The Stock Exchange of Hong Kong

(i)    Updated Listing Decision LD75-4, and provided additional guidance where the distribution of significant portion of business by a listed issuer warrants the same level of protection as for a withdrawal of listing.

What you should know:

The Listing Decision provides guidance on additional requirements where a disposal of assets by an issuer amounts to a “Very Substantial Disposal” under the Listing Rules (based on percentage ratio calculation). The proposed distribution would also be subject to Listing Rule requirements applicable to a withdrawal of listing. Specifically:

• The issuer should obtain prior approval of the distribution by independent shareholders in a general meeting: by (a) at least 75% of shareholders voting either in person or by proxy at the meeting, and not more than 10% of the shareholders may vote against the resolution

• The issuer’s shareholders (other than the directors (but excluding independent non-executive directors), chief executive and controlling shareholders) should be offered a reasonable cash alternative or other reasonable alternative for the distributed assets

What you should do/watch out for:

Companies contemplating major restructuring of a “similar” nature should be aware of the more stringent requirements. The Listing Department should be consulted in advance.

(ii)    Published “Analysis of Corporate Governance Practice Disclosure in 2014 Annual Reports”

What you should know:

As noted in the Exchange’s press release, the general level of compliance with the comply-or-explain CPs is found to be high.

However, five areas have been found to have the lowest compliance rate, including (CP A.4.1) “Non executive directors being appointed for a specific term, subject to re-election”. The Exchange also made useful comments on areas of improvement in the quality of explaining deviations from those CPs. Click here for our more detailed summary.

What you should do/watch out for:

As we start preparing our 2015 annual reports, “preparers” of reports should take into consideration the Exchange’s identified improvement areas regarding the quality of explaining deviations from the CPs.

In general, these observations by the Exchange are useful in understanding how the “comply or explain” regime is expected to work.

(iii)    Enforcement action: The Listing Committee censures Mr. Xue Wenge, a former executive director of Mayer Holdings Limited, for breaching Directors’ Declaration and Undertaking

What you should know:

This is quite a blatant case of failing to comply with Directors’ Declaration and Undertaking. The director in question failed to co-operate in the Exchange’s investigation of possible breaches of his Undertaking and Declaration; and his correspondence address was incomplete and/ or inaccurate.

In light of the circumstances, the Listing Committee censured Mr. Xue, and stated that his conduct in this matter would be taken into account in assessing his suitability under Rule 3.09 of the Listing Rules in the event of his wishing to become a director of another issuer in the future.

What you should do/watch out for:

Director’s duties represent a recurring theme in the Exchange’s enforcement actions.

Competition law

The Hong Kong Competition Commission (“HKCC”) published its (i) enforcement policy and (ii) the final version of its leniency policy. These represent the final steps towards the implementation of the Competition Ordinance (the “Ordinance”) on 14 December 2015.

What you should know:

The final version of the leniency policy is in substance the same as the draft version issued in September (which was covered in our September legal update).

The enforcement policy sets out the principal factors that HKCC will consider when exercising its discretion whether to investigate a case and, how to resolve the case. As anticipated, no sector-specific guidance has been provided. Nonetheless, “cartel” conduct was expressed to be a “compliance focus” of HKCC. “Compliance focus”; “severity factors”, and “effective and appropriate remedies” are the three key issues considered by HKCC in its enforcement.

As stated in previous legal updates, competition law is a highly specialist areas of law. We set out links to publications by two specialist law firms providing more detailed summaries of the enforcement and leniency policies: (i) by Herbert Smith Freehills; (ii) by Hogan Lovells.

What you should do/watch out for:

These represent the final steps towards the implementation of the Ordinance. Competition law is a highly specialist area of law. It also involves possible changes in your company’s business practices and behaviors. Specialist legal advice should be taken where needed.

Privacy Law

What you should know:

In November, a body check service company was fined for failing to comply with an “opt out request” of a customer. Please click here for the press release. This is the third conviction under the new direct marketing regime which came into force in April 2013. It was also noted in the press release issued by the Privacy Commissioner for Personal Data (“PCPD”) that 54% of the complaints received from April to Oct 15 relate to failure to comply with customers’ opt out request.

What you should do/watch out for:

As observed in previous updates, “privacy” should be a watch area for businesses. PCPD appears to be an “active” regulator. There is also much heightened stakeholder sensitivity generally. Companies that keep personal information for direct marketing must maintain an “opt out list” of customers that do not consent to “direct marketing”, and comply with this.