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Apr 18 Legal Update

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New Case on “disclosure of inside information”


SFC proceedings against Fujikon for “disclosure of inside information” breaches
(Click: press release)

What you should know:

  • Nature: delay in disclosure
  • Action against company, chairman/CEO, CFO/company secretary/executive director
  • Inside information”: notified by top customer that a headphone manufactured for it would be discontinued; comprises 10-15% of total revenue for immediate past 2 years (2013-4)
  • Delay: more than 7 weeks in disclosure
  • Officers failed to take reasonable measures to ensure proper safeguards for timely disclosure

What you should do/watch out for:

  • “Disclosure of inside information” remains a key area that listed companies should monitor


Hot Trends


Getting ready for AGM (Part 2)
– Stay ahead of the proxy curve (NASDAQ)

  • Growing shareholder “activism”, even for traditional “passive investors”
  • Focus on “governance” and “social” issues
  • Must get ready for AGM and investor engagement in this mode



Also in this issue


HKEX updated Guidance Letter HKEX – GL77-14, for listed companies using “contractual arrangements” to “indirectly” own or control businesses.  E.g. These arrangements are used in PRC, in light of foreign ownership restrictions.

Also watch out if your company proposes to acquire or establish businesses subject to such arrangements.

What you should do/watch out for:

  • Heightened concerns over the legality/validity of such arrangements, following consultation draft of new PRC Foreign Investment Law (Jan 15) — issuers should contact HKEX in advance to seek “informal and confidential guidance” (Para 23)
  • Where issuer proposes to acquire/establish such businesses which constitute “notifiable transactions” (Para 24)
    — Seek PRC legal advice and decide on mitigation steps
    — Disclosure in announcement/circular: reasons for such approach, risk factors


(i) The Companies (Amendment) Bill 2018 introduces amendments to the 2014 new Companies Ordinance: (i) implementation issues (ii) clarification/remove inconsistencies.

Notable amendments include expanding the scope for “simplified (financial) reporting” by corporate groups, e.g. those with non-HK incorporated subsidiaries. (Click: press release; Legislative Council Brief containing a detailed summary)

What you should know/watch out for:

  • Expand the scope for “simplified reporting”:
    — Holding companies with small private companies/eligible private companies on the one hand, and small guarantee companies on the other (“mixed groups”).  All relevant entities satisfy the “size tests”
    — Holding companies of groups of small private companies, eligible private companies, small guarantee companies, or “mixed groups” above; with non-HK subsidiaries.  All relevant entities satisfy the “size tests”
  • (Court-free procedures for) horizontal amalgamation: also available to HK-incorporated subsidiaries of a holding company, though the latter is not incorporated in HK
  • Listing of names of directors of subsidiary undertakings in directors’ reports — option to provide information on website, or keep the list at the holding company’s registered office (and open for inspection)


(ii) The Privacy Commissioner for Personal Data issued the “European Union General Data Protection (GDPR) 2016” booklet to raise awareness amongst local businesses of the new EU regulatory framework for data protection.

The new law, effective 25 May 2018, has “extra territorial” application.  E.g. HK businesses that collect/process personal data of EU individuals (e.g. online trading) will be caught.  Some requirements exceed current Hong Kong law. (press release; booklet)

What you should know/do:

  • Even if a business does not have any “establishment” in EU, it will be caught if it “offers goods or services to or monitor the behavior of individuals in the EU”
  • Check compliance status with legal/business teams if your businesses appear to fall within the above


(iii) The Competition Commission published an advisory bulletin and advises on practices in employment (Click: press release; advisory bulletin)

“Wage-fixing agreements”; “non-poaching agreements”; and “exchange of sensitive information” among businesses are potentially anti-competitive.  Examples include certain “salary surveys” of industry associations.  Alert your HR/relevant management teams!

What you should know/do:

  • Wage-fixing agreements: any element of compensation for employees, including benefits and allowances (e.g. insurance benefits, housing allowances or severance payments)
  • Non-poaching agreements: solicitation or hiring of each other’s employees.  E.g. an agreement to refuse to hire each other’s employees
  • Exchange of sensitive information: about intentions in employee compensation or hiring (whether unilateral/reciprocal); whether done directly or through a third party. E.g.  Salary surveys of industry association, if not conducted in the right manner (Q2, “Q+As” section of the bulletin)
  • Read “Q+As” section in the bulletin

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