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CSjJune 2020DigitalreadinessIn a time ofuncertaintyCrisis managementTech tools for CSPsData protection

ANNUAL CORPORATEANDREGULATORYUPDATE Thank You! The long-standing Annual Corporate and Regulatory Update (ACRU) conference was heldas the first online ACRU on 5 June 2020. At this 21st ACRU, we welcomed more than 1,900Chartered Secretaries, Chartered Governance Professionals, chairmen, directors, regulators, otherprofessionals and senior management who joined online.Our sincere gratitude goes to:Companies RegistryHong Kong Business Ethics Development Centre, ICACHong Kong Exchanges and Clearing LimitedSpeakers and Panel ChairsSponsors and Supporting OrganisationsTogether we made the 21st ACRU a huge success in promoting a high standard of corporategovernance that lives up to Hong Kong’s reputation as one of the world’s leading financial centres.Co-SponsorsGold SponsorsC100 M60 Y10 K53C0 M94 Y64 K0Silver SponsorsPlantinum SponsorsThe Hong Kong Institute of Chartered Secretaries 香港特許秘書公會 (Incorporated in Hong Kong with limited liability by guarantee) www.hkics.org.hk

June 2020Good governance comes with membershipAbout The Hong Kong Institute of Chartered SecretariesThe Hong Kong Institute of Chartered Secretaries (HKICS) is an independent professional body dedicated to the promotion ofits members’ role in the formulation and effective implementation of good governance policies, as well as the developmentof the profession of Chartered Secretary and Chartered Governance Professional in Hong Kong and throughout the mainlandof China (the Mainland). HKICS was first established in 1949 as an association of Hong Kong members of The CharteredGovernance Institute – formerly known as The Institute of Chartered Secretaries and Administrators (ICSA) of London. It wasa branch of The Chartered Governance Institute in 1990 before gaining local status in 1994 and has also been The CharteredGovernance Institute’s China Division since 2005. HKICS is a founder member of Corporate Secretaries InternationalAssociation Limited (CSIA), which was established in March 2010 in Geneva, Switzerland. In 2017, CSIA was relocated toHong Kong where it operates as a company limited by guarantee. CSIA aims to give a global voice to corporate secretariesand governance professionals. HKICS has over 6,000 members and 3,200 students.Council 2020Committee chairmenGillian Meller FCIS FCS – PresidentDr Gao Wei FCIS FCS(PE) – Vice-PresidentDavid Simmonds FCIS FCS – Vice-PresidentDr Eva Chan FCIS FCS(PE) - Vice-PresidentErnest Lee FCIS FCS(PE)– TreasurerLoretta Chan FCIS FCSEdmond Chiu FCIS FCS(PE)Daniel Chow FCIS FCS(PE)Wendy Ho FCIS FCS(PE)Arthur Lee FCIS FCS(PE)Stella Lo FCIS FCS(PE)Professor CK Low FCIS FCSNatalia Seng FCIS FCS(PE)Xie Bing FCIS FCSWendy Yung FCIS FCSDavid Fu FCIS FCS(PE) - Immediate Past PresidentIvan Tam FCIS FCS – Past PresidentAudit Committee:Arthur Lee FCIS FCS(PE)Education Committee:Dr Eva Chan FCIS FCS(PE)Human Resources Committee:Natalia Seng FCIS FCS(PE)Membership Committee:David Simmonds FCIS FCSNomination Committee:Edith Shih FCG(CS, CGP) FCS(CS, CGP)(PE)Professional Development Committee:Loretta Chan FCIS FCSMembership and studentshipstatistics updateAs of 30 April 2020 the statistics were asfollows:Associates: 5,681Students: 3,264Fellows: 718Graduates: 436SecretariatSamantha Suen FCIS FCS(PE) Chief ExecutiveMohan Datwani FCIS FCS(PE) Senior Director and Headof Technical & ResearchLouisa Lau FCIS FCS(PE) RegistrarCarman Wong FCIS FCS(PE) Company SecretaryDesmond Lau ACIS ACS Director, Professional DevelopmentMelani Au Senior Manager, MembershipKaren Ho Senior Manager, Finance and AccountingKenneth Jiang FCIS FCS(PE), Beijing Representative OfficeChief RepresentativeThe Hong Kong Institute of Chartered Secretaries(Incorporated in Hong Kong with limited liability by guarantee)3/F, Hong Kong Diamond Exchange Building, 8 Duddell Street, Central, Hong KongTel: (852) 2881 6177Fax: (852) 2881 5050Email: [email protected] (general)[email protected] (member)Website: [email protected] (professional development)[email protected] (student)Beijing Representative OfficeRm 15A04A, 15A/F, Dacheng Tower, No 127 Xuanwumen West StreetXicheng District, Beijing, 100031, PRCTel: (86) 10 6641 9368Fax: (86) 10 6641 9078Website: www.hkics.org.cnThe Chartered GovernanceInstitute of Canada202–300 March RoadOttawa, ON, Canada K2K 2E2Tel: (1) 613 595 1151Fax: (1) 613 595 1155MAICSA: The CharteredGovernance InstituteNo 57 The BoulevardMid Valley CityLingkaran Syed Putra59200 Kuala LumpurMalaysiaTel: (60) 3 2282 9276Fax: (60) 3 2282 9281Governance New ZealandPO Box 444Shortland StreetAuckland 1015New ZealandTel: (64) 9 377 0130Fax: (64) 9 366 3979Views expressed are not necessarily the views ofThe Hong Kong Institute of Chartered Secretariesor Ninehills Media. Any views or comments are forreference only and do not constitute investmentor legal advice. No part of this magazine may bereproduced without the permission of the publisheror The Hong Kong Institute of Chartered Secretaries.Circulation: 8,200Annual subscription: HK 2,600 (US 340)To subscribe call: (852) 3796 3060 oremail: [email protected] BoardKieran ColvertMohan DatwaniPaul DavisRobin HealyErnest LeeCreditsKieran ColvertEditorEster WensingArt DirectorLi ZhidongLow Chee KeongSamantha SuenHarry HarrisonIllustrator (cover)Images123rf.comContributors to this editionDr Jag KundiScholar-practitionerEmma NewmanVeridateAndrew CarrickDiligentAndrew McGinty, Philip ChengSherry Gong, Mark ParsonsMaggie Shen, Jing WangHogan LovellsAdvertising sales enquiriesEmail: [email protected] Chartered Governance InstituteGovernance Institute ofAustraliaLevel 10, 5 Hunter StreetSydney, NSW 2000AustraliaTel: (61) 2 9223 5744Fax: (61) 2 9232 7174CSj, the journal of The Hong Kong Institute ofChartered Secretaries, is published 12 times a yearby Ninehills Media and is sent to members andstudents of The Hong Kong Institute of CharteredSecretaries and to certain senior executives in thepublic and private sectors.The Chartered GovernanceInstitutec/o MCI UKDurford Mill, PetersfieldHampshire, GU31 5AZUnited KingdomTel: (44) 1730 821 969The Singapore Associationof the Institute of CharteredSecretaries & Administrators149 Rochor Road#04–07 Fu Lu Shou ComplexSingapore 188425Tel: (65) 6334 4302Fax: (65) 6334 4669ICSA: The CharteredGovernance InstituteSaffron House, 6–10 Kirby StreetLondon EC1N 8TSUnited KingdomTel: (44) 20 7580 4741Fax: (44) 20 7323 1132The Chartered GovernanceInstitute of Southern AfricaPO Box 3146Houghton 2041Republic of South AfricaTel: (27) 11 551 4000Fax: (27) 11 551 4027The Institute of CharteredSecretaries & Administratorsin ZimbabwePO Box CY172Causeway HarareZimbabweTel: (263) 4 702170Fax: (263) 4 700624Ninehills Media LtdTel: (852) 3796 3060Jennifer LukEmail: [email protected] PaulEmail: [email protected] Media Ltd12/F, Infinitus Plaza199 Des Voeux RoadSheung WanHong KongTel: (852) 3796 3060Fax: (852) 3020 7442Internet: www.ninehillsmedia.comEmail: [email protected] Copyright reservedISSN 1023-4128Tim ParkerAbigail LiuDenis Chang’sChambersGareth Hughes, MarkJohnson, Emily LamAllison Lau, RalphSellarDebevoise & Plimpton

ContentsCover StoriesTaxation of the platform-based economy 06Dr Jag Kundi, a Hong Kong-based scholar-practitioner active in the FinTech space, looks atthe role that blockchain can play in improving and upgrading the global tax system.Customer due diligence – how technology can help 14Emma Newman, Head of Sales, Veridate, highlights the key factors corporate servicesproviders should consider when seeking the right technology to assist with know yourclient and customer due diligence compliance.In FocusCrisis management 18Andrew Carrick, VP Customer Success – Asia Pacific, Diligent, offers tips for board members,management teams and governance professionals on developing decisive yet flexibleresponse plans that can accommodate a wide variety of crisis scenarios.Technical UpdateThe Mainland’s new Personal Information SecuritySpecification 22Hogan Lovells highlights how the Mainland’s new Personal Information SecuritySpecification, which will come into force on 1 October 2020, raises the stakes for dataprotection in the Mainland.Non-performance of commercial contracts during COVID-19 28Tim Parker and Abigail Liu, Barristers, Denis Chang’s Chambers, take an in-depth look at thelegal ramifications of the non-performance of commercial contracts during the currentcoronavirus pandemic.Case NoteDisclosure of inside information – a timely reminder 34Debevoise & Plimpton looks at a recent Market Misconduct Tribunal decision concerning latedisclosure of inside information and makes practical suggestions on steps listed companiescan take to ensure compliance with Hong Kong’s inside information disclosure regime.Careers in GovernanceEdith Shih 38This month sees the second instalment of our new Careers in Governance column,featuring photos and insights into the career path, views on governance and personalinterests of International President, The Chartered Governance Institute, and formerInstitute President, Edith Shih FCG(CS, CGP) FCS(CS, CGP)(PE).HKICS NewsPresident’s Message 04Institute News 42Student News 47

President’s MessageDigital readinessOn behalf of the Institute, I would liketo thank everyone who participatedin our 21st Annual Corporate andRegulatory Update (ACRU) held earlierthis month. The event will be reviewed innext month’s journal, but here I would liketo thank the speakers – both regulatorsand professional practitioners – whoparticipated in the sharing sessions.Thanks are also due to our sponsors, panelchairs and our Institute’s Secretariat fortheir contributions to the event.This year, however, I think special thanksshould also go to our ACRU audience. Dueto the COVID-19 pandemic, and for thefirst time in its history, ACRU was heldas a webinar. This is, of course, no smallchange to the usual format, but ACRU’ssuccess is an excellent demonstration,not only of the essential role thatdigital technologies will be playing inour personal and professional lives inthe post-COVID world, but also of theimportance of digital readiness. Not onlywas attendance at this year’s ACRU on apar with previous years, but also, judgingby the deluge of questions we received inthe Q&A sessions, the ACRU audience wasable to engage with the event in the sameway that they would have done in an inroom setting.This point leads me aptly to the themeof this month’s CSj. Technology is aJune 2020 04regular topic for this journal, butfrom time to time we also devotean entire edition to it. This month’sjournal will update you on the role oftechnology in crisis management, inknow your client and customer duediligence compliance for corporateservices providers, and in improvingand upgrading the global tax system.I would add to these perspectives thatdigital literacy and readiness havebecome essential skills for governanceprofessionals. Technology represents amajor opportunity for members of ourprofession, allowing us to spend lesstime on administrative tasks and moretime on the interpretive aspects of ourrole – providing better governanceadvice to boards facing increasingcomplexity and challenges.This month’s theme is also timely asCOVID-19 has led to a major shift inour attitudes to technology. The digitaltransition was already under way beforeCOVID-19 of course, but the pandemichas provided the well-directed nudgewe needed to really embrace the digitalfuture. Work-from-home arrangements– something that tended to be regardedwith suspicion if not downrighthostility by many organisations – havesuddenly become a core part of businesscontinuity. A similar pattern can beseen in attitudes to remote learning,virtual meetings and contactless digitalpayments. Many technologies, which preCOVID-19 may have been regarded asnice-to-have, have become must-haves.I don’t want to overstate the case;remote working is not an option foreveryone and there are still risks thatneed to be recognised in going digital –cybersecurity and data privacy being twoof the most prominent such risks – butthere can be no question that technologyis now more central to the strategy andoperation of organisations in Hong Kongthan ever before.Before I go, and staying on the COVID-19theme, I would like to highlight theadditional relief measures our Institute isnow providing for members, graduates,students and Affiliated Persons in viewof the current pandemic. Council hasdecided to extend the current 10%discount on Enhanced ContinuingProfessional Development (ECPD)webinars/seminars offered to members,graduates, students and Affiliated Personsto 30 September 2020. Moreover, we willbe applying a 10% discount to annualsubscription and renewal fees for thefinancial year 2020/2021 for Institutemembers, graduates and students. Fulldetails can be found on page 41 of thismonth’s journal.Stay safe and well during these uncertaintimes.Gillian Meller FCIS FCS

President’s 咨询顾问职能——员和学员 给予 10% ,同时也要感谢 ACRU 初举办的第 21 届企业规管最新发展研讨会 (ACRU)。下月会刊 ((CSj)) 构曾此外,今年也应向出席 ACRU 革,此次ACRU 绪度的重要性。今年 ACRU 问题来看, ACRU 和联席成员参加强化持续专业发展 ((ECPD)) 遇。借助科技,我们可予 10 % 折扣的政策延长至 2020 年 9月 学馬琳 FCIS FCSJune 2020 05

Cover StoryTaxation of theplatform-based economyAs economies shift into intangibles as drivers of economic value, is the present global taxsystem fit for purpose? Dr Jag Kundi, a Hong Kong–based scholar-practitioner active inthe FinTech space, looks at the role that blockchain can play in improving and upgradingthe global tax system.June 2020 06

Cover StoryThis article will consider how taxationon digital economies is limited in itsscope, effectiveness and collectability. Thislast point of collectability is a real threatto governments around the world as thedigital economy knows no borders orsovereign territories. There are big impactson an economy if tax is not collectedcorrectly. These risks would cover: loss of revenue for governmentexpenditure impacting on reducedpublic services delayed interest payments ongovernment bonds, which couldmake sale and holding of governmentbonds less attractive, and depreciation of the national currencythereby impacting international trade.The role of the blockchain will alsobe considered as a way of potentiallyimproving and upgrading the tax system.Is the present tax system fit forpurpose?In today’s world, taxes may be consideredas a necessary requirement for anycivilised society to function. Originallythis was not the case. Tax was used asa ‘temporary’ means by governmentto finance war. Every war from ancienttimes to today was paid for by some kindof tax, from the time of Alexander theGreat to the American Revolution. Youcould argue that if you want to end war,end taxes!Tax is one area that impacts us all. Thefamous quotation ‘Nothing can be saidto be certain, except death and taxes’attributed to Benjamin Franklin in 1789actually has its roots earlier in The Cobblerof Preston by Christopher Bullock (1716)who wrote ‘Tis impossible to be sure ofanything but death and taxes’.Taxation in a ‘bricks and mortar’ basedeconomy is relatively simple. The physicalpresence or permanent establishment testwould be applied and the tax calculated.As a local citizen, individual or corporate,being physically located within a definedterritory would be the basis for calculatingtax – this became known as a territorialbased tax system, that is, one in which agovernment would usually only tax incomeearned in that territory. Gibraltar, HongKong, Singapore and Macau are examplesof territorial-based tax systems.An alternative taxation system called‘worldwide taxation’ simply aggregates allincome, regardless of where earned, andtaxes it as one lump sum. The US is anexample of a worldwide taxation system.The pros and cons of either system are notthe focus of this article, as both dependon the physical location of the individualor corporation for the basis of their initialtax assessment.This approach worked well for the taxationof tangible assets and physical goodswithin physical borders as indicators ofeconomic value – who owes/owns what. Aslong as the underlying assets were tangible,that is observable and measurable, it wasperfect for tax authorities to use this asthe basis for financial record-keeping andthereafter for tax assessment.Consider the industry developmenttimeline below (see Figure 1) and seehow the time periods between eachsuccessive period of industrialisationare being squeezed. The whole pace hasquickened dramatically with the shiftto a digital world where the offlineworld is now becoming more and moreconnected online. Originally the processwas evolutionary in nature taking, time forprogression; today it is more revolutionaryin nature, due to rapid and disruptivechange. The digital world has impacted/disrupted nearly every industry frommedia, communication, entertainment,education, finance and logistics. Todayphysical reality is being displaced by virtualreality and augmented reality.Industry 4.0 has a host of enablingtechnologies that promises to usherin a golden era in the digitisation ofmanufacturing. Enabling technologiesinclude: Internet of Things (IoT) cloud computingHighlights the old model of investing in tangible assets (plant, property and equipment) isquickly being replaced with the concept of being lean, agile and ‘asset-light’ rather than fight the digital economy, government could turn to technology asan ally to improve the tax system when the financial details of every transaction become traceable, theownership of assets and money can be easily determined and tax due thereoneasily and automatically calculatedJune 2020 07

Cover StoryFigure 1: Industry development timlineIndustry 1.0MechanisationIndustry 2.0Mass productionIndustry 3.0Robotics &electronicsIndustry 4.0Smart factories,IoT, AI & MLLate 18th centuryEarly 20th centuryLate 20th centuryEarly 21th century artificial intelligence (AI) and machinelearning (ML) data analytics, and advanced smart robotics.Industry 4.0 will take what was startedin Industry 3.0 with the adoption ofcomputers and automation, and enhancethis with smart and autonomous systemsfueled by big data and machine learning– all intangible. As everything is beingdone faster, cheaper and at scale, thesetechnological innovations are drivingmarginal costs to near zero, making goodsand services priceless, nearly free andabundant and no longer subject tomarket forces.The challenge here for national taxsystems will be based on a numberof factors: absence of physical presence strong dependence on intangibleassets In the 21st century, value is beingdefined, created and shared across digitalplatforms and much of this value isintangible in nature – such as big data.As part of their digitalisation, companieshave been quick to transform part or allof their business operations to a platformwhere the exchange of value can be donewith less friction. The platform-based economyAs the tech consultancy firm Applico(ww

The Hong Kong Institute of Chartered Secretaries (Incorporated in Hong Kong with limited liability by guarantee) 3/F, Hong Kong Diamond Exchange Building, 8 Duddell Street, Central, Hong Kong Tel: (852) 2881 6177 Fax: (852) 2881 5050 Email: [email protected] (general) [email protected] (professional development)