Global Business Complexity Index finds 8 APAC jurisdictions expect to increase company secretary responsibilities, with international regulation the primary cause.
TMF Group’s Global Business Complexity Index (GBCI) 2019 reveals that the responsibilities of company secretaries in Hong Kong have grown over the past three years – and are expected to continue to increase over the next five years.
Seven other APAC jurisdictions are also expected to see more demands being placed on company secretaries: in Australia, China, India, Indonesia, Malaysia, Singapore and Taiwan. A major factor is the growth of international compliance regulations, including Anti-Money Laundering (AML), General Data Protection Regulation (GDPR) and other international regulatory initiatives.
According to the Index, 61% of global jurisdictions report that the responsibilities of company secretaries have increased in the last three years, particularly across the APAC region where that was said to be the case in 71% of jurisdictions – including Hong Kong – compared to 63% in Europe, Middle East and Africa (EMEA) and 50% in the Americas. Looking ahead, 69% of jurisdictions globally predict the job duties and responsibilities will increase in the next five – including for those based in Hong Kong and China.
The Index also suggests that while company secretaries are required by law in 25% of jurisdictions globally, many companies in other jurisdictions choose to appoint one voluntarily due to the amount of compliance-related work and the frequent changes to statutory requirements. The Companies Ordinance in Hong Kong, for example, requires each company to appoint a company secretary. The appointed person must reside in Hong Kong or the company must have a body corporate that has its registered office in Hong Kong. The residency rule is particularly common in APAC where governments are encouraging companies to ensure managers reside where the economic value is created.
Penalties
The ever-changing rules and regulations in the globalized business environment have added further complexity to the area of compliance. Compliance navigation can come from top-down (supranational regulation from International bodies) or bottom-up (national governments seeking compliance accreditation from international regulatory bodies). This requires an understanding of global issues and local particularities.
Failure to comply can result in heavy penalties, particularly in APAC. Companies that fail to comply with regulatory obligations are subject to severe penalties in 50% of jurisdictions in APAC, compared to 46% in the Americas and 38% in EMEA.
“International regulatory enactment is seldom a one-way, top-down process. It is subject to specific national requirements. Although two governments may have enacted similar pieces of legislation, the requirements and practical enforcement of each are unlikely to be identical. This complexity is heightened by regulators developing digital tools, with jurisdictions implementing them through local rules. The role of the company secretary is clearly undergoing rapid changes and evolution, as part of this greater emphasis and complexity. Beyond this, companies must take a holistic approach and recognise that compliance demands both a global strategy and local knowledge,” said Kenneth Lee, Director, Head of Corporate Secretarial Services in Hong Kong, TMF Group.
Complexity of setting up a business entity and bank account
The GBCI finds that incorporation is not straightforward in 36% of APAC jurisdictions, compared to 24% in EMEA and 21% in the Americas. Moreover, in 21% of APAC and Americas jurisdictions, this process usually takes longer than four months. By contrast, incorporation in EMEA is relatively straightforward and less time-consuming.
Early adopters of new electronic portals include Hong Kong, the USA and the British Virgin Islands, which are among the fastest jurisdictions for registering a business, demonstrate long-term benefits of electronic systems and digitization. While the incorporation or registration of a company in Hong Kong is a simple process, opening a commercial bank account, however, is generally rather arduous, especially for organizations without local on-the-ground presence.
According to the GBCI, opening a bank account from overseas has become a drawn-out process in 95% of global jurisdictions. This is true even in Hong Kong, which historically has been considered a straightforward jurisdiction to open bank accounts due to fierce competition between financial institution locally.
The Bank Account Opening Survey published by The Hong Kong Institute of Chartered Secretaries (“HKICS”) in September 2016 reported that 98% of survey respondents said companies had difficulties opening bank accounts in Hong Kong. In its 2018 follow up survey, result shows that 84% of the survey respondents observed that opening a bank account remained difficult. Difficulty in satisfying bank documentary requirements, difficulty in opening accounts for foreign nationals and difficulty in opening accounts for smaller revenue generating customers are identified as the top three reasons.
Ultimate Beneficial Owner
Issues surrounding ownership have also come under increasing scrutiny. Regulators are gaining greater powers to distinguish who is responsible – and liable – for compliance. A growing body of legislation enables authorities to identify, track and record financial transactions.
Ultimate Beneficial Owner (UBO), a register that complements these initiatives, operates in 64% of global jurisdictions. However, adoption varies wildly between regions. It is a requirement in 75% of jurisdictions in the Americas and 71% in EMEA but only 29% in APAC. The only 4 jurisdictions in APAC that operate a UBO register are China, Hong Kong (commonly referred as the Significant Controller Register, the requirement of which came into effect on March 1, 2018), Indonesia and Taiwan.
To download a copy of the report, please click here.
ENDS
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Ann Hung
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Ann.hung@allisonpr.com
Irene Chua
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