Should Hong Kong follow the experience of Singapore in developing its business trust regime?

This article aims to analyse whether Singapore’s business trust regime is suitable for Hong Kong as a benchmark for developing its business trust regime because Singapore is among the few jurisdictions in Asia that have put in place a regime for business trusts. Hong Kong and Singapore share some commonalities owing to historical reasons and recent competition. Both Hong Kong and Singapore received English law as former colonies of the United Kingdom. Therefore, the two jurisdictions share common law systems and similar legal doctrines underlying their securities laws. In addressing corporate governance issues, both Hong Kong and Singapore have traditionally relied on a principles-based approach, similar to that of the United Kingdom. The country-level corporate governance scores of Singapore and Hong Kong have been ranked top and second in Asia by CLSA in the recent decade, ahead of other Asian jurisdictions, suggesting that their corporate governance standards are the highest in Asia.7 In the 189 economies included in the ease of doing business index, Singapore and Hong Kong again were ranked top and second, indicating that both of them are the easiest with which to do business.8 Accordingly, Hong Kong and Singapore are close competitors in the region in a variety of dimensions. These reasons justify the use of Singapore as an appropriate benchmark for comparisons with Hong Kong with respect to their securities regulations. The modern business trust has only recently begun to be subjected to scholarly inquiry, and a large part of this literature focuses on US business trusts only.9 Little is known about the development of a business trust regime in other parts of the world.10 Regulators of major securities markets should remain vigilant in keeping a close eye on this development in order to maintain and even strengthen their competitive positions. The recent market request for developing a business trust regime in Hong Kong illustrates how its regulators attempt to strike the right balance between the compliance costs of issuers and protection of investors in establishing a new market segment of listed business trusts. The passage leading to the first business trust listed in Hong Kong is discussed next.