On 17 June 2020, the Occupational Retirement Schemes (Amendment) Bill 2019 (Bill) was passed at the Legislative Council. The Bill introduces amendments to the Occupational Retirement Schemes Ordinance (ORSO) with a view to preventing the misuse of schemes for purposes unrelated to employment and improving the governance of ORSO schemes.
|(1)||New employment-based criteria
ORSO schemes must limit membership to eligible persons, namely employees (whether past or present), transferred individuals in case of business transactions and the beneficiaries of deceased members (New Criteria). Additional documents are required to be filed with the Registrar (i.e., the Mandatory Provident Fund Schemes Authority) for the purposes of ongoing compliance as well as new applications for registration.
ORSO exempted schemes
The Registrar may only issue an exemption certificate in respect of a scheme which is an acceptable registered/approved offshore scheme. The criterion that the scheme has not more than either 10% or 50 of that scheme’s members (whichever is less), who are Hong Kong permanent identity card holders, is abolished. Furthermore, new grounds that allow the Registrar to withdraw exemption certificates are added.
ORSO registered schemes
The Registrar is empowered to impose, amend or revoke conditions for registration of a scheme. It also has the power to cancel the registration of a scheme if it no longer meets, among other new grounds, the New Criteria.
Note that further amendments were moved by the Secretary for Financial Services and the Treasury and passed at the Legislative Council meeting including, among others, amendments that stipulate the consequence for failure to comply with a condition imposed by the Registrar rendering it one of the ‘grounds for cancellation of registration’ of a scheme.
If the Registrar intends to issue or after issuing a proposal to cancel the registration of a scheme, it may apply to the court for an order to freeze the scheme assets to avoid them being transferred out of a scheme before the grant of a court order.
|(4)|| Bona fide transfer-in payments
Employers of registered schemes or exempted schemes are only permitted to accept a transfer of benefits from another scheme if it meets certain conditions, to minimise the risk of the schemes being misused or abused for holding monies of unknown source.
For more information on the key amendments, please see our previous client alert – ‘Proposed changes to ORSO: what employers and employees need to know’.
The Occupational Retirement Schemes (Amendment) Ordinance 2020 (Amendment Ordinance) allows the ORSO to more truly reflect the original policy intent that ORSO schemes should be employment-based. The strengthened regulatory control on ORSO exempted schemes, which had been subject to less stringent regulatory requirements than ORSO registered schemes and thus more susceptible to misuse as investment vehicles for non-employees, will help to prevent the increasing misuse of ORSO schemes.
The Amendment Ordinance will come into operation on the day on which it is published in the Gazette. In the meantime, employers should be aware of the changes and ensure compliance with the new regulatory requirements. Employers who wish to set up ORSO exempted schemes should also take note of the tightened requirements.