EN
On 11 February 2022, we published an article discussing a judgment of the Court of First Instance (CFI) (See Tam Sze Leung & Ors v Commissioner of Police [2021] HKCFI 3118). In that judgment, after holding that the longstanding practice of the Commissioner of Police to issue “Letters of No Consent” (LNC) was unconstitutional, the Court postponed the granting of relief.
On 23 March 2022, the CFI granted relief in its decision [2022] HKCFI 772, in which the LNCs and the LNC Regime as operated by the Commissioner of Police were declared “ultra vires sections 25 and 25A of Organised and Serious Crimes Ordinance (Cap 455) and incompatible with articles 6 and 105 of the Basic Law“. In other words, the current position in law is that an LNC is unconstitutional, and as such the Police may not use it as a tool to “administratively” freeze a bank account which is suspected to hold proceeds of crime.
Although Tam Sze Leung is a first instance decision, and the Commissioner of Police may lodge an appeal against the decision in the near future, until we have a higher court decision ruling to the contrary, victims (in particular, those of cyber fraud) should give serious consideration to applying for an injunction to minimise the risk of dissipation of the stolen funds.
In our previous article dated 27 January 2022, we reported on the enforcement action of Hong Kong’s Securities and Futures Commission (SFC) against Zhonghui International Futures Company Limited for breaching know-your-client, anti-money laundering and counter-terrorist financing (AML/CFT) requirements. On 16 Mar 2022, the SFC once again reprimanded and imposed a substantial fine (HK$5.4 million) on two licenced corporations, i.e. Emperor Securities Limited (ESL) and Emperor Futures Limited (EFL), for their AML/CFT breaches. Each of ESL and EFL is licensed under the Securities and Futures Ordinance to carry on Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities, and Type 2 (dealing in futures contracts) and Type 5 (advising on futures contracts) regulated activities, respectively.
The SFC found that ESL and EFL failed to implement adequate and effective policies and procedures to mitigate the risks of money laundering and terrorist financing associated with a total of 732 and 32 third-party fund transfers, respectively, involving funds of approximately HK$1.05 billion and HK$17.6 million respectively. The breaches of ESL and EFL include approving relevant transfers without adequate explanations or verifying documents, despite presence of red flags.
The imposition of this substantial disciplinary sanction is another example of the SFC sending a “strong deterrent message” to the market to guard against AML/CFT failures. For further information, please visit the SFC’s website here.
In December 2021, the Hong Kong Stock Exchange announced new rules to accommodate listings of Special Purpose Acquisition Companies (“SPACs”) after witnessing the growth of SPAC listings in the US. A SPAC, as defined in the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, refers to “an issuer that has no operating business and is established for the sole purpose of conducting a transaction in respect of an acquisition of, or a business combination with, a target, within a pre-defined time period, to achieve the listing of the target”. A SPAC is often known as a blank check company. The SPAC listing regime in Hong Kong came into effect on 1 January 2022.
In general, the Hong Kong Stock Exchange only allows professional investors (as defined in section 1 of Part 1 of Schedule 1 to the SFO) to invest in SPACs. A SPAC is required to raise IPO funds of at least HK$1 billion which must be held in a ring-fenced escrow account in Hong Kong operated by a trustee or custodian. The minimum board lot size and subscription amount will be HK$1 million. At listing and on an ongoing basis, at least one SPAC promoter must be licensed for regulated activity Type 6 (advising on corporate finance) and/or Type 9 (asset management) under the SFO and must hold at least 10% of the promoter shares. The Hong Kong Stock Exchange also requires the SPAC board to include at least two Type 6 or Type 9 licensed individuals (including one director representing the licensed SPAC promoter). Further, a SPAC must meet all other open market requirements applicable to a new listing, including the 25% public float requirements.
Hong Kong had its first SPAC IPO in March 2022, and the Hong Kong Stock Exchange is reviewing a further 10 SPAC applications for listing filed between January and March 2022. It is believed that Hong Kong will attract prospective SPAC issuers as it offers a platform for the SPAC issuers to hunt for acquisition targets in mainland China.
Private equities and companies looking to acquire targets in mainland China with a SPAC are advised to consider whether its SPAC may be eligible to be listed on the Hong Kong Stock Exchange when considering its listing venue.
On 11 February 2022, the Government of the HKSAR published the Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Bill 2022 (the “Bill”) in the Gazette after years of consultation. The Bill is to abolish the use of the accrued benefits of employers’ mandatory contributions under the Mandatory Provident Fund (“MPF”) Scheme to offset statutory severance payment (“SP”) and long service payment (“LSP”) (the “Offsetting Arrangement”). The abolition is also applicable to other retirement schemes, notably the ORSO Scheme. The eventual implementation of the Bill is said to be in 2025 at the earliest.
The Offsetting Arrangement will be abolished starting from a date to be appointed after the enactment of the Bill (the “Transition Date”). The proposed abolition will not have retrospective effect. After the Transition Date, employers can no longer use employers’ mandatory contributions to offset employees’ SP/LSP in respect of an employee’s employment period starting from the Transition Date. Typically, for employees who commence their employment before the Transition Date and whose employment is terminated on or after the Transition Date, their SP/LSP will be divided into two portions:
The rate and maximum payment of SP and LSP will remain unchanged after the abolition of the Offsetting Arrangement, being 2/3 x (the last month’s wages (or the average monthly wages of the preceding 12-month period) or HK$22,500, whichever is lesser) x years of services, subject to a cap of HK$390,000. The pre-transition portion would generally be calculated on the basis of the monthly wages immediately preceding the Transition Date whereas the post-transition portion would be calculated on the basis of the last monthly wages before the termination of employment.
While abolishing the Offsetting Arrangement would help improve employees’ retirement protection, the business sector, notably micro-, small- and medium-sized enterprises (“MSMEs“) remained highly concerned over the possible financial impact of the abolition. The Administration advised that supporting measures would be put in place to facilitate the transition and MSMEs would stand to benefit from, among others, the Government 25-year subsidy scheme totalling $33.2 billion at 2021 prices.
Employers are advised to get familiar with the changes introduced under the Bill and seek legal advice if necessary.
For further information, the Bill is available here.
On 11 February 2022, the District Court handed down its judgment for Francis William Haden v Leighton Contractors (Asia) Limited [2022] HKDC 152, a case concerning alleged race discrimination in the context of a termination of employment. This case was nicknamed the “gweilo” case as this term was allegedly the subject of the race discrimination complaint. The article explores the legal principles laid down by the Court in the judgment and highlights lessons for making a successful discrimination claim. MinterEllison LLP acted for the successful respondent in the case.
The full article can be found here.
See news from our global offices