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By: Tim Hamlett
It would be nice to think the Hong Kong government had stumbled into its recently-announced decision to protect the identities of businesspeople in the Companies Registry out of a well-intentioned effort to protect them from doxing, the practice of exposing identities without permission.
But there is an old saying in military circles: if something bad happens once it is a misfortune; twice is a coincidence; three times is enemy action. The attempt to curb access to the Companies Registry comes soon after the prosecution of an investigative journalist for using information about vehicle registration supplied to the public by the Transport Department to identify the masked perpetrators of attacks on pro-democracy demonstrators in 2019. That was followed by the news that court sheets are to be purged of the identifying details of defendants and other participants, including the prosecutor. This will be a serious impediment to the proper coverage of trials.
Three phases
The change, justified by Chief Executive Carrie Lam on the grounds that “personal information should not be disclosed … unless there is a crucial need for it to be made public” will come in three phases.
In the first, which starts now, companies will be given the right to withhold the home addresses and parts of the ID numbers of directors from public viewing. The second, to start in October, will prevent public access to any “protected information” listed on the registry. The third, penciled in for December 2023, will allow companies to apply to the registry for any information they wish to be “protected.”
There were immediate complaints from journalists and their organizations that this would make the investigation of abuses much more difficult. Lam, who has a knack for missing the point when confronted with criticism, responded that there was no reason why journalists should have a “privilege.”
But journalists are not the only people who find access to this sort of information useful. A Bloomberg report said that businesspeople also found the prospect of losing it discouraging, and it might deter some from operating in Hong Kong at all. Other observers characterized the change as a boon to perpetrators of money laundering and fraud.
A charitable explanation for the controversy would be that two strong currents are here colliding, producing turbulence. One of them is comparatively modern: the idea of privacy. When I first started teaching media law and ethics in Hong Kong several decades ago my students told me that there simply was no word in Chinese for privacy. Many of these young adults reported that their mail was routinely opened and read by their parents.
Hong Kong’s first legislation in the area was prompted by warnings that the European Union would ban the export of data to any jurisdiction which did not have legislation which would ensure its protection. This produced the Personal Data Privacy Ordinance in 1995 which, with subsequent improvements, is still regarded as one of the best regimes for this purpose in Asia. But as happens often with well-intentioned improvements of this kind it soon had unintended consequences. The ordinance set up an office, and a commissioner, who in due course became privacy enthusiasts and sought to extend its umbrella to matters well beyond the original intention: to encourage careful custody of computer databases.
People holding all kinds of data developed a fear, perhaps in many cases a healthy fear, of being accused of data malpractice. More controversially, people who needed to keep things secret seized eagerly on a new legal implement with which to threaten investigators and whistleblowers. The other current involved in this whirlpool goes back much further. The limited liability company was effectively developed in the 19th century to meet the demands for large sums of capital engendered by the industrial revolution. Its distinctive feature was that the company was a legal person in its own right, separate from its owners.
Consequently, if the business went pear-shaped you could sue the company, but the owners were only liable for the money they had put in for “shares”. Partners in a business enterprise could no longer be bankrupted or jailed by irate creditors. It was obvious from the earliest stage that there were hazards in this arrangement – for the creditors. John Stuart Mill put the case in principle for disclosure and urged that limited companies should be required to publish the identities of their directors and also their accounts. This is the origin of the Companies Registry, which embodies the principle that limited liability is a privilege which must be justified by openness. Anyone can, for a small fee, look at the file wherein the returns of any particular company are kept. This can, of course, now be done online.
It is difficult to see any recent change in commercial practice that would justify restricting this access. Potential creditors and other stakeholders still need access to as much information as they can find about companies. Standards of behavior among company directors have not noticeably improved.
It must also be said that the requirements of record-keeping and reporting by companies are not rigorously enforced. When I was a frequent user of the companies registry it often appeared that some returns had not been supplied for years.
Other wheezes which made life frustrating for inquirers included the use of lawyers as shareholders on behalf of clients. The lawyers would then refuse to identify their clients as a matter of professional privilege. Or the company would be owned by another company, leading you onto a trail which eventually led to the British Virgin Islands, or some other relaxed tropical venue whose registry is not searchable.
It is particularly ironic that the government’s proposal seeks to give directors the right to conceal their home addresses. There was an entertaining micro-scandal a few years ago when it emerged that large numbers of directors — including some notable public figures — had given as their “residential address” an address which was clearly not a home. It was an office. There is no reason to believe that this habit has become less common.
May we discern the influence of a mainland string-puller behind the scenes who is careless of the distinction between privacy and secrecy? Lam has expressed the intention to “reform” the Hong Kong media. Making reporting more difficult is not a good place to start.
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