Law firms have never thrown a lot of people or money at their private client practice largely for the simple reason that, outside of London and New York, the practice area has never been a huge fee-generator. Certainly not compared to other areas.
Yet even the small market share law firms have carved out may be under threat. Private banks are swallowing up huge swathes of the market, and are showing no hesitation in expanding their headcount. Where the private client lawyer once would handle all the aspects of a wealthy individuals tax and trust work, now the private banks are stepping in with promises of total solutions, relegating the lawyer to the role of external adviser.
On top of this is a host of pressing questions: how much of an increase in trust litigation can we expect? Will Hong Kong get rid of estate duty? And if it doesnt, will Singapore, touted as the Switzerland of Asia, trump Hong Kong as the best place in the region in which to locate a trust.
Coming as it did on the back of so many other heavy economic blows, the SARS outbreak has only pushed regional economies further into damage control mode.
Some lawyers have said that SARS has led to a jump in emigration-based trust work. Throw together SARS, the local economy and government policy, and many clients who had previously been toying with the idea of packing up and who had set up trusts a decade or so ago for that purpose are now calling it a day and revisiting those structures before moving out.
Not much has changed on the legislative front. Thats largely because the laws on the books are good enough for the current level of demand. One recent change affecting Hong Kong-based work is the new provisions in the Securities and Futures Ordinance, which came into effect on 1 April. Among the new rules is a tighter threshold for disclosure of interest in listed companies. It has dropped from a 10% shareholding threshold to 5%.
We have seen work come out of that says Susan Collins of Stephenson Harwood & Lo. The trust structure may now be a substantial shareholder and the trustee has had to look at the new rules and check to see if there is a need to disclose.
The idea behind the Section 1441 rules is to help the IRS find US taxpayers who are cheating on their taxes, and taxpayers who are taking the benefit of tax treaty reductions in withholding tax when they are not entitled to do so. Financial institutions have been working hard the last few years collecting the necessary details and making sure that the necessary procedures are in place to be in compliance with the QI rules. The audit reports must be submitted by 30 June.