving legal advice. Litigation privilege, on the other hand, covers communications between lawyers and their clients, or lawyers or their client and a third party, created for the dominant purpose of litigation which is either in progress or in contemplation. A corporation or person should be careful not to hand over documents which are subject to LPP to the regulator. In practice, many corporations often instruct their lawyers to review all potential documents to be handed over to a regulator in order to ensure that they do not accidentally waive LPP. In Hong Kong, the doctrine of limited waiver of privilege has been considered by the Court of Appeal in Citic Pacific (No 2) v Secretary for Justice [2012] 2 HKLRD 701. As a result, documents subject to LPP may be handed over to a regulator on a “limited waiver” basis, meaning that privileged documents can be provided to the regulator solely for the purposes of its investigation and the regulator cannot transfer or disclose the document to third parties for a derivative purpose. In certain circumstances, it is possible for a regulator to offer leniency to a corporation which is willing to waive privilege over its documents. In certain types of regulatory investigations, the right of silence may not be available. For instance, the SFO requires any person who is subject to or assisting in an investigation to answer any questions raised by the SFC in the interviews and/or to produce any documents as specified by it. Refusal to answer questions or produce documents is a criminal offence. Accordingly, there is no right to silence under the SFO. However, a person subject to an investigation under the SFO can make a claim to the privilege against self-incrimination when providing answers and/or documents to the SFC. Upon making such a claim, the answers and/or documents produced by such person will not become admissible in evidence in criminal proceedings against the person. The above are some of the obligations imposed on, and rights available to, a corporation or person subject to a regulatory investigation. As such, it is important for one to receive legal advice at the outset and during the course of a regulatory investigation so as to be fully apprised of one’s obligations and rights. The secrecy obligation A person assisting in or subject to an investigation is usually subject to the secrecy obligation. A regulated corporation and its employees should be careful not to disclose details relating to the regulatory investigation to any other person. For example, section 378 of the SFO imposes a secrecy obligation on persons subject to an investigation under section 183 of the SFO. The secrecy obligation is subject to limited exceptions, such as disclosure to employers, insurers and legal advisers, or disclosure of the fact that a person is bound by the secrecy obligation. Searching premises During some regulatory investigations, the regulator may wish to conduct a surprise raid at a corporation’s place of business. The regulator will need to obtain a search warrant issued by a magistrate to enter and search such premises. When the regulator arrives with a search warrant, it is important for the corporation’s representative or legal advisors to check the search warrant to ensure that: …READ FULL ARTICLE  This memorandum was prepared for general purposes only. It is not intended to be comprehensive in its scope and it is recommended that a client seeks professional legal advice. Author: Valarie Fung, Partner at YYC Legal