Transcript Logo - HKEx
Hong Kong Exchange and Clearing Limited
Press Conference on
Enhancing Corporate Governance
and Market Quality
30 January 2004
1
Corporate Governance
Update on Progress
Paul Chow
Chief Executive
2
Update on Progress
Release
of Exposure Paper on Draft Code on
Corporate Governance Practices and Corporate
Governance Report
Implementation
of corporate governance Rule
amendments
Consultation
conclusions and Rule amendments
on initial listing criteria and continuing listing
obligations
3
Update on Progress (2)
Initiatives under Hong Kong’s Corporate
Governance Action Plan
International standards as a benchmark
Improving
the transparency of our rules and
practices
Address perceived inadequacies in the Rules
Codify existing Exchange practices
Make the Rules clearer and more concise (where
possible)
4
Exposure of Draft Code on
Corporate Governance Practices and
Corporate Governance Report
Richard Williams
Head of Listing
5
Objective of the Exposure Paper
Public exposure of the draft Code and Corporate
Governance Report
To allow the market to comment on:
timing of the proposed implementation of
the Code
detailed wording of the draft Code
6
Structure of Draft Code
Non–mandatory
Two tiers of board practices
1st tier: Code provisions – comply or explain
approach
•
Non-compliance does not constitute a breach
of the Listing Rules
2nd tier: Recommended Best Practices – listed
issuers encouraged to disclose their noncompliance
7
Code Provisions
Section A: Directors
Section B: Directors’ remuneration
Section C: Accountability and Audit
Section D: Delegation by the Board
Section E: Communication with Shareholders
8
Major Recommended Best Practices
INEDs comprising at least one-third of the
board
Establishment of a nomination committee with
a majority of INEDs
Quarterly
reporting for Main Board issuers
Continuous training for directors
Disclosure of senior management’s emoluments
on a named basis
9
Corporate Governance Report
Three
levels of disclosure requirements
1st level: Mandatory disclosure requirements
2nd level: Code provision disclosure – need to
explain non-disclosure
3rd level: Recommended disclosure
10
Proposed Timetable
Comments on or before 31 March 2004
Target for publication of Code – end 1st half 2004
New Code effective for accounting periods
commencing:
1 January 2005 for all the Code provisions and
related disclosure obligations (except for those on
“internal control”)
1 July 2005 for the Code provisions on “internal
control” and related disclosure obligations
Early adoption encouraged
11
Corporate Governance
Rule Amendments
Anne Chapman
Vice President, Listing
12
Major areas of corporate governance
Rule amendments
New chapters of Main Board Rules on
notifiable transactions and connected
transactions
Revised classification of notifiable transactions
and connected transactions
Revised definition of “reverse takeovers”
Revised definition of “connected persons”
Revised definition of “associate” of a
connected person
Refreshment of general mandate
Disclosure of directors’ remuneration
13
Major Rule Amendments (1)
New Chapters of Main Board Rules
Chapter 14 (Notifiable transactions)
Chapter 14A (Connected transactions)
Alignment of the format and structure of Main
Board and GEM Rules
14
Major Rule Amendments (2)
Classification of notifiable transactions
Categories of notifiable transactions:
•
•
Introduced “VSD”
Introduced “reverse takeovers” (existing GEM Rules) into
Main Board Rules
Five size tests:
•
•
•
•
•
Total assets test which replaces the existing net assets test
Consideration to market capitalisation test which replaces
the existing consideration to net assets test
Revenue test as a new stand-alone test
Profits test (no change)
Equity capital test (no change)
Revised percentage thresholds:
•
Alignment of thresholds with international standards
15
Major Rule Amendments (3)
Classification of connected transactions
Existing requirement:
•
Assets test and consideration test only
New requirement:
•
All size tests (except for profits test) apply
•
Revised percentage thresholds apply
•
Existing de minimis thresholds of $1
million and $10 million retained
16
Major Rule Amendments (4)
Reverse
takeovers:
Treated as a deemed new listing
• Comply with new listing requirements
Revised definition:
• Acquisitions involving a change in control and
triggering VSA threshold
• Acquisitions within 24 months after a change
in control which individually or together
trigger VSA threshold
17
Major Rule Amendments (5)
Revised definition of “connected person”
Includes connected persons at subsidiary level
Includes, for the purpose of connected transactions,
non wholly owned subsidiaries of which connected
person(s) at the issuer’s level (individually or
together) is/are a substantial shareholder
Includes, for the purpose of connected transactions,
“relatives” of a connected person as his deemed
associates :
•
includes his spouse, parents, children and siblings
•
includes his mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, sister-in-law, grandparents,
grand-children, uncle, aunt, cousin, nephew and niece,
whose association with the connected person is such that, in
the opinion of the Exchange, the proposed transaction
should be subject to the connected transaction provisions
18
Major Rule Amendments (6)
Revised definition of “associate” :
in relation to an individual,
•
a trustee-controlled company
•
a subsidiary of a trustee-controlled company
•
a holding company of a trustee-controlled company and a
subsidiary of any such holding company
in relation to a corporation,
•
a trustee
•
a trustee-controlled company
•
a subsidiary of a trustee-controlled company
•
a holding company of a trustee-controlled company and a
subsidiary of any such holding company
19
Major Rule Amendments (7)
Limit on general mandate:
Existing limit of 20% of issued share capital retained
Further consideration will be given to lowering the limit
Refreshment of general mandate
Revised requirements:
•
Refreshment subject to shareholders’ approval
once a year
•
Independent shareholders’ approval for
subsequent refreshments in a year
•
GEM and Main Board rules aligned
20
Major Rule Amendments (8)
Disclosure of directors’ remuneration in annual
reports
Existing Main Board Rule:
•
By bands only
Existing GEM Rule:
•
On an individual but “no name” basis
New Main Board and GEM Rules:
•
On a “named” basis
21
Implementation
New Rules effective on 31 March 2004
Transitional arrangements :
•
Refer to the attachment to the HKEx’s press
release
New Rules will be published on HKEx’s website at
www.hkex.com.hk today
22
Consultation Conclusions
on Proposed Amendments to the Listing Rules
Relating to Initial Listing Criteria
and Continuing Listing Obligations
Keniel Wong
Senior Vice President, Listing
Focus
The Consultation Conclusions focus on:
initial listing eligibility criteria
continuing obligations
disclosure requirements at the time of initial
listing
24
Initial listing eligibility criteria
Introduction of alternative financial standards
to the profit requirement:
Market capitalisation / revenue test
Market capitalisation / revenue / cash flow test
Market Capitalisation
Public Float
Number and spread of shareholders
25
Initial listing eligibility criteria
Market capitalisation / revenue test
Market capitalisation: at least HK$4
billion
Revenue: at least HK$500 million
requirement for a higher minimum
number of shareholders : 1,000
26
Initial listing eligibility criteria
Waiver of the 3-financial-year trading
record requirement for listing applicants
applying to list under market
capitalisation / revenue test
Pre-requisites:
• management experience
• management and ownership continuity
27
Initial listing eligibility criteria
Market capitalisation / revenue / cash flow test
Market capitalisation: at least HK$2 billion
Revenue: at least HK$500 million
Positive cash flow: at least HK$100 million
28
Initial listing eligibility criteria
Minimum expected market capitalisation at
the time of listing
Current requirement:
at least HK$100 million
Increased to at least HK$200 million
Definition of “market capitalisation”
29
Initial listing eligibility criteria
Public float
Current requirement:
25% (if market capitalisation does not
exceed HK$4 billion)
floor: 10% (discretionary, if market
capitalisation exceeds HK$4 billion)
New:
25% by reference to aggregate market
capitalisation of all securities of
applicant
floor: 15% (discretionary, if market
capitalistaion exceeds HK$10 billion)
30
Initial listing eligibility criteria
Number and spread of shareholders
increased to 300
for issuers applying to list under the market
capitalisation / revenue test, minimum
requirement is 1,000
top 3 public shareholders hold not more than
50% of public float
31
Continuing obligations
Public float
suspension if public float falls below 15%
may consider waiver in general offer situation – 3 months
not extended to share repurchase situation
where lower % accepted for issuers (with market
capitalisation over HK$10 billion)
lower % only applicable at time of listing
% fixed
applicable throughout issuers’ listing on the Exchange
will not be considered post listing
confirmation of sufficiency in annual reports
32
Continuing obligations
Timeliness of accounts
immediate suspension – on failure to
publish financial results on due date
transitional period
33
Disclosure requirements
at the time of Initial Listing
Over-allotment option and price
stabilising activities
Persons in control of the listing applicant
Management experience / qualification
Applicant group prospects
34
Implementation
Effective Date : 31 March 2004
Except:
for initial listing eligibility criteria:
•
Form A1 submitted before this date, and
listed within three months afterwards
for continuing obligations:
•
a transitional period up to 31 December 2004
in respect of new rule on timely publication
of financial information
35