The most significant change was proposed in Hong Kong, where the regulation of listed company auditors would be taken away from the Hong Kong Institute of CPAs (HKICPAs) and given to the Financial Regulatory Commission. Hong Kong had faced the embarrassment of having its regulatory equivalency with the European Union revoked because of the lack of an independent audit regulator. The HKICPA has proven to be an ineffective regulator. Public consultations were held in Autumn 2014 and then everyone went silent. In March, HK Secretary for Financial Services and the Treasury, Professor KC Chan, reported that the government had completed the public consultation and found majority support for the direction of the reforms. The consultation conclusions are to be published in the middle of this year. ...
In a related matter, VIE reforms are now working their way through China’s legislative process. The proposed new foreign investment law makes it clear that foreign controlled VIEs are banned, but opens the door to VIEs (and perhaps alternative structures) so long as the foreign company remains under Chinese control. Many of China’s larger internet companies have structures in place to keep control in Chinese hands. Others may need to restructure to continue to operate, or else seek special permission. Multinational corporations that use the VIE structure may have greater difficulties. The US Chamber of Commerce, the American Chamber of Commerce in China and the American Chamber of Commerce in Shanghai jointly asked China to provide grandfathering for existing VIEs or a 25-year grace period, likely a fool’s errand.More at the China Accounting Blog.
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