Chapter 5
Due Diligence Guidelines –
Disclosure to the Market
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Code of Conduct Paragraphs |
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17.5(a) |
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17.5(b) |
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17.5(c) |
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17.6 |
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17.7 |
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Other Key References |
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Listing Rule 3A.12 |
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Listing Rule 3A.13 |
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Practice Note 21 to the Listing Rules |
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Paragraph 3 of Part I of Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance |
1. Overall Disclosure
1.1 Standard
At the time of issue of a listing document, a sponsor, after reasonable due diligence, should have reasonable grounds to believe and should believe that the listing document contains sufficient particulars and information to enable a reasonable person to form as a result thereof a valid and justifiable opinion of the shares and the financial condition and profitability of the listing applicant. [Paragraph 17.5(a) of the Code of Conduct]
1.2 Guidance
1.2.1 The Code of Conduct requirement replicates the current requirement under the Listing Rules. Under the Listing Rules, at the time of issue of a listing document, a sponsor is required to have conducted reasonable due diligence enquiries in order to make a declaration to the Stock Exchange that it has reasonable grounds to believe and does believe that the listing document contains sufficient particulars and information to enable a reasonable person to form as a result thereof a valid and justifiable opinion of the shares, the financial condition and profitability of the listing applicant.1
1.2.2 The Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance contains a substantially similar requirement.2
1.2.3 Under the Listing Rules, in determining the reasonable due diligence enquiries required, a sponsor must have regard to the due diligence practice note at Practice Note 21 to the Listing Rules and Paragraph 17 of the Code of Conduct.3 A sponsor must perform due diligence as set out in Paragraph 17.6 (due diligence) and Paragraph 17.7 (due diligence on expert reports) of the Code of Conduct. Whether a sponsor has performed reasonable due diligence will be assessed having regard to all facts and circumstances available at the time of issue of a listing document.
Endnotes
1. Listing Rule 3A.13 and Appendix 19 to the Listing Rules.
2. Paragraph 3 of Part I of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance.
Disclaimer
HKCFEF Limited and the contributing law firms, accountants and sponsors are not offering these due diligence guidelines as legal, financial or professional advice or services and they should not be relied upon as such. These due diligence guidelines should not be used as a sole basis for any decision, action or inaction and are not meant to serve as a substitute for the advice of qualified professionals. See here for the full terms and conditions.