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Hong Kong law firms will soon be able to convert to limited-liability partnerships (LLP) following a seven-year campaign by the legal profession.
Hong Kong Secretary for Justice Wong Yan-lung announced the imminent change during a speech at the 9th Chinese Lawyers Forum held in Qingdao, a seaside city in China’s Shandong province.
“Hong Kong will soon pass a new law enabling solicitor firms in Hong Kong to operate in the form of an LLP,” said Wong at the forum. “This new development will modernise Hong Kong’s legal services industry and will encourage multinational law firms to further their collaboration with their Hong Kong counterparts.”
The Hong Kong Law Society first came up with the LLP proposal in 2004 and raised the issue at its meeting with the Secretary for Justice in April 2007. In June last year, the Legal Practitioners (Amendment) Bill 2010 was finally introduced into the Legislative Council.
After rounds of public consultations, further discussions and committee stage amendments, it is understood that the draft bill will be reviewed in a Legislative Council session next month.
“Due to a couple of important issues upon which the administration and the profession couldn’t reach any agreement, the bill is still pending,” said Huen Wong, an of counsel in Fried Frank’s Hong Kong office and immediate past president of the Hong Kong Law Society. “It’s likely that both sides will be able to resolve the outstanding issues in the coming months and the bill will be passed into law without further delay, and in any event before the middle of next year when the current session of the Legislative Council ends.”
Wong is a member of the Law Society’s Working Party on the LLP Bill and has actively pushed for the change over the past few years.
The introduction of the LLP will broaden the choice of business models for Hong Kong’s 772 law firms, bringing the city’s legal system in line with those in other leading jurisdictions.
“It’s a positive development for Hong Kong law firms. Our peers in other major jurisdictions and financial centres have the option to structure their firms as LLPs, but Hong Kong still doesn’t have such provision,” said Victor Yang, managing partner of Hong Kong firm Boughton Peterson Yang Anderson (BPYA), which has an association with China’s leading firm Zhong Lun and is likely to convert to LLP status once the bill has passed.
“The lack of an LLP model may have hindered Hong Kong firms’ growth and potential mergers with other firms,” he added. “Partners have hesitated to take on unlimited liability for the debts and liabilities caused by other partners whom they don’t know very well.”
It is expected that giving foreign firms the ability to operate as a LLP in Hong Kong will bolster efforts to promote the jurisdiction as an international financial and legal centre.
“Hong Kong has already become an international legal centre,” said Wong. “There are 72 foreign law firms, together with a large number of localised international firms, operating in the local market. It’s important that we offer them different business structures to suit the particular needs of their operations.”