| July 2007 |
 |
 |
 |
 |
|
|
I started writing this month's Corner while in New York and, well, this happened...
I started again in Vienna and, well, this happened...twice...
I dared to try typing while in the Burgundy wine region, but, well, this happened...
I finally succeeded in Prague knowing full well that Warsaw, Tallinn and Moscow would cause significant problems. My success came despite this happening...
Back to the serious stuff... GCSL has spent an incredible amount of time recently reviewing, confirming and updating our due diligence procedures. Cathy Odgers, our Group Legal Counsel and Compliance Officer, has visited the GCSL offices for training of staff, reviewed the laws and spoken with the regulators. Simply stated, GCSL takes the due diligence function very seriously to ensure we are in compliance with the regulations to which we are subjected and users of offshore services know what is required. We have been saddened and shocked by the offshore providers who take advantage of their clients now to get the business and then surprise them later with the requirements of due diligence. If your offshore provider is not asking you for any information or very little, then you may want to ask why. After all, these offshore providers will eventually be audited by their regulator and will need to be compliant. GCSL is actively encouraging regulators in all jurisdictions to conduct such audits as frequently as possible to ensure their offshore providers are compliant with the law and the users of such services are not, unknowingly, being led astray. Do not be put in a position where your offshore provider writes to you six or twelve months after you have started operations and informs you that you have a certain number of days to provide the offshore provider with relevant due diligence or your company will be struck off. Yucky-pooh and we have seen this situation in some of the files transferred to GCSL...not a good situation!!! Be diligent...do it right now...that is the GCSL way!!! So let it be written... |
 |
|
|
GCSL
CONTRIBUTES TO THE CENTER FOR FREEDOM & PROSPERITY |
|
AOA HO CHI MINH
CITY, OCTOBER 31 TO NOVEMBER 2, 2007 |
|
AOA WWW SITE |
|
AOA CONTRIBUTES
TO THE CENTER FOR FREEDOM & PROSPERITY |
 |
|
|
LIMITED
LIABILITY COMPANY BILL APPROVED The proposed legislation, which could take effect in the first half of 2008, will reduce the amount of capital required to establish a GmbH from currently £á 25,000 to £á 10,000. Even a start up without any capital will be possible if the company retains profits until sufficient capital is accumulated with shareholders not receiving any dividend distributions prior to that time. Unlike the current system, simple setups will not require the involvement of a notary public and the Company Registrar may register companies before other necessary licenses and approvals have been obtained. Furthermore, company headquarters will no longer need to remain in Germany or at the registered location. Justice Minister Brigitte Zypries announced that the draft will enhance protection for creditors, make German limited liability companies more attractive and guarantee their place in the international arena. Contributed
by Peter Dehnen, D&P Dehnen GmbH |
 |
|
|
HONG
KONG 10 YEARS ON - A HISTORICAL REVIEW July 1997: The handover to Chinese rule comes with promises of "50 years, no change" to the people. Mr. Tung Chee Wah is appointed Chie Executive to replace the outgoing governor Chris Pattern. Oct 1997: Asian Financial Crisis. Hong Kong survives the currency devaluation as the government injects US$15 billion of reserves to defend the currency against hedge funds and foreign market raiders. 1998 - 1999: Not a good period for Hong Kong as the city recovers from the aftermath of the Asia financial crisis. Although not as economically hit as its neighboring Asian countries, the knock-on effect resulted in a 2 year recession for the local economy. 2000: The dot-com bubble hits the SAR as every business jumps onto the cyber-wagon. Tom.com lists at 2000 times over-subscription and a new 2nd board Growth Enterprise Market (GEM) market is created to cater for dot-com investors. 2001:Tech
bubble bursts causing stock values to plummet making the GEM board the
worst performing bourse in the world by the end of the year. June 2003: Nearly 1 million people take to the streets to protest against a government increasingly unpopular due to a series of political and economic domestic issues. This high level resignations and restructuring of government provides optimism to the people as government listened. 2004: Tung Chee Wah resigns as Chief Executive. Replaced by Donald Tsang, the Financial Secretary. 2005: China
assists in Hong Kong's recovery. CEPA - Closer Economic Partnership
Arrangement - 2006: Hong Kong enjoys record growth as the SAR benefits from China's economic boom and becomes the financial gateway to China. Hong Kong stock market is the 2nd largest IPO market in the world with major state banks and China companies choosing to list here. 2007: Economy continues to grow and local confidence and prosperity reaches highest post-handover levels while Hong Kong still retains its global number one position as freest economy in the world. Hong Kong has experienced a rollercoaster ride of a decade. From a personal viewpoint, what stands out during the events of this decade is the resolve of the local people in the face of adversity, honesty in seeking changes when pressed and the entrepreneurialism to capture new opportunities. Resolve, honesty and entrepreneurial spirit are traits we Hong Kongers have learned and they provide the foundation of what makes Hong Kong a leading global city. Happy 10th Anniversary Hong Kong!!! Contributed
by Tony Chan, General Manager - Fiduciary Services, GCSL Hong Kong
|
|
DUE DILIGENCE
(KNOW YOUR CLIENT) REVIEW Due diligence can loosely be defined as client identification, that is knowing with whom we are dealing and making sure all details given to us by clients and intermediaries are accurate. All of those operating in the offshore industry have to check this information by methods such as obtaining a certified passport copy, address proof or bank/personal reference. Another important collection method is completion and signature of our Company and Trust order forms. Various declarations in the forms are compiled not for GCSL in-house reasons, but because we need the information to comply with the actual law in the jurisdiction in which we are operating at the time and under which our operating license was issued. With the rapid expansion of the Group (we are now up to seven offices in less than a year), it is important that we have as close to standardised due diligence procedures as possible. With that in mind, I have conducted a review of each jurisdiction's legislation and compared it with our current practices. What has resulted is the conclusion that the law and practice of each jurisdiction (what is happening over the whole offshore industry) sometimes do not match as closely as they should. This will inevitably result in trust companies unsure of the minimum requirements for operation. The advantage GCSL has over other trust companies is that we have actual GCSL employees staffing offices in each of the seven jurisdictions in which we operate. These staff members can examine what is going on in each of their jurisdictions, including recent formal and informal developments, and report back accordingly. All jurisdictions have relevant general Anti-Money Laundering laws, but it is not until the ubiquitous, sometimes either formal or informal, "Guidelines" produced by authorities are examined that we can see what the best practice in each jurisdiction is and apply it to our own policy on collecting due diligence from our clients and intermediaries. I have now met and spoke personally in-depth with most regulators and am working with staff at the coal face of each GCSL operation to comprise a clear list of items required under basic minimum law in each jurisdiction. These items may vary between jurisdictions and this will hopefully be communicated clearly after the review has been complete. The grand conclusion is that with tighter rules and restrictions placed on clients that trust companies can accept, it is highly inevitable and beyond our control that all jurisdictions, regardless of their minimum requirements at present, will converge in a short space in time to a level of the toughest of the jurisdictions. All we can really ask for then are clear procedures and consistency in application across the whole offshore industry. Contributed
by Cathy Odgers, Group Legal Counsel and Compliance Officer, GCSL Hong
Kong. |
| |
|
|
PLAYBOY
MANSION TO OPEN IN MACAU Contributed
by Tony Chan, General Manager - Fiduciary Services, GCSL Hong Kong |
|
|
|
|
TAX REBATE REDUCED
OR REMOVED GIANT IT - INTEL'S
MOVE IN CHINA MERGER AND ACQUISITIONS
IN CHINA FACING SECURITY SCRUTINY QDII EXPANDED
TO INCLUDE SECURITIES AND FUND COMPANIES WAHAHA VS. DANONE Wahaha is now the largest beverages company in China, despite modest beginnings in Hangzhou in 1987 as a sales department of a school-run business. Revenue now exceeds US$100 million. In 1996, Danone, a leading Fortune 500 company along with a Hong Kong based investment company (Peregrine) reached an agreement with Wahaha to establish five joint ventures in China. The shareholding arrangement was Wahaha with 49% and Danone and Peregrine with 51%. However, after the Asia financial crisis, Peregine sold its shares to Danone, which is now the 51% shareholder. Since Danone taking control of Wahaha's operations, disputes between the two party's management teams have been ongoing. As a result, Wahaha set-up separate companies to exploit the Western part of China. These companies have met with great success including approximately US$137 million in net profits. Recently, Danone made a request to acquire the separate companies based on the argument those companies never obtained authorization from Wahaha Danone Joint Venture to use the Wahaha trade mark. The acquisition encountered strong resistance from the Chinese party, as they argued the trade market "Wahaha" was never transferred to the Wahaha Danone Joint Venture. Danone filed a lawsuit in the USA against the separate companies for illegally selling products that are identical to those sold by the joint ventures. They claim more than US$100 million in damages. In addition, Danone has filed for arbitration in Stockholm to help resolve the dispute. On the other hand, Wahaha has also applied for arbitration over a trademark dispute with Danone at the Hangzhou Arbitration Committee for terminating a trademark transfer contract, as they contend the contract with Danone was never approved by China's trademark authority, which means the transfer was invalid and the contract should be terminated. Watch this space as the Danone v Wahaha dispute is just in its infancy!!! Contributed
by Johnson Chien, General Manager - Fiduciary Services, GCSL Shanghai |
|
|
|
|
FAR EAST SWITZERLAND
- REVISITED S&P has affirmed its top "AAA" long-term and "A-1+" short-term sovereign credit ratings for Singapore and further added that the outlook for the Republic is stable, reflecting its belief that Singapore will maintain its substantial fiscal and external reserves to withstand any external shocks. S&P pointed to Singapore's strong net external position as a reason for the high ratings and added that the ratings are also supported by a strong record of political stability and prudent economic management. S&P's outlook for Singapore includes its expectation that the Republic can keep building on its restructuring efforts and maintain a competitive edge. Singapore's government surplus remains one of the highest in the world, giving it the fiscal flexibility for ongoing restructuring. On a related matter, and as chocolate is quintessential to the Swiss package, so is the famous Hainanese Chicken Rice to Singapore. Nowhere else in this world can you find a vendor with the perfect concoction of chili, ginger and dark sauce, served with al-dente chicken and perfectly lubricated white rice (notice that the chilli, ginger and dark sauce come first!). I have enjoyed the last two weeks with Tony Chan from our Hong Kong Office, visiting accountants, consultants, bankers and the like, to refresh them on the beauty and advantages of Anguilla, Belize, Cook Islands, Samoa and all the GCSL offices. This gave me the opportunity to expose Tony to some of the subtleties of the Singapore Chicken rice. Alas, here, I may have gone overboard. Suffice it to say now that he will not feel any urge to eat the delectable dish for quite some time. Ah, the Singapore hospitality. Contributed
by Lawrence Fong, Managing Director, GCSL Singapore |
|
SINGAPORE - A BOOMTOWN
FOR MILLIONAIRES Contributed
by Tony Chan, General Manager - Fiduciary Services, GCSL Hong Kong |
 |
|
|
ANGUILLA: THE
CONCEPT OF A "FOREIGN REGULATED PERSON" UNDER THE ANTI-MONEY
LAUNDERING REGULATIONS 2006 These AML Regs speak mainly to the identification procedures. All those to whom they apply, as stated above, must follow the AML Regs when dealing with clients/customers for business. So, for example, the AML Regs apply to the company formation agent who has a client who wants an IBC and they apply equally to an insurance manager who has a client who wants to establish a captive insurance company. The AML Regs specify the identification procedures to be established and maintained, the records to be kept, internal reporting and training procedures as well as other matters pertaining to offences etc. They also provide a mechanism whereby due diligence can be held by someone other than the company formation agent, trust company, offshore bank or other financial services industry professional mentioned previously. Of the three options available, the most important is the concept of the foreign regulated person and it is to this peculiar character that I will now turn. The term is defined in section 1(1) of the AML Regs as follows: "foreign regulated person" means a person:
It is important to understand clearly what this means in fact and practice. The first thing that must be noted is that the term can refer to either a corporate entity or a natural person. In Anguilla, individuals can hold licenses as company formation agents, trustees etc. Of course, the usual practice is not to do so because of the potential legal exposure and liability associated with such a decision. Relevant financial business as defined in the Regulations refers to the following activities:
Under the Money Laundering Reporting Authority Act 2000, which allowed for the AML Regs to be issued, the Money Laundering Reporting Authority designates certain jurisdictions as having legislation equivalent to these Regulations. To date, only OECD member countries along with Hong Kong and Singapore are on this list of jurisdictions. The Commission, however, is in the process of updating and therefore adding more jurisdictions to it. GCSL has made recommendations to this effect and expect that several of our jurisdictions will indeed be added. Finally, the Commission has to approve each potential "foreign regulated person." The Commission has recently issued guidelines as the basis upon which a decision shall be granted designating an applicant as a "foreign regulated person." I shall discuss the criteria in a subsequent article but it is important now to focus on the practical significant of the grant of this designation. Business introduced to a service provider by a foreign regulated person must be assessed in terms of due diligence in the same manner as business coming directly to the service provider. However, the foreign regulated person is allowed, under the AML Regs, to give to the service provider, an undertaking verifying that he/she/the firm, has indeed conducted the necessary background checks and thus the due diligence is maintained by him/her/the firm. This does not absolve the foreign regulated person from complying with the AML Regs, but rather that the due diligence can be kept by the foreign regulated person. For clients who are very sensitive regarding where due diligence is maintained especially where the clients are unfamiliar with Anguilla as a jurisdiction, the foreign regulated person concept allows the clients' fears and concerns to be addressed while at the same time ensuring that Anguilla's regulatory regime is adhered to, the laws of Anguilla are respected and proper identification of the clients is done. GCSL Anguilla stands ready to assist any service provider to apply for and receive this designation and to work with them to develop their business and the industry in Anguilla for the benefit of all parties concerned. Contributed
by Carlyle Rogers, Managing Director, GCSL Anguilla |
|
BELIZE: THE TRUSTS
(AMENDMENT) ACT 2007 The procedure for registration is simple: the Trust deed will be registered by one of those persons filling out the application form and then submitting it, along with an affidavit from the Trust Agent stating the name of the Trust, the date of settlement, the Trustee, the Protector, the Trust Agent and that the documents are being kept with the Trust Agent at wherever they have their offices. The Trust Agent is a person or entity that has been granted a license by the International Financial Services Commission of Belize. The Director-General of the International Financial Services Commission is now the Registrar of the newly created International Trusts Registry. The trust must be registered at this registry, but the trust deed is not kept at the Registry. What is kept at the Registry is the application and the affidavit of the Trust Agent, which has the basic information, as indicated above. If one had previously volunteered to register a trust, then the entire trust deed would need to be submitted to the Supreme Court Registry. This has resulted in even further privacy for the Settlor and his trust arrangement. Easier access could then be had to the actual trust deed and all its provisions. Now, should ever such an order be granted by the court, the individual will gain access, but then there will be no idea as to how the Settlor has provided for the beneficiary, and what if anything the trust has provided for. The other significant development in Belizean trust legislation is the creation of the office of Trust Agent, by virtue of section 65E. Previously one had only the office of Trustee to deal with, but now, the Trust Agent position has been created, one which must be licensed by the IFSC to engage in the business of offering trust services. Therefore, the very same trust company also has the responsibility of being the Trust Agent. The Trust Agent must be responsible for the acceptance of any legal service on behalf of the Trustee and the Protector of the trust, and must keep a register, showing the name of the Trust, the date of settlement, the name of the trust, date of registration of the trust, name(s) of the trustee(s), name of Settlor, name of protector (if any), names and addresses of all the beneficiaries, initial funds settled, additional funds settled, changes in beneficiaries, change of protector, original trust instrument and any amendments thereto. These are some of the changes to the Trust law now in place, as the amendment came into force on the 15th day of June, 2007. There will be some teething pains, but rest assured that the law has changed for the better. In the next newsletter I will go into some more changes wrought by the amendment. Enjoy, and should you desire a copy of the amendment, feel free to contact me. Contributed
by Carlo Mason, Managing Director, GCSL Belize |
|
COOK ISLANDS:
PROTECTING YOUR ASSETS USING AN INTERNATIONAL COMPANY We are all aware
of how the concept of asset protection has become developed in trusts,
where the legal ownership of an asset is isolated from the use and enjoyment
of same. The basic idea of asset protection using trusts as the vehicle
of choice, has evolved over the years (well lets make that centuries)
where today all offshore jurisdictions that have embraced the idea of
asset protection trusts, have more or less become uniform in their approach
and use of these creatures of equity. In the Cook Islands,
legislators wanted to extend this flight clause concept to corporations
incorporated under the International Companies Act. They devised an
ingenious provision in Section 228B of that Act which specifically allows
a Cook Islands' International Company to state in its articles of association
that membership of the International Company will change automatically
upon the happening of a specified event. The specified event can be
any event whatsoever and may include actions which are a result of attempts
by a foreign government to adversely impact upon a membership interest.
Upon the occurrence of a specified event, the membership interest will
automatically vest in a specified person. If it all sounds familiar
to what you would read in a trust instrument - you would be absolutely
correct because these are typical words in a "flight clause"
found in asset protection trusts, but which have been adapted for corporate
use. For those service providers in civil law jurisdictions who have difficulty coming to grips with the concept of trusts - this is an ideal vehicle to use as the alternative for asset preservation objectives. Contributed
by Puai Wichman, Managing Director, GCSL Cook Islands |
|
SAMOA: BANKING
CENTRE OF THE FUTURE? The above Act provides for three classes of banks: an "A", "B1" and "B2" international banks. What distinguishes each class is the amount of capitalization required with an A class bank needing unimpaired paid up capital of US$10,000,000; a B1 needing US$2,000,000; and a B2 needing US$250,000 of paid up and unimpaired reserves. A B2 bank is not permitted to accept deposits from the public. The usual prudential and physical presence requirements apply to all classes. Physical presence is defined in the Act as "¡K a place of business maintained by the international bank and located at a fixed address, other than a post office box or electronic address in Samoa and at which location the bank -
There are additional requirements in the event that the bank wishes to carry on domestic banking business in Samoa. It is worthy to note that, while there already are a number of International Banks in Samoa, the application process is both extensive and thorough, with SIFA keen to maintain the integrity of the jurisdiction by ensuring that applicants not only have the financial means, but also possess the necessary skills to operate and manage a bank. SIFA is a very approachable and pragmatic regulatory body and will advise and lead applicants through the licensing process. However, make no mistake - SIFA will not take short cuts in determining the suitability of applicants. This approach has proven to be a winning formula and serves Samoa well for a future as a recognized international banking centre in the Pacific. Contributed
by Laura Fepuleai, Manager, GCSL Samoa |
 |
|
|
The things that make us smile, frown and generally make life interesting... OUR
MONTHLY QUOTE THAT MADE US SMILE GOOD COP, BAD
LAWYER
The courtroom erupted in laughter, and a prompt recess was called. Let's hear it for the cop!!! KIDS SAY THE
NICEST THINGS
AND WE THOUGHT
WE HAD HEARD EVERYTHING... A SEXY STORY |
An officer of the law was being cross-examined by a defense attorney
during a felony trial. The lawyer, as expected, was attacking the policeman's
credibility¡Kwell, sorta. Smile as you read¡K
|
The contents of the Global Consultants and Services Ltd's ("GCSL") Newsletter is for reference purposes only, and is provided by GCSL as a complimentary service. We have reviewed many different publications to compile this information, and we recommend that readers conduct due diligence before acting on any opinions mentioned herein. GCSL, its directors, officers, shareholders, employees, affiliates and agents do not warrant the accuracy or reliability of any information made available herein. In accordance with the Personal Data (Privacy) Ordinance, Chapter 486, of the Hong Kong Special Administrative Region of the People's Republic of China, we hereby inform you that we will discontinue sending our newsletter to you in the event you request we do the same. |
 |