The Stock Exchange of Hong Kong Limited (“HKEX”)

(i) HKEX published 7 Listing Decisions, principally relating to attempted “takeovers” of listed companies using “new” methods (“sufficiency of operations or assets after disposal”: LD 97, 98, 99; “reverse takeovers”: LD 94, 95, 96 ); and spin-offs: LD 93

What you should know:

• the (6) cases principally illustrate the implementation of HKEX’s guidance letters seeking to control attempted “takeovers” using new means — “sufficiency of operation or assets after a disposal”; “reverse takeovers”
• please refer to our previous newsletters (Nov 15 legal update and Dec 15 legal update) summarizing HKEX’s relevant guidance letters in this areas

What you should do/watch out for:

Companies contemplating similar transactions should watch out, and approach HKEX to seek its guidance on the application of the rules as early as possible.

(ii) HKEX published a new webpage on ESG reporting

What you should know/watch out for:

• the revamped ESG webpage contains (i) an updated toolkit; (ii) a reporting guidance on environmental KPIs, to assist listed issuers in ESG reporting
• HKEx also organized a series of ESG training in March, which include sharing by listed companies of various industry groups. These are expected to be uploaded to the webpage in due course

The Securities and Futures Commission (“SFC”)

(i) SFC published its latest Corporate Regulation Newsletter:

What you should know:

• stresses the disclosure principles of “accuracy”, “clarity” and “balance”
• means of disclosure: HKExnews website; not to be substituted by corporate website or social media i.e. not generally known to the public
• gives useful examples of “untimely” disclosure, including IT- related problems
• gives useful examples of “incomplete” or “misleading” disclosure, including unintended disclosure of sensitive information by individual executives via social media account
• where a company has requested trading suspension in light of inside information, trading halt to be kept as short as possible (Note : HKEX’s Guidance Letter – click here for our Dec 15 legal update)
• (where listed in multiple jurisdictions) Hong Kong trading should resume after the issuer discloses relevant inside information, though it may be subject to different requirements for trade resumption in other markets

What you should do/watch out for:

• listed issuers should develop corporate disclosure policies, clearly specifying means of inside information disclosure, and roles of various teams (including legal/finance/IR and communications)
• social media policy should be developed, including regulating sensitive disclosure by individual executives in social media

Click here for our summary.

(ii) SFC commenced second action under inside information disclosure regime

What you should know/watch out for:

• nature of four items of “inside information” alleged: “outstanding audit issues”; “potential qualified audit report”; resignation of auditor; significant prepayment (totaling US$14m) underlying auditor concerns
• action brought against the listed issuer as well as ten of the issuer’s senior executives (chairman and executive director; company secretary and financial controller; executive directors); independent non-executive directors and non-executive director) in office at the material times

Click here for a summary by Debevoise & Plimpton LLP

(iii) SFC published consultation conclusions on “Principles of Responsible Ownership”

What you should know:

• SFC decided to introduce the principles with minor changes, removing references to individual and retail investors
• the principles are voluntary, perceived as best practices for share ownership, and investors are encouraged to adopt them
• SFC will monitor the application of the principles to assess whether any amendments or other changes may be needed in the future

What you should watch out for:

Listed issuers should note this as an emerging trend, while monitoring reaction of institutional investors

Competition Commission published its report on trade associations

What you should know:

• Competition law implications of activities of trade associations
• these include (i) price recommendations and fee scales, (ii) exchange of information; (iii) association meetings, (iv) certification standards and standard terms, (v) membership and event participation criteria

What you should do/watch out for:

• the potentially anti-competitive activities should be noted, if your company has involvement with trade associations
• appropriate policies should be developed with “do’s and don’ts”, as operating units (not only the legal/compliance functions) will be involved in trade association activities
• Click here for a summary by Hogan Lovells