In addition to being a former legal counsel to the Li Ka Shing Foundation, Michelle Chow, Consultant, Withers, is one of Hong Kong’s top advisers for charities and trusts, and regularly lectures on philanthropy and charity law issues. It’s not by chance, then, that she is known to her peers and friends as ‘the charity doctor’.
Michelle Chow loves the harp. Although one of the world’s first musical instruments, with popularity peaks in ancient Mesopotamia as well as in the 18th century French court, its popularity has successively weakened over time, with some members of the harp family being lost along the way. So, together with some friends, Michelle Chow set up a charity in Hong Kong a decade ago to support the tradition. Today, dozens of children – mostly from underprivileged backgrounds – learn to play the harp each year under the wings of the ‘Friends of the Harp’. The charity finances teachers, concerts and even the training of harp technicians.
What’s more, when the children have learned to master the instrument, they are invited to perform at a nursing home for the elderly, run by a charity where Chow is a board member.
In addition to being one of Hong Kong’s top advisers for charities and trusts, and a former legal counsel to the Li Ka Shing Foundation, the practical day-to-day work with the harp charity gives Chow hands-on experience in everything from dealing with government officials to applying for grants.
During an interview at her office at international law firm Withers in Hong Kong, where she works as a consultant, Chow discussed the importance of good governance when running not-for-profit organisations and the pros and cons of the suggested new charity law.
How relevant is corporate governance for charities?
With approximately 400 new charities being set up in Hong Kong each year, the demand for professional consultants and qualified company secretaries is increasing. ‘A growing number of wealthy individuals are setting up charities today. It’s a trend’, she says. ‘If the older generation wrote cheques and gave to good causes, the new generation sets up their own charities and runs their own projects’.
Chow joined Withers two years ago with 15 years of experience in legal practice in both Hong Kong and the UK. Today, she advises on matters in relation to discretionary trusts, from initial advice on trust structures to the transfer of assets and distribution; as well as changes of trustees and preparing letters of wishes. That, of course, is in addition to her ‘charity doctor’ role. Chow is in demand as an adviser to universities, schools, banks, corporations and individuals on issues relating to setting up charities and compliance. This includes negotiating and preparing grant agreements, the use of funds for charitable purposes, making and receiving donations, charities operations and dealing with the Hong Kong Inland Revenue Department and Companies Registry.
Although charities are basically unregulated in Hong Kong, as the city lacks a charity law, the overall environment for charitable organisations and philanthropy is wholesome, Chow believes. However, since many directors and volunteers work pro-bono in their free time, there is sometimes a perception in Hong Kong that governance is mainly for commercial enterprises, and less so for the not-for-profit sector. Chow emphasises that directors’ risks and liabilities are the same for commercial firms and NGOs under the Companies Ordinance.
‘The same risks and liabilities apply to all companies, whether they are established to make profit or not, or whether their directors are remunerated’, she says. ‘The Companies Ordinance does not impose fewer liabilities or ongoing obligations on NGOs. So NGOs must observe the filing deadlines according to the Companies Ordinance.’
She adds that the benefits of good governance are also particularly important for charities since they depend for their very existence on having the trust of their stakeholders. ‘A properly run charity with good governance, internal records and financial accounts is more appealing to potential donors than one which does not seem to organise itself properly,’ she points out.
What role should the company secretary play in charities governance?
Company secretaries play an important role in upholding good standards in charities, Chow points out, but in some cases the importance of the company secretary is underestimated.
‘Some charities recruit ‘volunteers’ who claim they can assist with the role of the company secretary but actually they do not have any training, knowledge or experience of a company secretary. Some may be secretaries or a personal assistant of an individual or director of the NGO. It is important that they have a properly qualified company secretary to handle the company secretarial matters’, she says.
‘I really urge my clients to have a qualified company secretary. If you miss a deadline, there’s no excuse. Every person responsible can be liable, not just the people at the top. Some small NGOs do not have funds to employ a qualified company secretary – that will put the unqualified named company secretary as well as the board members at risk’.
One of the main challenges, Chow points out, is ensuring that directors of charities are fully informed of their obligations and the regulatory obligations of their charity. ‘It’s difficult to tell the general level of knowledge of new people entering this sector, but from meeting NGOs through giving seminars and attending forums, I would say they often have very little knowledge of the Companies Ordinance, especially the new Companies Ordinance, and about directors’ duties and liabilities and charity governance’, she says.
‘Although the Hong Kong Council of Social Service (HKCSS) provides some training on these subjects, and that training is well attended, NGOs need more education. Some charity directors mistakenly think that, since they are not remunerated, they do not have any liabilities and they pay too little attention to the operation of the NGO’.
Many aspects of standard governance ‘due diligence’ play a crucial role in ensuring that charities function effectively. This includes doing due diligence checks on the people the charity would like to appoint as directors – checking that they have the requisite experience and background in the sector, for example. NGOs should also have a proper induction process for new recruits to the board, including an NGOs’ handbook, information on the NGO, its mission and vision, past and current activities, donors lists, and the expectations of directors.
Chow also encourages charities to follow the best practice checklist published by the ICAC entitled ‘Management of Charities and Fund-Raising Activities’ and the best practice manual produced by the Social Welfare Department for NGOs under their ‘Lump Sum Grant Subvention System’ (LSGSS). It’s a best practice manual which serves as a good starting point for all NGOs, not just the ones that obtain funding from the LSGSS, she says. According to the government’s website, such checklists and manuals aim to enhance efficiency and effectiveness, improve quality, encourage innovation, strengthen accountability and provide flexibility, with a view to deploying resources in the most cost-effective manner to meet changing needs in the community.
Is working for a charity a rewarding career?
For Chow, working with charities is more than just a job, it’s a passion. She currently sits on the board of a number of charities in Hong Kong, and regularly lectures on philanthropy and charity law issues. Her efforts have not gone unnoticed. In 2012, 2013 and 2014, the Law Society of Hong Kong awarded Chow the Distinguished Community Service Award in recognition of her service to the community.
However, the reason she got involved in charities was not a strategic career move but more the result of a chance assignment. After qualifying as a solicitor in London and working at the UK law firm Farrer & Co, Chow returned to Hong Kong in 2001 and was recruited to Mayer Brown JSM, one of the oldest law firms in Asia, where she specialised in trust and corporate work.
‘Some of the firm’s wealthy clients wanted to donate money and asked us to set up charity companies. But they didn’t want to pay too much money for the service’, she remembers. ‘Being the youngest in the team, the partner gave me the job. I basically learned how to establish charitable organisations in Hong Kong by myself’, she says.
A few years later, she was recruited as legal counsel and company secretary to the Li Ka Shing Foundation. Founded in 1980, the foundation seeks to inspire societal improvement through supporting education and healthcare initiatives; it helps hospitals, schools and universities across 19 countries and regions. Li Ka-shing – the richest businessman in Hong Kong and a noted philanthropist – has previously said he considers the foundation to be his ‘third son’ and has pledged to donate one-third of his assets. He also calls for other Asian entrepreneurs to do the same.
‘I worked very closely with Mr Li. It was a really fun period, but very busy’, Chow says. ‘We had over 60 programmes running at the same time. His donations were not just in Hong Kong, but worldwide. It gave me a lot of experience’.
Today, Michelle Chow is also involved in the HKCSS, a federation of non-governmental social service agencies in Hong Kong, as a member of the steering committee of its ‘WiseGiving’ service which aims to enhance charity accountability and transparency. WiseGiving is a platform for donors to access information, including governance and financial information, about charities that interest them. For NGOs to be listed on the WiseGiving website, they must disclose their mission, structure, activities, governance and financial information. Before being approved, WiseGiving screens and verifies the accuracy of the information provided. With the information provided on the website, individual donors, companies and foundation grant-makers are in a better position to make informed decisions, which in return will benefit well-run charities. Basically, it helps donors to be smarter donors, Chow explains.
Does Hong Kong need a better regulatory regime for charities?
Michelle Chow believes Hong Kong is in need of increased transparency and a better regulatory regime for the charity sector. As mentioned in this month’s cover story, Hong Kong does not have a formal, established registration system for charitable organisations and no specific government authority has overall responsibility for this sector. This means that members of the public may not be able to ascertain the status of a ‘charitable organisation’ soliciting funds.
Moreover, the reform proposals put forward by the Law Reform Commission in 2013 – including the need for a charity register – have gone nowhere. The government has still not responded to its recommendations.
‘We understand it’s going to be a very, very long process. It’s not going to happen overnight and not all of the Law Reform Commission’s 18 recommendations will go ahead. There’s no big urgency from the government to do anything’, she says. ‘Still, even if no real action has been taken by the government so far, the general discussion and reform work process might have had a positive effect’.
Despite the impasse relating to the main reform proposals, Chow points out that there may be progress on the Law Reform Commission’s less controversial recommendations, such as the development of better guidelines for charities’ reporting and governance standards and increased educational initiatives to enhance public knowledge about how to be a smart donor. There is no better time for charity directors to look at their internal procedures and governance to ensure good charity governance is in place. As Chow, the ‘charity doctor’ observes, ‘donors love healthy charities’.
SIDEBAR: Best practice tips
Michelle Chow offers the following best practice tips for charities in Hong Kong:
have a properly qualified company secretary
- have a proper handbook
- make directors aware of their responsibilities
- tell the general public exactly what you do
- be open about your finances
- be open about your future plans
- give staff confidence and have committed people on board
- use the ‘Lump Sum Grant Subvention System’ best practice manual and the ICAC’s best
- practice checklist as your guidelines
- check out government departments’ websites for references
- have a website or publication to explain what you do, and
- sign up to be included in the WiseGiving list of approved charities.
The ‘Lump Sum Grant Subvention System’ best practice manual for NGOs and the ICAC’s best practice checklist – ‘Management of Charities and Fund-Raising Activities’ are available on the websites of the Social Welfare Department: www.swd.gov.hk, and ICAC: www.icac.org.hk.