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Mar 18 Legal Update

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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).

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