Getting ready for AGM (Part 1)
-HK Voting Policy Guidelines 2018 (ISS and Glass Lewis)
- Influential reports of proxy advisors, widely followed by institutional investors
- Little changed from previous year generally
- Main change affects PRC companies
— more stringent approach in considering Articles amendment to add “Communist Party Committees”
- Key lessons of 2017 season
— general mandate (both firms: maximum 10% issuance; ISS: max 10% price discount, Glass Lewis: 15%)
— director “over boarding” (ISS: max public directorships: 6; Glass Lewis: 5)
- For your planning + brief your board
— manage expectations: for company; personal re-election
Click: ISS Guidelines; Glass Lewis Guidelines
HKEX published another Listing Decision (LD118-2018), along the theme of combating listed “shells” which are susceptible to speculative activities. This reflects its tightened approach in applying Rule 13.24, as regards “sufficiency of operations/assets of sufficient value” for continued listing. It would apply the rule in “extreme cases” with certain characteristics: (i) a very low level of operating activities and revenue; (ii) not a temporary downturn; (iii) the assets do not generate sufficient revenue and profits to support a continued listing. Obligation is on the issuer to support its case.
Issuer failed to demonstrate its case. Its existing business (second-hand vehicles sales in HK) recorded declining revenue for the past 5 years (near 95%, to less than $5m); net loss and negative operating cash flow; total assets (HK$50m, mostly cash, loan/interest receivables, etc.).
HKEX rejected its submission regarding a new business, for being: substantially different (wholesale distribution of new vehicles in PRC); “preliminary/uncertain” (significant portion of projected revenue not based on legally binding commitments).
This Update in PDF