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THE HONG KONG INSTITUTE OF CHARTERED SECRETARIESTHE INSTITUTE OF CHARTERED SECRETARIES AND
ADMINISTRATORS
International Qualifying Scheme Examination
CORPORATE ADMINISTRATIONJUNE 2015
Suggested Answer
The suggested answers are published for the purpose of assisting students in theirunderstanding of the possible principles, analysis or arguments that may be identifiedin each question
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SECTION A
1.
M Son Holdings Limited is an international textile manufacturer specialising in theAmerican and European markets and is listed in Hong Kong. It has recentlyrecruited Peter, who has just returned to Hong Kong from Europe, to join thecompany as chief operating officer. Peter is keen to get acquainted with thecompany’s operations. While Peter has extensive experience in the fashionindustry in Europe, he is less familiar with the laws and regulations in Hong Kongand relies on you, the company secretary, to give him advice.
Part of your duties is to oversee the human resources department. Peter wantsyou to give him some background information on the operations of the MandatoryProvident Fund (MPF) in Hong Kong. Some friends have told Peter that employerscan choose MPF schemes for their employees. Some have even mentioned thatthe company need not contribute to the MPF for certain types of employees, andone of the directors has stated that foreigners need not contribute to the MPF.Peter is unsure of the situation and wants to clarify his understanding of the MPF,especially since the company has appointed a new expatriate marketing directorfrom Europe. Moreover, some staff members need to spend a considerableamount of time in Mainland China during the year, and he wants to know how heshould handle MPF contributions for them.
M Son Holdings Limited is also engaged in trading clothing on the internet and itintends to promote its famous brand name ‘JJ’ in Hong Kong. The company isusing www.jj.cn and www.jj.com.cn as its domain names in Mainland China. Peterintends to register two new domain names, www.jj.hk and www.jj.com.hk, as theofficial websites of the company’s Hong Kong operations.
When you went to register the domain names in Hong Kong, you discovered thatthey had already been registered by another party in Hong Kong. You reportedthis situation to Peter, who insisted that the brand name ‘JJ’ is very famous inMainland China, so he refused to accept that it cannot be registered in HongKong.
Peter is also concerned about the reporting of workplace accidents as well as theeligibility and calculation of sickness allowance in Hong Kong. The penalty fornon-compliance is very heavy in Europe and Peter wants to know the
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consequences for non-compliance in Hong Kong.
Three weeks ago the safety manager left the company but no replacement hasbeen employed to fill the vacancy. The production manager felt that there was noneed to find an immediate replacement because the company has a good safetymanagement system and workplace accidents are rare. Last week, one workerwas injured at the workplace and had to stay away from work for five days.
REQUIRED:
Write a report to Peter, the vice chairman, covering the following:
1. (a) Give Peter the requisite background information on the MPF and addresshis concerns on this. Discuss the categories of exempt persons and assesswhether the marketing director may be exempt from joining the MPF schemein Hong Kong.
(20 marks including 1 mark for format)
Ans (a) To: Peter, vice chairman
From: XXX, company secretary
Date: 3 December 2014
Re: MPF
Under the MPF Schemes Ordinance, employers are required to enrol all theirrelevant employees in an MPF scheme. An employer may choose one or more ofthe available approved MPF schemes for employees. However, as a goodpractice and as a gesture of good faith to the employees, the company shouldconsult them when choosing an MPF scheme.
Although all MPF schemes have to comply with the provisions of the MPFSchemes Ordinance, each MPF scheme has its own governing rules andconstituent funds, and each constituent fund will have its own investment policy.As an employer the company should be aware of the different options available inthe market and should consider factors including the scheme’s governing rules, itsinvestment policies, fees and charges payable under the scheme, and so on.
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Employees may be exempt from joining an MPF scheme if they belong to one ofthe following categories:
- Domestic employees
- Self-employed hawkers
- People covered by statutory pension or provident fund schemes, such as civilservants and subsidised or grant school teachers
- Members of occupational retirement schemes which are granted MPFexemption certificates
- People from overseas who enter Hong Kong for employment for less than 13months, or who are covered by overseas retirement schemes
- Employees of the European Union Office of the European Commission inHong Kong
The new expatriate marketing director is exempt in the first 13 months of being inHong Kong or if he/she is covered by an overseas retirement scheme.
Today, many Hong Kong employees (of Hong Kong companies) live and/or workon the Mainland. The guiding principle for MPF coverage is that the Ordinance isintended to cover only employees who are employed in or from Hong Kong.
Broadly speaking, a Hong Kong resident employed from Hong Kong to workoverseas for a limited period by a company engaging in business in Hong Kong issufficiently connected to Hong Kong, and therefore the employer has to enrol theemployee in an MPF scheme and make MPF contributions for him/her.
Likewise, a person who is employed in Hong Kong, but who is working outsideHong Kong on a temporary basis is also covered by the MPF system. There aregenerally three questions you may ask of your employees:
1. Are they Hong Kong employees (i.e. are they normally resident in HongKong)?
2. Are they working for a Hong Kong company (no matter where they are basedright now)?
3. Are they working in Hong Kong right now?
If the answer is ‘yes’ to two out of three of these questions, then the employee
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needs to be enrolled in an MPF scheme.
Therefore, the company needs to consider the above factors in handling MPFmatters for staff members who need to spend a considerable amount of time inMainland China.
1. (b) Explain to Peter the meaning of a domain name. Advise him of the threelevels of domain names. As the desired domain names have already beenregistered by someone else, recommend how you could help Peter addressthe situation and obtain the desired “JJ” domain names.
(10 marks)
Ans (b) Peter should understand that the function of the domain name is to provide aunique alphabetical representation to Internet Protocol (IP) addresses. This helpsInternet users to find and communicate with websites and allows multiple IPaddresses to be assigned to a single domain name. In addition, it allows multipledomain names to be serviced from a single IP address. Examples of domain nameendings in Hong Kong include:
hk – Local or overseas individual or entities
com.hk – Commercial entities registered in Hong Kong
org.hk – Non-profit organisations in Hong Kong
gov.hk – Departments or bureaus of the HKSAR Government
net.hk – Host entities with a licence from the Office of the CommunicationAuthority
edu.hk – Schools, educational institutions
idv.hk – Individuals (HKSAR residents)
Three levels of domain names
Top level – .com / .com.hk would typically indicate a business with somecommercial interest based in Hong Kong
Second level – to the left of .com/.com.hk is the name of the business orits brand name or trademark; this constitutes the most important part ofthe domain name for a business as it represents a projection of its brand
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Third level – not registered; this refers to particular websites pages suchas /home.html
As ‘JJ’ is very famous and popular in Mainland China, it is very important to M SonHoldings Limited to have a domain name that is identifiable with the brand name‘JJ’. Therefore, Peter should consider using the following methods to obtain thedomain name. If a domain name is already registered by someone else, thecompany should find out the identity of the owner and negotiate to try to buy theregistered name from him/her.
If the domain name is identical or similar to a registered trademark, the company,as owner of the trademark, can sue for the transfer. If the domain name is identicalor similar to an unregistered trademark, legal action through the courts is difficult.An alternative is to seek a dispute resolution via one of the relevant authorities,such as The World Intellectual Property Organisation, The National ArbitrationForum, CPR Institute for Dispute Resolution, Disputes.org / eResolutionConsortium.
The company can consider registering ‘JJ’ as a registered trademark in HongKong, assuming that the owner of the ‘JJ’ domain name has not already done so.After the successful registration of trademark in Hong Kong, the company can suethe third party to seek for a transfer of the right to the domain name because thecontinuous use of such a domain name may constitute an infringement of thetrademark.
When registering the trademark, the company should consider registering bothEnglish and Chinese terms ‘JJ’ (translation or transliteration) for use in Hong Kongto give it broader protection.
Domain names that can be registered in Hong Kong are names ending with ‘hk’including those in Chinese characters, e.g. 公司.hk, .組織.hk, .政府.hk, .網絡.hk, .教育.hk, .個人.hk
All Hong Kong domain names are registered by Hong Kong Domain NameRegistration Limited. The registration of a domain name in Hong Kong is on
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first-come-first-served basis.
1. (c) As there is currently no safety manager, explain the guidelines setting outwhat should be reported in respect of workplace accidents to theOccupational Safety Officer of the Labour Department under theOccupational Safety and Health Ordinance and explain if there are reportingobligations in respect of the injury last week. Discuss if it is worthemploying a safety manager to be in charge of reporting workplaceaccidents. Discuss the eligibility for the sickness allowance and the methodof its calculation.
(10 marks)
(Total: 40 marks)
Ans (c) Employers should notify an Occupational Safety Officer of the Labour Departmentof any accident that causes death or serious injury within 24 hours.
The accident should be reported in writing to an Occupational Safety Officer withinseven days after the date of the accident if notification of the accident is notalready contained in a written report that includes the particulars required.
If the accident results in incapacitation which prevents an employee from workingfor at least three days, employers should report this in writing to an OccupationalSafety Officer within seven days after the date of the accident. Therefore, weshould report to the Labour Department within seven days after the date of theaccident.
It is worth employing a safety manager to help us report accidents in a timelymanner and manage the reporting system because an employer who fails to filerequisite reports with the Commissioner for Labour is liable to prosecution.
Eligibility for sickness allowance
An employee employed under a continuous contract is entitled to sicknessallowance if:
1. The sick leave taken is not less than four consecutive days (unless for any dayoff taken by a female employee for her pregnancy check-ups, postconfinement medical treatment or miscarriage: any such day on which she is
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absent shall be counted as a sickness day and, subject to the followingconditions, be paid sickness allowance);
2. The sick leave is supported by an appropriate medical certificate; and
3. The employee has accumulated a sufficient number of paid sickness days.
An employee shall not be entitled to sickness allowance under the followingcircumstances:
- The employee, without reasonable excuse, refuses treatment by a companydoctor of a medical scheme recognised by the Director of Health or disregardsthe advice of the doctor. (If the recognised scheme operated by an employerdoes not cover treatment from a certain medical discipline, the employee maychoose to receive treatment from any registered medical practitioner,registered Chinese medicine practitioner or registered dentist under thatparticular discipline);
- The sickness day falls on a statutory holiday on which the employee is entitledto holiday pay; or
- Compensation is payable under the Employees’ Compensation Ordinance.
Sickness allowance
The daily rate of sickness allowance is a sum equivalent to four-fifths of theaverage daily wages earned by an employee in the 12-month period preceding thespecified dates stated below. If an employee is employed for less than 12 months,the calculation shall be based on the shorter period.
No. of sickness days Specified datesOne day The sickness day
More than one consecutive day The first sickness day
Sickness allowance should be paid to the employee no later than the normal payday.
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SECTION B
2. Smart Limited is a medium-sized trading company in Hong Kong specialising inthe European market. The company employs several hundred members of staff inHong Kong. To facilitate a review of the company’s human resources strategy andcurrent processes, the managing director has asked you to report on a few areasof particular interest to him.
REQUIRED:
2. (a) Present to the managing director, in a report format, a discussion of relevantincome with respect to the calculations of MPF contributions and the duties,including record-keeping obligations, an employer owes to its MPF trusteeand employees.
(11 marks including 1 mark for format)
Ans (a) To: XXX, the director
From: YYY, the corporate administrator
Date: 6 June 2015
Re: MPF scheme
Under the Mandatory Provident Fund Scheme Ordinance (MPFSO), relevantincome includes wages, salaries, leave pay, fees, commissions, bonuses,gratuities and allowances (including housing allowance or other housing benefits),expressed in monetary terms, that are paid or payable by an employer to anemployee in consideration of his/her employment. The following items areexcluded from the calculation of relevant income: any loans advanced to theemployee, long service payments and severance payments, and other non-cashbenefits, e.g. uniforms, furniture, etc.
An employer is required to enroll employees in a registered scheme and carry outthe following duties:
To trustees
- Submit remittance statement to trustees, providing details of contributions.
- Notify trustee of any change of business details, e.g. address, telephone/fax.
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- Notify trustee of any termination of employment within 10 days after the lastday of the calendar month in which the employee ceases employment.
To the employee
- Produce monthly pay-record for employees, showing details of relevantincome and contributions paid during the month
- Handle documents received from trustees regarding employees within sevenworking days
Record keeping
- Keep employment records (employee’s name, address and the first date ofemployment) for at least six months after termination of employment
- Keep records of payment of relevant income (with breakdown and dates onwhich payments were made) for at least six months after each payment
- Keep information included in the remittance statement for at least seven yearsafter the date of the remittance statement
2. (b) Explain the options an employee has with regards to the transfer of accruedbenefits under a MPF scheme. Discuss if these options to transfer accruedbenefits have any relevance to the company’s initiatives with new recruits.
(9 marks)
(Total: 20 marks)
Ans (b) When an employee changes jobs, there are three alternative arrangements forhis/her accrued MPF benefits:
(a) Transfer the accrued benefits to the contribution account in the newemployer’s MPF scheme.
(b) Keep the accrued benefits in the existing scheme. In doing so, the employeewould need to open a personal account with the existing trustee. If anemployee does not indicate his preference on how to handle his/her accruedbenefits within three months after his/her ex-employer has notified the trusteeof the termination of employment, the employee’s accrued benefits will beautomatically transferred to a preserved account.
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(c) Transfer the accrued benefits to a personal account in any other MPF scheme.The employee has to open a personal account with the trustee of the selectedscheme.
If an employee wants to transfer his/her accrued benefits to his/her newemployer’s MPF scheme, he/she should complete a Scheme Member’s Requestfor Fund Transfer Form, which is obtainable from his/her trustee or the MPFA, ordownloadable from the MPFA website. The completed form should be returned tothe new trustee directly or through the new employer.
If an employee wants to open a personal account for the accrued benefits fromhis/her last employment, the completed form should be returned directly to thetrustee of the selected scheme.
To better assist employees in managing their accrued MPF benefits effectively,our company should draw the attention of our new recruits to the options availableand procedures involved in transferring their accrued benefits and opening ofpersonal accounts.
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3. Nancy has been appointed as an executive director of a company which isheadquartered in Hong Kong and which has factories in Mainland China. Sheintends to register the company’s trademark but she is not familiar with the lawsand application procedures relating to trademark registration. She would like you,the corporate administrator, to research this matter. Recently Nancy went toMainland China and found that a China-registered company is using a trademarksimilar, but not identical, to the one she intends to register for the company.
REQUIRED:
Write a report to Nancy explaining the position regarding trademarks in Hong Kong,focusing on the following issues:
3. (a) Define a trademark and the conditions for registrable trademarks. Explain‘passing off’ and the grounds required to constitute a passing-off action.
(10 marks including 1 mark for format)
Ans (a) To: Nancy, executive director
From: YYY, corporate administrator
Date: 3 December 2014
Re: Trademark
A trademark is a sign that distinguishes the goods and services of one trader fromthose of others. Typically a trademark can be words (including personal names),indications, designs, letters, characters, numerals, figurative elements, colours,sounds, smells, the shape of the goods or their packaging, or any combination ofthese. A sign must be capable of being represented graphically in order for it to beregistered as a trademark.
To be registrable, the trademark must be:
distinctive for the goods or services in respect of which registration is sought,
not deceptive, or contrary to law or morality, and
not similar or identical to any earlier marks for the same or similar goods orservices.
Passing off is a breach of the law that involves trading in a manner likely to
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confuse the public into believing that the goods or services, or the organisationitself, is or are associated with another, possibly better known, entity of higherrepute.
To succeed in a civil action against passing-off, the plaintiff must establish thefollowing three points:
the plaintiff has goodwill or reputation in a business in the supply of goods orservices distinguished by a name or a mark under which his goods or servicesare offered to the public;
the defendant has made a misrepresentation leading or likely to lead the publicto believe that the defendant’s goods or services are those of the plaintiff’s;
the plaintiff has suffered or is likely to suffer damage as a result of thedefendant’s misrepresentation.
3. (b) After registering a trademark in Hong Kong, what strategies should thecompany adopt to protect its trademark both in Hong Kong and, separately,in Mainland China?
(10 marks)
(Total: 20 marks)
Ans (b) Some strategies that the company, as a trademark owner, should consider:
Adopting a mark that is clearly different from and that will not infringe on otherowners’ marks. Infringement of a well-known trademark extends to the use ofthe mark or a similar mark for dissimilar goods, so we may be liable forinfringement even if our product is very different.
Registering a new trademark as soon as possible to ensure it is available forour business use and so that we can take immediate action againstinfringement.
Registering our trademark here in Hong Kong and separately in MainlandChina as there is a separate system of registration and protection there.Registering a mark in Hong Kong does not automatically give protection in
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Mainland China, and vice versa.
Registering the trademark in Chinese characters (or a translation ortransliteration) for use locally to complement our trademark and to give itbroader appeal and protection.
Putting in place a structured licensing system if we intend to license the use ofthe trademark.
Continuously monitoring the on-line Hong Kong Intellectual Property Journalfor applications to register trademarks likely to cause confusion with ourtrademark and taking action to oppose them.
Taking action under the Trade Marks Ordinance if an infringing activity takesplace in Hong Kong.
Taking action for passing off against damage to our business goodwill andreputation in Hong Kong.
Reporting the infringement immediately to the Customs and ExciseDepartment and Intellectual Property Investigation Bureau if the infringingactivity takes place in Hong Kong. We will need to provide the Customs andExcise Department with evidence that we own the trademark or copyright andproof of the alleged infringement.
Taking administrative or legal action under the law in Mainland China if theinfringing activity is in the Mainland. If a Hong Kong company uses ourtrademark in its name as a front for infringing activities in the Mainland, we cantake steps under Mainland law against the company’s infringing activities.
Most importantly, obtaining specialist IP advice from an IP lawyer or agent onall aspects of the applicant’s IP rights, including copyright, trademarks orregistered designs, which may protect our products in other ways.
Obtaining specialist advice on other business safeguards, including registering
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our trademark, trade name and company name as domain names to protectthem on the Internet. Hong Kong Domain Name Registration Company Limitedis a non-profit company that administers the registration of Internet domainnames under the ‘.hk’ country-code top-level domain.
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4. Stephanie Limited is a local group of retail companies operating in Hong Kong.Stephanie, the director of the company, is an expatriate from France who has livedin Hong Kong for several years. You are the company’s corporate administratorand are now responsible for relocating a retail shop from one site to another.
Stephanie notes that outsourcing of services is very common among businessorganisations today.
Stephanie has instructed you, the corporate administrator, to study the issuesregarding shop relocation and the outsourcing of services.
REQUIRED:
Write a report to Stephanie addressing the following issues:
4. (a) Explain the benefits of the shop relocation and the factors you haveconsidered in planning the move.
(10 marks)
Ans (a) To: Stephanie, director
From: YYY, corporate administrator
Date: 3 December 2014
Re: Shop Relocation and Outsourcing Arrangements
Relocation of a business inevitably involves time, money and disruption to ournormal business operations. However, these considerations are outweighed bylonger-term cost savings, new market opportunities and improvements in thequality and suitability of the premises for our company’s future development. Adetailed cost-benefit analysis has been conducted and the outcome supports themove.
This relocation also serves as a means of refreshing our company’s workforce andoperating methods. It meets our differing location needs and serves our customersbetter. The new site is an appropriate location that can be accessed by morecustomers. This aligns with our strategic goals and matches all our operationalrequirements.
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In carrying out this relocation exercise, we have considered the following factors:
Availability – the right premises and leasing conditions are readily available.Planning permission has been obtained for the specific use of the land as a newretail site.
Workforce changes – 20 new staff members have been recruited in addition to theexisting 25 staff on our workforce. Consultations have been made and the existingstaff members are pleased to move to the new site.
Workforce availability and expectations – appropriate staff members are availableand their expectations on the new site are met.
Design and construction – a design-and-build approach has been adopted to meetour operational needs.
Business-specific needs – geographical and other market requirements regardingoperations have been considered and the conclusions are positive.
The competitive environment – our competitors are adopting similar strategies sowe must not lag behind them.
Internal infrastructure – all the required systems, technology, and equipment areprovided.
External infrastructure – the new site is close to related facilities and key suppliers.Transport and communication links for staff and customers as well as the deliveryof supplies, goods and services are better than before.
The regulatory environment – the new premises meet all health and safetyrequirements.
Customer expectations – our research team’s findings show that the locationmeets the expectations of our customers.
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Maintenance and risks – we have taken into account the maintenance cost andreputational risks associated with the new premises.
4. (b) Discuss the meaning of outsourcing and evaluate the importance of writtenservice specifications and service level agreements in outsourcingarrangements.
(10 marks including 1 mark for format)
(Total: 20 marks)
Ans (b) Outsourcing can be defined as the strategic use of outside service providers toperform activities which would otherwise be handled by internal staff andresources. The company outsources non-core functions to specialised, efficientservice providers who become working partners with the company. The strategyaims at permitting a company to direct its internal resources toward its core andhigher value-adding activities, allowing staff to deliver their best.
A service specification is a description of the minimum service required to meet acompany’s needs and expectations, together with any legal, regulatory or industrystandard requirements. It mostly includes the following details:
Definition of terms used
Scope of the contract
Ways of execution
Required standard
Required outcome
Time schedule for completion
Termination conditions
Remedies for breach of contract
In outsourcing, a service level agreement identifies service levels or performancestandards that the service provider must meet or exceed. It also specifies theconsequences of failure to achieve one or more service levels, and incentives forperformance which exceeds targets, e.g. grant, credits or bonus. A good servicelevel agreement usually includes a section that provides precise definitions of keyterms. In some cases, the parties may choose to identify not only a threshold level
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of acceptable performance for each service level, but also a level of increasedimpact if the performance is at an agreed level below the threshold service level.Although the service level agreement is usually a separate addendum to theoutsourcing contract, it is not legally a separate agreement, but another set ofterms and conditions of the outsourcing contract.
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5. SS Limited is a medium-sized manufacturer based in Hong Kong. Recently thecompany developed a new market segment and needed to employ more staff fromdifferent countries in order to benefit from the market demand in different areas.However, the human resources manager refused to employ people of SoutheastAsian origin because he was concerned about their body odour. Richard, themanaging director with a European background, is not familiar with the law relatingto discrimination in Hong Kong but is worried that the human resources manager’srefusal to hire people of certain ethnic background may have legal implications forthe company.
Richard understands that environmental protection laws are very tough in Europeand he wants to know if environmental protection legislation in Hong Kong issimilar.
REQUIRED:
5. (a) Write a report to Richard explaining the law in Hong Kong with respect todirect discrimination, indirect discrimination and victimisation. Discusswhether the human resources manager’s refusal to hire people of SoutheastAsian origin has any legal implications for the company.
(12 marks including 1 mark for format)
Ans (a) To: Richard, managing director
From: YYY, corporate administrator
Date: 3 December 2014
Re: Racial Discrimination
In general terms, racial discrimination is about treating people less favourably onthe basis of their race.
Direct discrimination occurs when a person is treated less favourably than anotherunder comparable circumstances because of his/her or his/her near relative’srace. It is also direct discrimination to segregate a person on the basis of his/herrace.
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Example: A person of Pakistani origin who speaks fluent Cantonese and hasadopted a Chinese name applies by telephone for a job as a salesperson and isinvited for an interview. But because his appearance indicates that he is ofPakistani origin, when he turns up for the interview he is falsely told that someoneelse has already been hired and he is not interviewed for the job. This is lessfavourable treatment on the ground of race if another job seeker, not of Pakistaniorigin, was interviewed. This is an unlawful act under the Racial DiscriminationOrdinance (RDO).
(Or any other similar example)
Indirect discrimination occurs when the same requirement (rule, policy, practice,criterion or procedure) or condition, which cannot be justified on non-racialgrounds, is applied equally to people of different races but which has an unfaireffect on a particular group because: (i) only a small proportion of people from thatracial group can meet that requirement compared with the proportion of people ofother racial groups; and/or (ii) the condition is to the detriment to the persons ofthat particular group because they cannot meet it.
Example: A blanket ban on beards for health and safety reasons in a foodpackaging factory is a requirement or condition that indirectly discriminatesagainst ethnic groups such as Sikhs (who, by their custom, have to keep a beard),when compared with other racial groups. It is indirect discrimination if the blanketban is not justifiable, for example, because face masks could be used to meethealth and safety standards.
(Or any other similar example)
Victimisation: Racial discrimination also occurs by way of victimisation if a persontreats another person less favourably than other people because that person hasdone an act protected under the RDO, such as making or planning to make a racediscrimination complaint, taking legal action, acting as witness against racediscrimination or helping somebody else to do so.
Example: A manager of Nepalese origin is discriminated against by way ofvictimisation if he complains that he has been paid less annual bonus than anothermanager who is of Chinese origin on the ground of race, and the company decidesto dismiss him because he made this complaint.
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(Or any other similar example)
In view of the above, the company’s refusal to employ people of Southeast Asianorigin is a form of direct discrimination and should be avoided.
5. (b) Give Richard a summary of the environmental protection legislation in HongKong which has relevance to a manufacturing company. You may focus onthe Air Pollution Control Ordinance (Cap.311) and Waste DisposalOrdinance (Cap.354).
(8 marks)
(Total: 20 marks)
Ans (b) Air Pollution Control Ordinance (Cap.311) (APCO)
This ordinance empowers the Environmental Protection Department (EPD) tocontrol air pollution from industry, commercial operations and construction work.The APCO prohibits the use of high sulphur and leaded fuels and the openburning of construction waste, tyres and cables for metal salvage.
Abatement notices are usually issued to those causing air pollution from a processor machinery and they will be asked to reduce or stop their emissions, or faceprosecution. Some offences, such as black smoke emissions, are prosecuted onthe spot. Potential polluters whose fuel consumption exceeds a certain limit mustsubmit plans for installing or altering furnaces, ovens and chimneys. Majorindustrial processes, or ‘specified processes’, are subject to tighter control. Themethods and standards for assessing air pollution can be found in the TechnicalMemorandum for Issuing Air Pollution Abatement Notices.
Asbestos control provisions in the ordinance require that building works involvingasbestos must be conducted only by registered qualified personnel and under thesupervision of a registered consultant.
Air Pollution Control (Volatile Organic Compounds) Regulation:The Regulation prohibits import into Hong Kong and manufacture in Hong Kong ofregulated products with volatile organic compound content exceeding theprescribed limits for local sale or use. The regulated products include architectural
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paints, vehicle refinishing paints, vessel paints, pleasure craft paints, adhesives,sealants, printing inks and six categories of consumer products (namely airfresheners, hairsprays, multi-purpose lubricants, floor wax strippers, insecticides,and insect repellents).
Waste Disposal Ordinance (Cap.354)
It is prohibited to dump waste in public places, or on Government land, or onprivate premises without the consent of the owner or occupier. In addition to thisgeneral provision, there are two major provisions under the Waste DisposalOrdinance related to a manufacturing company.
Waste Disposal (Chemical Waste) (General) RegulationAnyone who produces chemical waste or causes it to be produced has to registeras a chemical waste producer. The waste must be packaged, labelled and storedproperly before disposal. Only a licensed collector can transport the waste to alicensed chemical waste disposal site for disposal. Chemical waste producers alsoneed to keep records of their chemical waste disposal for inspection by EPD staff.
Import and Export of Waste ControlA permit system to control the import and export of hazardous and other waste inline with the requirements of the Basel Convention is set out in the Ordinance.
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6. Lucia is the managing director of a multinational textile manufacturing companywith its own factory building in Hong Kong. The company employs more than 500workers. Lucia has reviewed the company’s insurance policies. Over the years,the company has purchased its insurance needs through a broker, but Lucia isdoubtful of the value of services the company has purchased. She has noticedthat the company does not have a policy of inviting competitive bids.
Lucia asks you, the newly appointed company secretary, to study the matter andprovide her with the information she requires.
REQUIRED:
6. (a) Write a report to Lucia and provide her with the information about theadvantages of using a broker, the additional services which may beprovided by a specialist broker, and the process of choosing a broker.
(15 marks including 1 mark for format)
Ans (a) To: Lucia, director
From: YYY, company secretary
Date: 3 December 2014
Re: Brokerage services
A broker will have access to a very wide range of insurance companies withwhich to place business. A broker should be able to obtain better terms than aninsured individual could achieve and may have access to special schemes anddiscounts.
A large broker often has a negotiating power with insurers which a non-brokerdoes not have.
For buyers of corporate insurance, one of the benefits of using a broker is that thebroker can benchmark proposed policy wording and negotiate amendments withthe insurer to meet the insured’s requirements.
Using a broker should result in obtaining the best cover available for buyers ofcorporate insurance who do not have the facilities or expertise in-house.
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A broker can provide risk management advice specific to the business or industryof the client: this can include risk management surveys, assistance with riskassessments and control, advice on property and/or liability risks, and assistancewith health and safety policies.
A broker can also provide claims management service including liaison with lossadjusters and insurers. This service may also include an uninsured loss recoveryservice.
A broker is also able to advise on contracts where there is an insurance element.
A broker may also be able to provide training in respect of particular areas of risksuch as product liability, fire and computer risks.
A broker can also provide advice and updates on new insurance products or riskmanagement aids specific to the business, the levels of cover the companyshould purchase, etc.
The process of choosing a broker
Ensure that the brokers are competing on an equal footing by providing the sameinformation to each of them. As the client, it is our responsibility to providebrokers with information on loss experience, risk exposure and other datarequested.
Make clear to the brokers the criteria on which we will base our selection. Forexample, clarify if we want the brokers to quote on the existing range ofinsurances in place, or if we want them to consider additional services offered bythem as part of the package.
Start the process early. Brokers may want to survey our premises and willcertainly require information such as projected turnover figures, details of pastinsurance claims, property values, etc., and gathering this information can betime-consuming. We need to leave sufficient time at the end of the process to
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fine-tune any quotations with our selected broker before our existing policies aredue for renewal.
Be prepared to meet with competing brokers several times before they make theirfinal report. This is important to ensure that they are fully aware and familiar withour business and that we are familiar with and confident in the service they canoffer. Make meeting the team that will handle our business part of the process.
Invite competing brokers to make a report well in advance of the time wheninsurance policies are expected to be in place (a month or longer perioddepending on the size of the business and complexity of the risks). The reportshould include an analysis of our business risks, the suggested policies, level ofcover, etc., and premium details. In addition, the report should detail how theyexpect to be remunerated (fee basis or percentage) and what is included in thebasic remuneration package. The report should also detail how our account willbe handled, by whom, the frequency of meetings, how information will becommunicated to them, etc.
Once a final selection has been made, insurance policies will need to bereviewed to ensure that the terms, conditions and policy limits are satisfactoryand the premiums quoted are the best possible for the risk. Regular meetingswith the account team should be scheduled so that the brokers can be kept up todate with our businesses and any issues that arise can be addressed and advicecan be sought.
6. (b) Explain to Lucia what best practice is and why it is important to today’sorganisations. State the key characteristics of an organisation whichadopts best practices.
(5 marks)
(Total: 20 marks)
Ans (b) The term ‘best practice’ is frequently used in modern organisations. It refers to atechnique or methodology that, through experience and research, has proven toreliably lead to business excellence. Most organisations adopt various bestpractices to help them cut costs, add value and deliver enhanced services orproducts to their customers.
While customers’ expectations are rising and profit margins are shrinking, the
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study of processes, practices and methods of organisations which adopt bestpractice enables an organisation to compare its critical operating factors againstthe similar processes of another organisation and strive for improvements. Intoday’s competitive and market-driven environment, engaging best practiceprinciples is the only way for a company to meet rising customer expectations,improve margins and stay in business.
Key characteristics of an organisation which adopts best practices:
1) The presence of an effective leader who empowers his employees to developand fulfill their potential.
2) The organisation makes an effort to meet and exceed the expectations of itscustomers, manage its supply chain effectively and constantly introduce newor improved products and services.
3) It capitalises on its knowledge and skills and champions innovation tomaintain its competitive edge in its industry. It also recognises best practiceas a continuous learning process through which the company can alwaysidentify ways for improvement.
END
