Specific Matters Relevant to the Issuer's Business
13.11(1) Rules 13.12 to 13.19 set out specific instances that give rise to a disclosure obligation on an issuer's part.
Note: Transactions and financing arrangements of the sort referred to in rules 13.12 to 13.19 may also be subject to Chapters 14 and/or 14A.(2) For the purposes of rules 13.12 to 13.19,(a) the expression "affiliated company" refers to a company which, in accordance with Hong Kong Financial Reporting Standards, is recorded using the equity method of accounting in an entity's financial statements. This includes associated companies and jointly controlled entities as defined in those standards;(b) [Repealed 1 March 2006];(c) the expression "relevant advance to an entity" refers to the aggregate of amounts due from and all guarantees given on behalf of:(i) an entity;(ii) the entity's controlling shareholder;(iii) the entity's subsidiaries; and(iv) the entity's affiliated companies.(d) [Repealed 1 January 2013](3) [Repealed 1 January 2013](4) No disclosure is necessary under rules 13.12 to 13.19 where the indebtedness or financial assistance arises from a transaction which was approved by shareholders provided that information equivalent to that specified in rules 13.15 or 13.16, as applicable, was included in the circular to shareholders of the issuer.(5) [Repealed 1 January 2013]
Situations for disclosure (13.12)
Advance to an entity (13.13-13.15A)
Where the relevant advance to an entity exceeds 8% under the assets ratio defined under rule 14.07(1), the issuer must announce the information in rule 13.15 as soon as reasonably practicable. For the avoidance of doubt, an advance to a subsidiary of the issuer will not be regarded as an advance to an entity.
Where the relevant advance to an entity increases from that previously disclosed under rule 13.13, 13.14, or 13.20 and the amount of the increase since the previous disclosure is 3% or more under the assets ratio defined under rule 14.07(1), the issuer must announce the information in rule 13.15 as soon as reasonably practicable.
Under rule 13.13 or 13.14, issuers must announce details of the relevant advance to an entity, including details of the balances, the nature of events or transactions giving rise to the amounts, the identity of the debtor group, interest rate, repayment terms and collateral.
13.15A(1) it arose in the issuer's ordinary and usual course of business (other than as a result of the provision of financial assistance); and(2) the transaction from which the trade receivable arose was on normal commercial terms.
Financial assistance and guarantees to affiliated companies of an issuer (13.16)
Where the financial assistance to affiliated companies of an issuer, and guarantees given for facilities granted to affiliated companies of an issuer, together in aggregate exceeds 8% under the assets ratio defined under rule 14.07(1), the issuer must announce as soon as reasonably practicable the following information:(1) analysis by company of the amount of financial assistance given to, committed capital injection to, and guarantees given for facilities granted to, affiliated companies;(2) terms of the financial assistance, including interest rate, method of repayment, maturity date, and the security therefor, if any;(3) source of funding for the committed capital injection; and(4) banking facilities utilised by affiliated companies which are guaranteed by the issuer.
Pledging of shares by the controlling shareholder (13.17)
Where the issuer's controlling shareholder has pledged all or part of its interest in the issuer's shares to secure the issuer's debts or to secure guarantees or other support of its obligations, the issuer must announce the following information as soon as reasonably practicable:(1) the number and class of shares being pledged;(2) the amounts of debts, guarantees or other support for which the pledge is made; and(3) any other details that are considered necessary for an understanding of the arrangements.
Loan agreements with covenants relating to specific performance of the controlling shareholder (13.18)
Where an issuer (or any of its subsidiaries) enters into a loan agreement that includes a condition imposing specific performance obligations on any controlling shareholder (e.g. a requirement to maintain a specified minimum holding in the share capital of the issuer) and breach of such an obligation will cause a default in respect of loans that are significant to the issuer's operations, the issuer must announce the following information as soon as reasonably practicable:(1) the aggregate level of the facilities that may be affected by such breach;(2) the life of the facility; and(3) the specific performance obligation imposed on any controlling shareholder.
Breach of loan agreement by an issuer (13.19)
When an issuer breaches the terms of its loan agreements for loans that are significant to its operations, such that the lenders may demand their immediate repayment, and where the lenders have not issued a waiver in respect of the breach, the issuer must announce such information as soon as reasonably practicable.
Continuing disclosure requirements (13.20-13.22)
Where the circumstances giving rise to a disclosure under rule 13.13 continue to exist at the issuer's interim period end or annual financial year end, the information specified under rule 13.15, as at the interim period end or year end, shall be included in the interim or annual report.
Where an obligation arises under rules 13.17, 13.18 or 13.19, the disclosures required by these rules should be included in subsequent interim and annual reports for so long as circumstances giving rise to the obligation continue to exist.
Where the circumstances giving rise to a disclosure under rule 13.16 continue to exist at the issuer's interim period end or annual financial year end, its interim or annual report must include a combined balance sheet of affiliated companies as at the latest practicable date. The combined balance sheet of affiliated companies should include significant balance sheet classifications and state the issuer's attributable interest in the affiliated companies. If it is not practicable to prepare the combined balance sheet of affiliated companies, the Exchange on the issuer's application may consider accepting, as an alternative, a statement of the indebtedness, contingent liabilities and capital commitments as at the end of the period reported on by affiliated companies.
Notifiable transactions, connected transactions, takeovers and share repurchases (13.23)
13.23(1) An issuer must announce details of acquisitions and realisations of assets and other transactions required by Chapters 14 and 14A and, where applicable, must circularise holders of its listed securities with their details and obtain their approval of them.(2) The issuer shall comply with the Takeovers Code and the Code on Share Buy-backs.
Note: Where the consideration under an offer includes securities for which listing is being or is to be sought, the offer document(s) will constitute a listing document.
Sufficient operations (13.24-13.24A)
(1) An issuer shall carry out, directly or indirectly, a business with a sufficient level of operations and assets of sufficient value to support its operations to warrant the continued listing of the issuer's securities.
Note: Rule 13.24(1) is a qualitative test. The Exchange may consider an issuer to have failed to comply with the rule in situations where, for example, the Exchange considers that the issuer does not have a business that has substance and/or that is viable and sustainable.
The Exchange will make an assessment based on specific facts and circumstances of individual issuers. For example, when assessing whether a money lending business of a particular issuer is a business of substance, the Exchange may consider, among other factors, the business model, operating scale and history, source of funding, size and diversity of customer base and loan portfolio and internal control systems of the money lending business of that particular issuer, taking into account the norms and standards of the relevant industry.
Where the Exchange raises concerns with an issuer about its compliance with the rule, the onus is on the issuer to provide information to address the Exchange’s concerns and demonstrate its compliance with the rule.
(2) Proprietary trading and/or investment in securities by an issuer and its subsidiaries (other than an issuer which is an investment company listed under Chapter 21) are normally excluded when considering whether the issuer can meet rule 13.24(1).
Note: This rule would not normally apply to proprietary securities trading and/or investment activities carried out in the ordinary and usual course of business by a member of an issuer’s group that is:
(a) a banking company (as defined in rule 14A.88);
(b) an insurance company (as defined in rule 14.04); or
(c) a securities house (as defined in rule 14.04) that is mainly engaged in regulated activities under the SFO. It should be noted that proprietary securities trading and/or investment is not a regulated activity under the SFO and accordingly, this exemption is not available where proprietary securities trading and/or investment constitutes a significant part of the business of the securities house.
An issuer must, after trading in its listed securities has been suspended, publish quarterly announcements of its developments.
Material matters which impact on profit forecasts (13.24B)
13.24B(1) If, during the profit forecast period, an event occurs which, had it been known when the profit forecast was made, would have caused any of the assumptions upon which the forecast is based to have been materially different, the issuer must promptly announce the event. In the announcement, the issuer must also indicate its view of the likely impact of that event on the profit forecast al made.(2)(a) If profit or loss generated by some activity outside the issuer's ordinary and usual course of business which was not disclosed as anticipated in the document containing the profit forecast, materially contributes to or reduces the profits for the period to which the profit forecast relates, the issuer must announce this information, including an indication of the level to which the unusual activity has contributed to or reduced the profit.(b) The issuer must announce the information under rule 13.24B(2)(a) as soon as it becomes aware that it is likely that the contribution to or reduction in the profits made or to be made by the profit or loss generated or to be generated will be material.
Winding-up and liquidation (13.25)
13.25(1) An issuer shall inform the Exchange and publish an announcement of the happening of any of the following events as soon as it comes to its attention:—(a) the appointment of a receiver or manager either by any court having jurisdiction or under the terms of a debenture or any application to any court having jurisdiction for the appointment of a receiver or manager, or equivalent action in the country of incorporation or other establishment, in respect of the business or any part of the business of the issuer or the property of the issuer, its holding company or any subsidiary falling under rule 13.25(2);(b) the presentation of any winding-up petition, or equivalent application in the country of incorporation or other establishment, or the making of any winding-up order or the appointment of a provisional liquidator, or equivalent action in the country of incorporation or other establishment, against or in respect of the issuer, its holding company or any subsidiary falling under rule 13.25(2);(c) the passing of any resolution by the issuer, its holding company or any subsidiary falling under rule 13.25(2) that it be wound up by way of members' or creditors' voluntary winding-up, or equivalent action in the country of incorporation or other establishment;(d) the entry into possession of or the sale by any mortgagee of a portion of the issuer's assets where the aggregate value of the total assets or the aggregate amount of profits or revenue attributable to such assets represents more than 5% under any of the percentage ratios defined under rule 14.04(9) ; or(e) the making of any final judgment, declaration or order by any court or tribunal of competent jurisdiction whether on appeal or at first instance which is not subject to any or further appeal, which may adversely affect the issuer's enjoyment of any portion of its assets where the aggregate value of the total assets or the aggregate amount of profits or revenue attributable to such assets represents more than 5% under any of the percentage ratios defined under rule 14.04(9).(2) Rules 13.25(1)(a), (b) and (c) will apply to a subsidiary of the issuer if the value of that subsidiary's total assets, profits or revenue represents 5% or more under any of the percentage ratios defined under rule 14.04(9). For the purpose of this rule 13.25(2), 100% of that subsidiary's total assets, profits or revenue (as the case may be) or, where that subsidiary itself has subsidiaries, the consolidated total assets, profits or revenue (as the case may be) of that subsidiary is to be compared to the total assets, profits or revenue (as the case may be) shown in the issuer's latest published audited consolidated financial statements irrespective of the interest held in the subsidiary.
Notes: [Repealed 1 January 2013]