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THE LAW REFORM COMMISSION OF HONG KONG

REPORT

CHARITIES

This report can be found on the Internet at:
< >

DECEMBER 2013

Page 2

The Law Reform Commission of Hong Kong was established by the Executive
Council in January 1980. The Commission considers for reform such aspects
of the law as may be referred to it by the Secretary for Justice or the Chief
Justice of the Court of Final Appeal.


The members of the Commission at present are:


Chairman: The Hon Rimsky Yuen, SC, JP, Secretary for Justice

Members: The Hon Chief Justice Geoffrey Ma, GBM

The Hon Mr Justice Robert Tang Ching, SBS, PJ
Mr Paul Wan How-leung, JP, Law Draftsman
Mrs Pamela Chan, BBS, JP
Mr John Budge, SBS, JP
Mr Peter Rhodes
Professor Michael Wilkinson
Mrs Eleanor Ling, SBS, OBE, JP
Ms Angela W Y Lee, BBS, JP
Mr Anderson Chow, SC
Mr Eugene Fung, SC


The Secretary of the Commission is

and the Commission's offices are at:



20/F Harcourt House
39 Gloucester Road
Wanchai
Hong Kong



Telephone: 2528 0472
Fax: 2865 2902
E-mail: [email protected]
Website: http://www.hkreform.gov.hk

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(1) Greater transparency and accountability among tax-exempt
charities, as well as greater public accessibility to information.


(This is an obvious result if information, such as financial

statements and reports about charities, could be made available
to the public. Members of the public would be better informed
about the operation of tax-exempt charities and would therefore
be able to make appropriate and informed decisions regarding
the making of charitable donations.)


(2) Enhancement of greater public trust and confidence in

tax-exempt charities.

(Tax-exempt charities which disclose their information will gain

greater public trust and confidence. This should be a positive
re-inforcement for tax-exempt charities to enhance their
transparency and accountability.)




Recommendation 7

We recommend that the Administration should ensure that
tax-exempt charities make information about their
operations available to the public by publishing certain
documents, such as their financial statements and
activities' reports, on their websites.





5.75 The Sub-committee had considered that the ability of the future
charity commission to investigate and check abuses was crucial to building
and maintaining public confidence.

5.76 In most overseas jurisdictions, the regulatory authority is vested
with statutory power to investigate any reports of breaches of trust and
maladministration by charities or their officers. In England and Wales, the
Charity Commission is vested with wide powers to investigate and institute
inquiries, either generally or for particular purposes, and to investigate any
mismanagement and misconduct within charities. It also has the power to
protect charity assets at risk and take action against those persons responsible
for misconduct and mismanagement in a charity.

5.77 When a charity's assets, reputation, services or beneficiaries
have been harmed or are at risk of abuse or damage, the stated aim of the
Charity Commission in England and Wales is to stop the abuse or damage and
put the charity back on a proper footing for the future. The Commission’s
work involves identifying and investigating causes of misconduct or

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mismanagement in the administration of charities and resolving the problems
that it finds.59

5.78 The Charity Commission has issued a guideline entitled, CC46 -
Statutory inquiries into charities: guidance for charities and their advisers,
which seeks to provide guidance to help charities and their advisers
understand the regulatory role of the Commission, including its compliance
work in relation to identifying and investigating apparent misconduct or
mismanagement in the administration of charities, and resolving issues of
concern. Details of the form an inquiry takes and the legal powers involved
are set out in section D of CC 46. According to section D1 of CC 46,
"misconduct" includes "any act that the person committing it knew (or ought to
have known) was criminal, unlawful or improper." "Mismanagement" includes
"doing anything to: lose or misuse significant charitable resources; seriously
undermine a charity's reputation; or put beneficiaries at risk."

5.79 In more serious cases, the Commission may open a statutory
inquiry, which may involve using its remedial and protective powers when it is
appropriate and proportionate to do so. The criteria the Commission
considers when deciding to open an inquiry in any case are set out in the Risk
Framework Application Document at section G3.60

5.80 The Commission's guideline CC 46 lists a number of higher risk
issues that may be dealt with under a statutory inquiry. These examples
include:


"• significant financial loss to a charity;
serious harm to beneficiaries and, in particular, vulnerable

beneficiaries;

misuse of a charity for terrorist purposes (including charity links
with or support for terrorism, financial or otherwise, connections
to proscribed organisations or misuse of a charity to foster
criminal extremism);

serious criminality and/ or illegal activity within or involving a
charity (including fraud and money laundering);

charities set up for an illegal or improper purpose;

charities deliberately being used for significant private advantage;

where a charity's independence is seriously called into question;


59 The Charity Commission for England and Wales, CC46 - Statutory inquiries into charities:

guidance for charities and their advisers, available at:
http://www.charitycommission.gov.uk/detailed-guidance/protecting-your-charity/statutory-inquiri

es-into-charities-guidance-for-charities-and-their-advisers-cc46/.
60 The Charity Commission for England and Wales, CC46 - Statutory inquiries into charities:

guidance for charities and their advisers, at C2, available at:
http://www.charitycommission.gov.uk/Our_regulatory_activity/Our_approach/app_risk_
framework.aspx.

http://www.charitycommission.gov.uk/our-regulatory-work/how-we-regulate-charities/how-we-ensure-charities-comply-with-their-legal-requirements/charity-commission-risk-framework/
http://www.charitycommission.gov.uk/our-regulatory-work/how-we-regulate-charities/how-we-ensure-charities-comply-with-their-legal-requirements/charity-commission-risk-framework/
http://www.charitycommission.gov.uk/Our_regulatory_activity/Our_approach/app_risk_

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Name of statutory
organisation Function Composition

Method of appointment of
chairman and members Other remarks

Government or statutory
corporations;

(f) for the better
performance of his other
functions, undertake
research into, and
monitor developments
in, the processing of
data and computer
technology in order to
take account of any
likely adverse effects
such developments may
have on the privacy of
individuals in relation to
personal data; and

(g) to liaise and co-operate
with any person in any
place outside Hong
Kong-
(i) performing in that

place any functions
which, in the opinion
of the
Commissioner, are
similar to any of the
Commissioner's
functions under this
Ordinance; and

(ii) in respect of matters
of mutual interest
concerning the
privacy of

as the Chief Secretary
for Administration
allows), furnish -

(a) a report on the
activities of the
Commissioner
during that year
including a general
survey of
developments,
during that year, in
respect of matters
falling within the
scope of the
Commissioner's
functions;

(b) a copy of the
statement of
accounts; and

(c) the auditor's report
on the statement,

to the Chief Secretary
for Administration who
shall table them in the
Legislative Council
(para 4(4) of Schedule 2
to Cap 486).

The Director of Audit
may, in respect of any
financial year, conduct
an examination into the
economy, efficiency and

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Name of statutory
organisation Function Composition

Method of appointment of
chairman and members Other remarks

individuals in
relation to personal
data.

effectiveness with which
the Commissioner has
expended his resources
in performing his
functions and exercising
his powers (para 5(1) of
Schedule 2 to Cap 486).

The Director of Audit
may report to the
President of the
Legislative Council the
results of an
examination conducted
by him (para 5(4) of
Schedule 2 of Cap 486).

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