Shares in China’s second-largest property developer Evergrande have plunged by almost 17% as investors weigh up whether the company’s huge debt problems could trigger a broader sell-off across other financial markets. 

In Hong Kong on Monday, Evergrande fell to its lowest market value ever, trawling the Hang Seng index down to its lowest point in almost a year. Other large property stocks in Hong Kong, such as Henderson Land and New World Development, also saw double-figure falls in their prices on Monday amid widespread anticipation that Evergrande will default on some of its debt repayments this week. The property developer currently owes $300 billion. 

There are concerns that such a move by Evergrande could have a dramatic knock-on effect throughout the Chinese economy and even beyond. 

This contagion factor was most perceptible in Australia as the benchmark ASX200 index closed down 2.1% on Monday as investors abandoned mining stocks such as Rio and BHP. The price of iron ore — Australia’s main export — also fell by 60% from its high point back in May due to a slowdown in the Chinese property and construction industries. If Evergrande were to collapse, such issues within the sectors would only accelerate. 

Following other big tech firms such as Baidu and Bilibili, Xpeng is the latest Chinese company to list on the Hong Kong stock exchange. The electric car manufacturer is already listed on Nasdaq and is rapidly becoming a strong rival to Tesla in China. 

Xpeng raised HK$14 billion ($1.8 billion) in its initial public offering ahead of the start of trade on Wednesday. The company issued 85 million Class A ordinary shares at HK$165 ($21.20) each. Its shares traded approximately 1.8% higher on opening. The IPO comes as Chinese firms are put under pressure to list closer to home. Recently, Chinese transport company DiDi fell under scrutiny over data security when it listed overseas. 

Xpeng’s performance has improved considerably over the years, having previously proposed, and been rejected for, a merger with another struggling electric car manufacturer Nio. In its US IPO last year, Xpeng raised $1.5 billion and in the fiscal year 2020, and delivered over 27,000 vehicles to consumers. If successful, Xpeng’s performance in Hong Kong could facilitate similar moves by other electric vehicles companies.

Hong Kong is a highly banked, wealthy region which enjoys excellent digital and physical infrastructure. To hear about the financial hub’s payment evolution, we hear from leading ePayment technology and eCommerce management company Payment Asia which provides customised all-around payment strategies to more than 10,000 Asian and multinational companies.

We speak with Lance Lau, Head of Sales at the Hong Kong Team of Payment Asia. Established in 1999 in Hong Kong, Payment Asia has over 20 years’ experience in providing eCommerce payment solution services to local and international markets. Taking the lead in the ePayment technology and eCommerce management market in Asia, the company helps merchants to continue to grow in the wave of technological development.

Over the last two decades, Payment Asia has expanded its business from Southeast Asia to the international market, including the Philippines, Malaysia, Singapore, Australia, New Zealand, Mauritius, the United Kingdom and Canada.

Tell us a little bit about the current payments environment in Hong Kong?

The current payments environment has been very interesting as we’re witnessing a stage of transformation - from cash transactions to the digital era with traditional cashless payment such as credit and debit cards being replaced by eWallets, mobile payments, virtual banking and the future usage of cryptocurrencies.

What payments trends do you expect to see in Hong Kong in 2021? How is Payment Asia going to respond to these?

With the pandemic still affecting everyone across the globe, most merchants are finding ways to improve the purchase experience for their clients while also implementing the online/eCommerce elements to their business.

At Payment Asia, we have designed and self-developed a mobile payment application called PA Pay - specifically for merchants - which integrates multiple payment channels, including credit cards, debit cards, UnionPay and a variety of eWallets, and can be applied to POS or smartphone operating systems.

We offer various online payment solutions including Visa, Mastercard, UnionPay, Alipay and WeChat Pay, which integrate with online stores, H5 web pages and applets through API. We can also guide merchants and personal clients in the process of setting up international bank accounts (IBAN) for payment settlements and operate as an offshore virtual bank.

On top of payment processing solutions, Payment Asia’s services also cover online and offline eCommerce payment strategies, payment gateways integration, eCommerce management, artificial intelligence, big data and more.

Payment Asia’s mobile payment application - PA Pay which can be applied to POS or smartphone operating systems

What is Hong Kong’s current position in China’s payment evolution?

Over the last decade, China has been a pioneer in implementing ePayments, propelled by China UnionPay, Alibaba’s Alipay and Tencent’s WeChat Pay.

The FinTech industry is taking off amid a backdrop of growing consumption and the large, tech-savvy millennial generation. China’s FinTech Explosion explores the transformative potential of the country’s financial technology industry, covering subsectors such as digital payment systems, peer-to-peer lending and crowdfunding, credit card issuance and internet banks, blockchain finance and virtual currencies, and online insurance.

In 2014, the People’s Bank of China established the Digital Currency Institute of the People’s Bank of China where a specialist research team discusses technical and regulatory issues in relation to the development of Digital Currencies in China.

Since August 2020, the People’s Bank has been carrying out pilot trials of Digital Currency Electronic Payment (DCEP) in various cities across China. The estimate is that 30%-50% of cash will be replaced by the DCEP within two to three years.

Features and capabilities of DCEP:

• DCEP uses digital tokens and blockchain technology to represent a country’s official currency. DCEP differs from cryptocurrencies in that it has the status of legal tender and is centralised and regulated by a country’s monetary authority.
• DCEP is a digital version of the Renminbi (RMB).
• DCEP is a sovereign currency issued and backed by the People’s Bank of China and controlled by the Chinese Government which will be able to track the currency moving through its economy and monitor its usage.
• DCEP is said to be secure, have controllable anonymity and prevent counterfeiting. It also addresses the high costs of cash issuance and handling, and difficulties in tracking and fraud.
• Like cash, the DCEP cannot be refused as payment. The People’s Bank will exchange DCEP with commercial banks and payment operators, which can then distribute DCEP to their customers via eWallets.
• The use of DCEP will be convenient for the public and provide more efficiency in the financial system, helping China bring its unbanked population into the mainstream economy and accelerate the move to a cashless society.
• DCEP also helps to internationalise the RMB’s use in trade settlements and presents an attractive alternative to the established international funds-transfer system, SWIFT, with lower transaction fees.

On 4^th December 2020, Eddie Yue, Chief Executive of Hong Kong Monetary Authority (HKMA), announced that HKMA and the Institute are discussing the technical pilot testing of using DCEP for making cross-border payments and are making the corresponding technical preparations.

How is Payment Asia contributing to this?

Payment Asia has always delivered the advantage of being in Hong Kong to our merchants. We are now implementing blockchain technology to our payment platform and are actively developing an emerging cryptocurrency gateway. This can be seen as a baby step but is still an efficient and effective way to get merchants to warm-up and be ready for the new payment era.

At present, 36% of the SMEs in the United States accept Bitcoin (BTC), whereas Wikipedia, Microsoft, Expedia, AT&T, Burger King, KFC and Subway have also started accepting BTC. Our value proposition is to provide merchants with a familiar payment gateway experience while bridging the gap between digital and fiat currencies. Customers will be able to have this new option as their payment method while merchants will be protected on the cryptocurrency’s fluctuation.

Features of Payment Asia’s Crypto Gateway:

• Acceptance of major digital currencies (e.g., Bitcoin, Ethereum, Cardano, BCH, Stellar, USDT etc.) for online and offline payments.
• Instant locking of rate to minimise merchants’ risk.
• Withdrawal of funds in less than a business day.
• Payment to merchant’s suppliers in 200+ countries with digital currencies.

Payment Asia’s Crypto Gateway bridges the gap between digital and fiat currencies

What does the future hold for Hong Kong’s payments industry?

With its status as a key Asian financial hub, Hong Kong will always be an important part of the global payments industry.

Supporting this, Hong Kong's Stock Exchange raised $51 billion from 154 new listings in 2020.

Numbers like this make Hong Kong irresistible for many investors, according to Tara Joseph from the American Chamber of Commerce Hong Kong.

"The flow of money that comes in and out of Hong Kong on a daily basis, that goes into mainland China and comes out, is very hard to replicate," she said during an interview with BBC's Asia Business Report.

A city with attractive tax rates and a business-friendly environment is the natural successor to Hong Kong. Being the gate into the Chinese market, a lot of international businesses will still prefer Hong Kong as the processing hub for their B2B and B2C activities.

How can Payment Asia help merchants with digital transformation?

One of Payment Asia’s strengths is based on creating a landscape for merchants and businesses in order to generate traffic and convert this into sales through our payment technology.

As transactions are made, we are implementing big data for our merchants, through our secure system and a robust business intelligence system.

We use this data to create inbound and outbound digital marketing strategies for merchants, in order to increase their conversion rates.

In addition, we have also developed a chatbot platform that uses artificial intelligence to realise real-time conversations to strengthen the interaction between brands and consumers.

What’s on Payment Asia’s agenda for 2021?

With our extensive experience in the market, moving forward into the post-COVID world, we aim to redefine the benchmark of online/offline and mobile payments - not just in Hong Kong but on a global scale.

For more information on the work we do, you can follow our  blog on our official website: www.paymentasia.com.

US investment banks are set to delist Hong Kong-listed structured products linked to companies sanctioned under a recent executive order from President Donald Trump.

Goldman Sachs, Morgan Stanley and JPMorgan will delist a total of 500 Hong Kong-listed structured products, according to filings from the Hong Kong stock exchange on Sunday. These structured products are linked to telecom companies China Mobile, China Telecom and China Unicorn.

The executive order that prompted the delisting bans US citizens from investing in firms that the government has deemed to be linked with the Chinese military. 35 firms were targeted in the order as enabling “the development and modernisation” of China’s armed force and which “directly threaten” US security.

From 11 January at 09:30 EST, US investors will be prohibited from owning or trading securities in the banned companies. This extends to pension funds and share ownership.

Transactions made for the purpose of divesting ownership in the firms will be permitted until 11 November.

Bourse operator Hong Kong Exchanges and Clearing released a statement saying it was “working closely with the relevant issuers to ensure orderly delisting, and facilitate buyback arrangements being arranged by the issuers.”

The operator added: “We do not believe this will have a material adverse impact on Hong Kong’s structured products market, the largest in the world with over 12,000 listed products.”

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In a separate statement, US custodian bank State Street confirmed that an ETF it manages which tracks the Hang Seng Index would no longer make investments in sanctioned stocks, though it would maintain its existing shareholdings.

The statement also noted that, according to information published by the US Office of Foreign Assets Control last week, the fund was no longer appropriate for US firms or individuals to invest in.

Natalie Smith is an English Solicitor admitted to the Supreme Court of Justice of England & Wales in 2003. Prior to taking up her role at Lutea (Hong Kong) Limited and relocating to Hong Kong, she worked extensively in Tax & Estate Planning and Trust & Company structures. She’s worked with family offices, international entrepreneurs, both regional and city law firms, and headed up the Private Client and Wealth Structuring department for one of the ‘Big 4’ Accountancy Firms. After nearly 2 decades of practice, she joined Lutea (Hong Kong) Limited as Director in November 2019.

Lutea has been providing trustee & advisory services to residents of Hong Kong and Asia for over 25 years and focuses on helping private individuals, families and businesses around the world maintain family wealth and ensure succession throughout the generations. The firm does this with practical and holistic succession planning, trusteeship of family trusts and pension schemes, international will drafting, company incorporation and administration services and UK tax advice. As a global organisation, Lutea has offices in Jersey, Hong Kong, Singapore, Anguilla, and the UK. It prides itself on personal service and employs modern technology to meet the evolving needs of clients.

We caught up with Natalie to hear about the ins and outs of establishing a trust in Hong Kong.

How attractive is Hong Kong as a trust jurisdiction?

Since 2013, Hong Kong has been following modern trust laws due to the Trust Law (Amendment) Bill under Trustee Ordinance. Since Hong Kong’s trust legislation is based on English trust law, with a judiciary experienced in trust law, Hong Kong has become an attractive trust jurisdiction by giving a high level of confidence in the legal framework. It also is a party to a wide range on International Tax Treaties.

Hong Kong offers a combination of advantages for those who set up trusts and has become one of the most attractive Asian trust jurisdictions. It is one of the major international financial centres and stock exchanges in the world. Hong Kong is a hub of international business in Asia due to its central geographic location. The well-developed transportation network, airport and telecommunications network facilitate business activities.

With its comprehensive investment infrastructure and owing to the support provided by different professionals in various areas, Hong Kong has also become an ideal platform and vehicle for investment.

What are the advantages of setting up and operating a trust in Hong Kong?

Hong Kong has a favourable tax regime as well as a robust regulatory environment. A trust in Hong Kong will be set up and managed according to a well-tested set of laws and regulations, including the Trust Law (Amendment) Ordinance, the Trustee Ordinance, the Companies Ordinance and elements of common law stretching back centuries.  As a result, a trust in Hong Kong is regarded as a secure, reliable, and effective way for families and individuals to manage their assets.

Trusts usually have a period of existence, called a ‘perpetuity period’ during which the trust can exist and is usually defined in the trust deed that first establishes the trust. However, in Hong Kong, there is no such limit, trusts can exist indefinitely and can be used to plan for multiple generations ahead, safeguarding capital and permitting longer-term, more strategic planning.

Hong Kong is a member of The Financial Action Task Force on Money Laundering (“FATF”) therefore Hong Kong fully subscribes to the FATF's recommendations in combating money laundering and terrorist financing.

In Hong Kong, it’s possible to set up a trust in which the trust entity, the trustee, banking and investment activity, legal, and accounting services are all covered by the same jurisdiction and subject to the same law.

In some jurisdictions, a trust’s settlor cannot have any control over the day-to-day operation of the trust. In Hong Kong, that is not the case - settlors can reserve some powers of investment and management of the trust to themselves, meaning settlors can retain greater control over the trust assets.

Some jurisdictions permit full freedom of testation, allowing a person to set up a trust to confer their assets on whomever they please. Other jurisdictions, however, practice various forms of forced heirship, in which certain individuals are automatically entitled to a portion of a deceased person’s assets. While you can usually place the affected assets in a trust, this still affects how you can set up trusts. Hong Kong has no forced heirship laws. When you set up a trust in Hong Kong, you can divide and confer your assets in any way you choose, and assets placed in the trust are beyond the legal reach of forced heirs in other jurisdictions on the death of the settlor.

Hong Kong has a tax regime that is unusually positive for the beneficiaries of trusts and does not treat trusts like businesses. There is no capital gains tax levied, the taxation of income is assessed on a territorial basis so only income arising in or derived from Hong Kong, is subject to tax here.

In Hong Kong, it’s possible to set up a trust in which the trust entity, the trustee, banking and investment activity, legal, and accounting services are all covered by the same jurisdiction and subject to the same law. Since all such entities are familiar with interacting with the others under the aegis of Hong Kong trust law, setting up a trust in Hong Kong can also be more efficient and run more smoothly.

What are the key things to consider when establishing a trust in Hong Kong?

The trustees are the appointed legal owners of the assets within the trust and they have the responsibility of administering the trust and the trust assets in accordance with the terms of the trust deed and the prevailing trust law.

The selection of a trustee is crucial when creating a trust, the choice of trustee should consider knowledge, experience, access to the assets and management abilities. Choosing a trustee is a personal decision because the trustee will be deciding how the beneficiaries will receive distributions from the trust. This can be guided by informed decision making when creating the trust. The settlor typically provides the trustees with a letter of wishes regarding their desired wishes on how they would like the trustees to execute their discretion with regard to the trust fund and distribution of the trust assets. The wishes contained will cover both the period during the settlor’s’ lifetime and also after death. A letter of wishes is not a legal document and can be reviewed and amended from time to time but does not form part of the trust deed itself.

Often a priority for settlors is the continuation of wealth for the benefit of future generations. This can be achieved by effectively locking up the capital of the trust and specifying to whom of the family the income and capital should be paid in the years to follow. A settlor can also give the trustees the discretion to pay capital to beneficiaries if he/she think it appropriate.

The settlor should consider guarding against or providing for, in particular, the following:

• Children/grandchildren under the age of majority who require provision for their maintenance and education until they come of age.
• Extravagant beneficiaries who would otherwise waste away capital given to them outright.
• Naive members of the family who would be taken advantage of by others.
• Vulnerable beneficiaries who are unlikely to be able to look after their own affairs.
• To help succession planning in family businesses.

How can Lutea help clients to successfully protect and grow their wealth?

Our objective is to provide trustee, corporate, administration and advisory services to individuals and families concerning the organisation, management, preservation, protection, and succession of their wealth. Leveraging our global network and local expertise, we deliver high-quality, tailored services to our clients, ensuring that we understand their changing needs and providing them with the comprehensive support they require.

How has the global pandemic affected your operations?

We have a business continuity policy in place meaning we can smoothly change our operations from office-based to remote working and ensure minimal impact to our operations. Following the Hong Kong Government’s direction, we have implemented work from home arrangements and flexible working hours to limit the number of staff in the office, and avoid staff travelling during peak hours.

Armed with modern technology, all staff are equipped with devices to allow them to work remotely. This has also minimised the impact on our business, by allowing us to conduct virtual meetings and video conferencing on platforms such as Skype, Zoom, and Microsoft Teams.

What do US or UK citizens who live in Hong Kong or plan to move there need to be aware of and plan for?

If you’re a US citizen living outside the US, you will still need to file US tax returns and pay US tax on your worldwide income. Similarly, for UK citizens, if you’re a non-resident who owns UK property or has sources of income in the UK, you may still need to file UK tax returns, even if you have moved abroad. You will need to get to grips with your tax filing requirements in your home country and add the tax filing and payment deadlines to your calendar to avoid exposure to penalties. As well as compliance, you should consider whether your investments are tax favourable assets. Some investments can bring with them large tax bills. Some investments can bring with them large tax bills, so seek advice before you buy!

If you’re moving to Hong Kong for work, will you be on a local contract or paid through your home country payroll? There are pros and cons either way so you should seek advice to find out what this could mean for you, before signing on the dotted line. If you’re setting up your own business in Hong Kong, selecting the right structure is important in achieving the best tax result and minimising tax filing requirements, so you should loop in an adviser before you set up shop to get the most out of this new opportunity.

Are you familiar with the cost of living in Hong Kong? This may be higher than in your home country so find out how much you can expect to pay before you move - especially accommodation, which is notoriously expensive!

What are the advantages of speaking with an expatriate tax expert when moving abroad?

Your tax affairs are likely to be even more complex when you move abroad so the helping hand of an expert adviser can take away the burden, to leave you to enjoy your new home and embrace the culture. Even if you do have all of your tax filings up to date, there can be various opportunities for saving tax that you may not be aware of. An expatriate tax expert will make sure that you do not miss those opportunities in your home country and in Hong Kong. You will probably find that working with a tax adviser based in the same or similar time zone has some advantages over retaining an adviser located in your home country. Communication will be simpler; they will understand the tax issues faced by those living abroad and they are likely to have the necessary understanding of the local tax regimes that may impact you.

What are the key tax priorities to consider in the current uncertain times?

• Tax residence – if you are unable to travel, this could affect your residence status for tax purposes.
• Immigration status - if you stay abroad longer than planned, you may be in breach of your visa conditions.
• Government support schemes – you may be entitled to financial support or reliefs from tax filing deadlines under various government schemes.

The US and UK governments have released various guidance on the relief available for those affected by the above, so if you’re in this situation, be sure to find out what you are eligible for. If you’re stuck overseas, make sure you hold on to your passport with your original entry/exit dates, flight records, and anything else that proves your stay was extended due to the impact of COVID-19.

This reputation has been particularly prevalent since July 1997, when the region gained independence as a sovereignty and set about establishing itself as a low-tax haven with a raft of lucrative free trade agreements.

In the modern age, however, what is it that makes Hong Kong such an attractive proposition for international investors, and what role does the digital sector play in this?

Accessing a Free Market Economy

The most apt description of Hong Kong was provided by the economist Milton Friedman, who opined that the region was the world’s greatest experiment in laissez-faire capitalism. There can be little doubt that Hong Kong represents the quintessential free market economy, and one that’s built on the principle of lowering trade barriers and minimising corporation tax (this is currently fixed at 16.5% and will not change until 2022 at the earliest).

This is one of the main reasons for the popularity of Hong Kong amongst overseas business owners, who’ll have the opportunity to minimise their operating costs and boost their bottom line profit accordingly.

The low rate of corporation tax is also appealing to forex trading firms, which already benefit from the fact that most brokers don’t charge a levy on currency trading. Not only this, but Hong Kong is now ranked as the fourth-largest financial centre in the world with a 7.6% share of the global forex market, while the region is also home to the second-largest exchange in Asia (behind Singapore). Hong Kong is also renowned for having the fifth-largest stock exchange and largest initial public offering market in the world, and this highlights the appetite for domestic and international investment in an open and prosperous economy.

The low rate of corporation tax is also appealing to forex trading firms, which already benefit from the fact that most brokers don’t charge a levy on currency trading.

The nature of Hong Kong’s economy also contributes to an incredibly influential and cash-rich consumer base, which ensures that firms are able to optimise turnover on an annual basis.

In US dollar terms, one in seven Hong Kong households exist in the millionaire category, and while real estate represents 70% of these assets, there’s clearly an opportunity for international businesses to thrive and target affluent consumer demographics.

How is the Digital Sector Faring in Hong Kong? 

Despite the issues that the region has faced in terms of social unrest and angst, it continues to record average annual GDP growth of around 5% in real terms. One of the key factors here is also the rise of digital and web-based businesses, with Hong Kong’s relaxed commercial climate ideal for low-overhead and tech startups who wish to target a vast and diverse marketplace.

The open nature of Hong Kong’s economy also means that it’s easier than ever for companies to invest in advanced technologies and computational infrastructure, creating a competitive and potential lucrative landscape where profit margins are often higher than in developed economies.

Make no mistake; there’s a clear alignment between the values of Hong Kong’s economy and the ambitions of domestic and overseas SMEs, and this continues to build the digital landscape and lead into a far broader economy-wide transformation. Of course, we’ve already touched on the viability of launching a digital forex trading business in Hong Kong, and this is indicative of an economy that’s perfectly suited to online companies and tech-led startups.

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In terms of the best practice, the way in which you open a business in Hong Kong (digital or otherwise) will depend on the sector that you operate in. For example, firms looking to operate in the competitive forex space will need to identify a key differentiator, while also relying on key knowledge and datasets from the Asian marketplace.

The same principle of standing out from the crowd also applies when launching a business in the digital space, with marketing and the ability to target key demographics in Hong Kong also crucial to new ventures.

Dubai is now the number one city for graduates seeking a career in financial services, whilst London doesn’t make the top ten, reveals a survey by one of the world’s largest independent financial advisory organisations.

In an annual poll, deVere Group asks those who start its flagship Graduate Programme, in which location within the Group’s global network of more than 70 offices they would like to start their international financial services career.

This year, 28% said their first choice would be Dubai. The second most popular was Barcelona (22%); third is Hong Kong (17%); fourth is New York (14%); and fifth is Cape Town (8%).

The remaining 11% is made up of other destinations including Shanghai, Sydney, Geneva, Paris, Bangkok and Abu Dhabi.

deVere Group founder and CEO, Nigel Green, comments: “This survey highlights that the next generation of financial services professionals are open to look beyond the traditional and more established global financial hubs.

“It underscores how cities like Dubai, Barcelona and Cape Town are increasingly important international financial centres and compete with the stalwarts such as Hong Kong and New York.

“With this, as the apparent perception of the wealth mangers and advisers of the future, we can expect this trend to continue for the foreseeable future.”

He continues: “The fact that Barcelona this year is second-placed and London – currently the world’s most important global financial hub – does not make the top ten is interesting.

“Could it be that the respondents believe mainland Europe’s international financial centres offer more opportunities than post-Brexit London?”

Mr Green goes on to say: “These global hubs of finance, trade and commerce represent destinations of incredible possibilities for ambitious grads wanting to embark on careers as wealth professionals.

“There are some shared characteristics amongst these top five cities. These include that English is commonly spoken, they are politically and economically stable and there is a high level of high net worth individuals.

“But these destinations are also quite different from each other in terms of the lifestyle they offer and in terms of clients’ expectations, economic environments and regulatory conditions.

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“With each of the top five cities offering unique opportunities and challenges, each one attracts grads who have often quite markedly different strengths and weaknesses, skill sets and aspirations.”

The 18-month deVere Group Graduate Programme’s training begins at the Malta administration and support office, and graduates are then given the choice to attend an international deVere Academy, before full-time relocation when they actively start their careers.

The deVere CEO concludes: “deVere graduates don’t just witness our client-focused, values-driven, attention-to-detail culture from their side-lines – they’re an integral part of it.

“We like them to share their own personalities and perspectives, because together with our continual training and mentoring, it will allow them to become better financial advisers.”

(Source: deVere Group)

Cheung Wai Man is a solicitor currently practising as a Consultant at Christopher Li & Co., Solicitors & Notaries in Hong Kong SAR. She is also a General Mediator, accredited by Hong Kong International Arbitration Centre (HKIAC) and a member of The Chartered Institute of Arbitrators (MCIArb.) Below, Miss Cheung speaks to Finance Monthly about her legal practice, and in particular, her mediation work.

What kind of disputes that involve mediation do you handle?

Thus far in my career, I’ve worked on four mediation for litigation cases and have appeared as a party’s legal representative in Financial Dispute Resolution (FDR) hearings before FDR Judge – all in matrimonial cases. When it comes to this type of cases, parties have attempted private family mediation, and a few have been able to reach a settlement. In a few cases, this has resulted in having their terms of settlement reduced in Consent Summons by both parties’ solicitors for the Court’s granting of matrimonial settlement order. Other cases have been settled after one or two FDR hearings without having full trial on the question of ancillary relief. Yet, a considerable number of the cases I have handled are still settled traditionally by without prejudiceMediation has been becoming a popular Alternative Dispute Resolution method in Hong Kong since 2010 when the Hong Kong Judiciary implemented a practice direction to encourage parties to have mediation for court cases before trial, with a view to save time and reduce litigation costs. As it’s been less than a decade since mediation was officially introduced in Hong Kong, there is still a lot that needs to be done in terms of developing our domestic mediation practices.

When is the right time to choose a mediator in a dispute?

Normally, the right time to choose a mediator in a dispute is when documentary evidence relevant to the dispute is disclosed and the parties’ issues and stances in the dispute are known. During this stage, the parties are more likely to have an effective mediation conference to communicate and work on their differences with a view to eventually reach a settlement. Parties can then have a clear idea of what mediation can achieve and choose the mediator based on his/her areas of expertise.

How do matrimonial cases differ from other cases that you’ve worked on?

Matrimonial cases tend to be a bit more personal as the Family Court requires to see a party’s report of their finances or a financial statement. Another thing that is specific to the nature of matrimonial cases is that the general atmosphere during proceedings is quite heated and emotional.

Family mediation during the pre-proceedings stage is highly desirable as this is when parties can have a private and confidential negotiation and overcome their differences, which can result in a quick settlement. A friendlier, more civil approach is obviously advisable for families who have children.

What skills would you say are essential for a good mediator?

I think that in order to be a mediator, one should be able to effortlessly encourage two individuals to communicate with one another. A good mediator needs to be confident, articulate, analytical and persuasive and have excellent listening and summarising skills.

What would be your top advice for managing disputes to the best possible outcome?

My top advice is to make sure to fully understand the parties’ cause(s) and the background of a dispute. Assess the strength of each party’s case. Know each party’s expectation for the outcome of the dispute and the concession(s) that each party is willing to make in order to settle it. Avoid and/or shorten the duration of a litigation proceeding to save time and reduce costs, if there is an ADR method that can be used instead. And lastly, encourage both sides to consider a win-win type of settlement.

Contact details: 

E-mail:  christine@member.hklawsoc.org.hk

Tel: +852 9238 2475

Sandy Tao Chen serves as Executive Director – Head of Trusts of the First Advisory Group’s Hong Kong branch and its entities. First Advisory Group is a wealth planning group that was founded in Liechtenstein in 1954.

Sandy’s professional career has been split between New York and Hong Kong, having accumulated more than 20 years’ experience in the provision of wealth planning solutions, specializing in asset protection and succession planning.  She is a full member of Society of Trust and Estate Practitioners, the NYS Certified Public Accountant (CPA) and is a member of AICPA. Below, Sandy speaks to Finance Monthly about First Advisory Group and trust and wealth planning trends in Hong Kong.

Tell us about First Advisory Group and its mission?

First Advisory Group is a leading independent financial services provider with offices in Geneva, Hong Kong, Panama, Singapore, Vaduz and Zurich and has more than 300 experienced employees working around the world to fulfil this commitment. With expertise backed by 62 years’ experience and a diversity of external specialists, the Group offers an independent, one-stop and results focused advisory service for its clients’ wealth management needs.

Furthermore, the Group has formally operated in Hong Kong as a jurisdiction for a number of years, establishing a physical presence in 2010. First Advisory is present and active in all-important financial and business centers worldwide. With its head office in Vaduz, Liechtenstein and further offices in Zurich and Geneva, Switzerland, the Group offers unique locational advantages to its clients, i.e. banking and professional secrecy, highly flexible company law, high legal certainty, high political and economic stability and continuity, highly professional approach to financial services and central location in the heart of Europe.

First Advisory Group offers further attractive locations to its clients in Asia, namely Hong Kong and Singapore, as well as in Central America.

How can trusts be set up and structured in Hong Kong?

• English common law concept;
• One party (Settlor) has a fiduciary arrangement with another party (trustee);
• Settlor transfers legal title of assets to the trustee to hold “in trust”;
• Trustee Holds in trust for the benefit of a third party (beneficiary);
• Protector may be appointed to safeguard interest of beneficiaries.

How can trusts provide tax efficient solutions for clients?

• Minimization of income, estate and inheritance tax;
• Pre-immigration tax planning or planning for returned citizens.

What other wealth planning structures are available in Hong Kong?

At First Advisory, we offer clients diverse and innovative wealth planning services through a single platform. These include international asset structuring by using trusts, foundation and/or corporate solutions. The Group is positioned to deliver a dynamic and sophisticated service, precisely tailored to client needs.

Can trusts be structured in such a way that they can be open to abuse? Which preventative measures can be taken?

Although under the modern trust laws, settlors are given certain powers (i.e. investment power) on the trust, to executive certain investment decisions. The Group’s compliance has taken precautious measures to make sure that we, as a trustee, have the full discretionary power on the trust fund distributions. The investment powers given to the settlors/beneficiaries are only at the limited power of attorney basis. If there is a private company held under the trust structure, one of our Group subsidiaries must act as the director and shareholder of the company. Our compliance department has implemented a strict and powerful system to monitor our clients on an ongoing basis to make sure they are not involved in any legal transactions i.e. money-laundering, drug-tricking, etc.

What makes First Advisory’ services unique when compared to your competitors in Hong Kong?

First Advisory Group offers an independent, one-stop advisory service for our clients’ wealth management needs.

The wealth planning solutions that our Hong Kong office offers are flexible and enduring, aiming at smooth transitions of wealth from generation-to-generation. As all the services derive from one single platform, the Group’s offices can guarantee a seamless and effective solution for our clients. We are one of the very few independent trust companies in Hong Kong that can provide both trust and foundation wealth solutions to high-net-worth clients.

Contact details:

Telephone:  +852 2537 9478

Facsimile:   +852 2537 9476

Email: sandy.chen@first.li

By Melanie Ison, Nerine Group of Fiduciaries Hong Kong Managing Director

Originally from Guernsey in the Channel Islands, I started in the trust and fiduciary sector in 1998. I worked for a large South African bank-owned trust company in Guernsey for eight and a half years before making the move to Hong Kong in June 2007 where I joined a large global bank-owned trust company. From there I moved to Nerine in 2008, and took over the running of the Hong Kong office in 2011 with formal appointment as managing director in 2015.

The Nerine Group of Fiduciaries core business is bespoke succession and wealth structuring for global High-Net-Worth (HNW) and ultra HNW families.

Guernsey is a leading jurisdiction for succession planning so it was natural for me after finishing my education to move into this interesting sector. When I started in the industry, I quickly realised that succession planning for individuals and families exposed me to a wide range of issues and circumstances. It is a varied area of wealth management and has a genuine impact on people’s lives; getting it right for a family is rewarding. Being able to apply my experience and expertise in structuring appropriately for families brings a lot of satisfaction. There is an assumption that we deal solely with financial assets but that’s just not the case. We have the capabilities to deal with real property, family businesses and unique assets as well as facilitating family discussions and managing issues; family governance matters are becoming an increasing part of what our clients need from us.

From a Nerine perspective, my key responsibilities in Asia include overseeing the growth of the business in this region and ensuring Nerine’s brand remains strong in the region. Nerine has an enviable reputation for working with the best professionals in the best interests of our clients throughout Asia. I have been significantly involved in ensuring Nerine is synonymous with expertise and knowledge, and am pleased to say we are trusted by our clients and have grown both our staff numbers and our business presence and recognition throughout Asia.

It is through our trusted relationships, and our ability to tailor bespoke solutions to each client’s needs and expertise that we succeed. Trust and fiduciary specialists should give the right advice and implement the right solutions, so families can ensure they’re as well prepared as possible to preserve and enhance their wealth for the next generation and beyond.

At Nerine, we help families to get the right professionals involved to address their broad financial and familial needs. We anticipate issues and put in place good family governance, appropriate ownership structures and excellent corporate governance for their circumstances; it’s not an overnight process and taking shortcuts can have disastrous consequences.

Ineffective succession planning can cause a family business to shut down overnight. There is significant case law in Asia which can all too often make this a reality. One of the best known, and widely publicised, of these cases was the famous Yung Kee Restaurant and the founding Kam family. The case ended up in Hong Kong’s Court of Final Appeal and caused a bitter family feud because expectations were not managed and family members had differing views which had not been clearly defined or planned for in prior discussions. Cases like this are increasing as families become more international and generations think differently from one another; they help us as responsible fiduciary specialists to hone of expertise and avoid pitfalls.

Cultural sensitivities must be taken into account, particularly in the area of family wealth and business  where  the younger generations may have been schooled elsewhere and don’t hold the same traditional values and visions as their parents or may not feel the same sense of legacy towards the family business and wealth.

Asian HNW individuals and families continue to grow in number and wealth. Their needs, and those of the generations to follow them, will evolve and develop as they lead increasingly global lives with varied interests. It is those fiduciary experts that fully immerse themselves in the region, who are able to cater to the varied demands and respect the traditions, while keeping abreast of developments within the sector, who will win the trust of clients looking to ensure their legacy is secure and successfully passed on  to the next generations.

Nerine Trust Company (Hong Kong) Limited
Suite 1703
17th Floor Central Plaza
18 Harbour Road
Wanchai
Hong Kong
Tel: +852 3125 1200Fax: +852 2537 7624
Melanie.Ison@nerine.com.hk

HSBC’s Group Chief Executive Stuart Gulliver blamed a ‘challenging year’ for the banking group’s 17% drop in profit before tax (PBT), as the financial giant posted its full year 2014 results today. The results follow allegations earlier this month that HSBC’s Swiss unit has assisted people to avoid and evade tax using hidden accounts in Geneva.

The beleaguered bank filed a PBT of $18.7 billion (€16.5 billion), down from US$22.6 billion (€19.9 billion) in 2013. The banking group said this primarily reflected lower business disposal and reclassification gains and the negative effect, on both revenue and costs, of significant items including fines, settlements, UK customer redress and associated provisions.

Adjusted PBT was broadly unchanged in 2014 at $22.8 billion (€20.1 billion) and excludes the year-on-year effects of foreign currency translation and significant items, compared with $23 billion (€20.3 billion) in 2013. Return on equity was lower at 7.3%, compared with 9.2% in 2013.

However, HSBC did report stable revenue, with 2014 adjusted revenue of $62 billion (€54.8 billion) compared with $61.8 billion (€54.6 billion) in 2013, underpinned by growth in Commercial Banking, notably in its home markets of Hong Kong and the UK.

Stuart Gulliver, Group Chief Executive said: “2014 was a challenging year in which we continued to work hard to improve business performance while managing the impact of a higher operating cost base. Profits disappointed, although a tough fourth quarter masked some of the progress made over the preceding three quarters Air Maniax. Many of the challenging aspects of the fourth quarter results were common to the industry as a whole. In spite of this, there were a number of encouraging signs, particularly in Commercial Banking, Payments & Cash Management and renminbi products and services. We were also able to continue to grow the dividend.”