HKEx LISTING ENFORCEMENT GUIDANCE LETTER
Cite as HKEx-LEGL05-08 (December 2008)
|Listing Rule||Main Board Listing Rule 2.13(2)|
|Subject||Guidance on ensuring and achieving accuracy and completeness in disclosure|
|Contents||Extracts of a No Further Action (Guidance) letter from the authorised signatory of the Stock Exchange of Hong Kong|
[Name and Address of Listed Issuer]
[Name of Listed Issuer] (the "Company")
Announcement dated [*day*month*year]
No Further Action: Guidance
We refer to earlier correspondence concerning the captioned matter resting with the letter of [*name of solicitors] to the Listing Division ("Division") dated [*day*month*year]. Unless otherwise stated, the terms and abbreviations in the Company's announcement dated [*day*month*year] (the "Announcement") are adopted in this letter.
The Division refers to the following materials which have been reviewed:
Thank you for the information and materials provided by the Company which enable the Division to have a clearer understanding of the matter.
In the Announcement the Company disclosed to shareholders and the market information relating to a substantial acquisition that it was proposing to make. In summary:
We have reviewed and carefully considered the materials more particularly described above from which we note the following:
The JV was formed as a [*nature of enterprise] on [*day*month*year], and until [*day*month*year], was owned as to [*x]% by [*Company B] and [*y]% by [*Company C] (the "Original Shareholding") and was described as such in the Announcement.
In [*month*year], various agreements were entered into by the existing shareholders of the JV namely [*Company B], [*Company C] with [*Company A] with a view to joining [*Company A] as a third shareholder of the JV. However these agreements expressly provided that such new shareholdings were not to be effective until after fulfillment of two conditions (i) registration and certification of the payment in full of the respective capital contribution towards the JV's increased registered capital of RMB[*no.]; and (ii) the issuing of the revised business licence to the JV (the "Conditions"). It is our understanding that the agreements were entered into so as to facilitate the JV's application to the relevant authority for a change of status to [*nature of enterprise] paving the path for the deal contemplated at the time and which was subsequently agreed and disclosed in the Announcement.
In [*month*year], a revised business licence was issued to the JV by the appropriate [*name of country] Government body. This document records a change of status of the JV with effect from [*day*month*year]. This document indicates that one if not both of the Conditions referred to above had yet to be fulfilled. Thus it appears that there were some grounds for adopting the position stated in the Announcement as to the status of [*Company A] in the JV as at the date of publication. However the absence of any narrative as to the important events taking place between [*month] and [*month*year] is a matter of concern impacting on the quality of disclosure and information available to shareholders.
The Division takes the view that disclosure of the events from [*month*year] to [*month*year] which directly concerned and resulted in the shareholdings in the JV at the time of the Announcement could be material information directly relevant to the then existing shareholdings in the JV. This is particularly so, given the Company's ultimate target under the Agreement was the acquisition through [*Company A] of [*x]% effective interest in the JV. Any inaccuracy or incompleteness of information provided to shareholders could have serious and far-reaching implications as to (a) the existence of proper title and interest in the JV of the proposed vendor from whom [*Company A] was to acquire the [*x]% shareholdings in the JV; and (b) in turn the Company's acquisition of valid and proper title to [*x]% effective interest in the JV; and consequently on the decisions made by shareholders as to the resolutions placed before them.
The Company has acknowledged in its submissions to the Division that having reviewed the relevant documents in responding to the Division's enquiries, "the Company agrees that more disclosure of shareholdings in [*the JV] (in particular the arrangement joining [*Company A] as a shareholder to facilitate the regulatory application procedures) could have been made in the Announcement provided it was carefully worded so as not to mislead the public that [*Company A] already had at the time, any lawful rights as a shareholder of [*the JV]."
We have considered all of the foregoing information. We have concluded that no further regulatory action is appropriate or necessary. In coming to this decision we have noted the concession made by the Company as to the completeness of the disclosure made in the Announcement. We have also noted that, as disclosed in the Announcement, completion of the transaction was subject to conditions including the provision of a legal opinion by the [*name of country] legal adviser to [*name of the subsidiary] that [*Company A] is the lawful owner of [*x]% of the registered capital of the JV free and clear of encumbrances; and further that this condition and all other conditions have been fulfilled leading to completion on [*day*month*year].
We do believe however that the circumstances of this case do require that we comment on the process adopted by the Company and the following guidance be offered in order to inform the future performance of the Company in relation to matters relating to corporate governance.
Invitation to Comment
We invite the board of directors of the Company to comment on this letter if they wish. Your submission, together with this letter, will be placed on the Company's compliance file. No further action will be taken in respect of this matter which is now considered closed.
We wish to inform you that, at an appropriate time, the Division may, in the discharge of its regulatory function, publicize certain facts and guidance given in this letter. This would be done on an anonymous and redacted basis, to explain our views on the issues raised by this case for the benefit of the market as a whole. If such disclosure is made it may be published on our website and in our quarterly publication "Exchange".
For and on behalf of
The Stock Exchange of Hong Kong Limited