Chapter 7

Due Diligence Guidelines –

Knowing the Listing Applicant and its Management

Appendix II – Recommended Topics to be Covered in Directors’ Training

1. Directors’ duties pre-listing

(a) sponsors’ obligations and duty to assist sponsors (Listing Rule 3A.05) and obligations with which sponsors have to comply under the Code of Conduct, Practice Note 21, the sponsor’s undertaking (Appendix 17 to the Listing Rules) and declaration (Appendix 19 to the Listing Rules)

(b) the general duty of disclosure in the listing document (Companies (Winding Up and Miscellaneous Provisions) Ordinance schedule 3, Listing Rule 11.07 and the duty to notify if there are significant changes to the information disclosed)

(c) obligations relating to the listing document under the Listing Rules and the Companies (Winding Up and Miscellaneous Provisions) Ordinance

(d) disclosures relating to or by directors, including the directors’ responsibility statement

(e) prospectus liability (at common law and under the Companies (Winding Up and Miscellaneous Provisions) Ordinance, the Securities and Futures Ordinance, the Misrepresentation Ordinance, and the Theft Ordinance)

(f) documents to be signed by directors during the listing process

(g) publicity restrictions (including Listing Rule 9.08, and U.S. market “conditioning”)

(h) share dealings restrictions under the Listing Rules

2. Fiduciary duties

(a) Duty to act in good faith for the benefit of the company as a whole

(b) Duty to use powers for a proper purpose for the benefit of members as a whole

(c) Duty not to delegate powers except with proper authorisation and duty to exercise independent judgement

(d) Duty to exercise care, skill and diligence

(e) Duty to avoid conflicts between personal interests and interests of the listed company

(f) Duty not to enter into transactions in which the directors have an interest except in compliance with the requirements of the law

(g) Duties specified in Listing Rule 3.08 and the requirements under the Companies Ordinance (sections 465, 466 and 473)

3. Compliance with the Listing Rules and continuing obligations, including

(a) Notifiable Transactions under Chapter 14 of the Listing Rules

(b) Connected Transactions under Chapter 14A of the Listing Rules

(c) Continuing Obligations under Listing Rules 13.13 to 13.19

(d) Model Code for Securities Transactions by Directors of Listed Issuers under Appendix 10 to the Listing Rules

(e) Corporate Governance:

(i) Corporate Governance Code under Appendix 14 to the Listing Rules

(ii) Corporate Governance Report (Appendix 14 to the Listing Rules)

(f) Environmental, Social and Governance Reporting under Appendix 27 to the Listing Rules

(g) Disclosure obligations

(i) Under Listing Rules 13.09, 13.10 and 13.10A

(ii) Disclosure of changes in issued share capital

(iii) Disclosure of financial information

4. Disclosure of Inside Information pursuant to Part XIVA of the Securities and Futures Ordinance

5. Market Misconduct under Parts XIII and XIV of the Securities and Futures Ordinance

(a) Criminal and civil liability regimes for market misconduct (section 281 of the SFO)

(b) Officer’s liability (sections 279 and 390 of the SFO)

(c) Insider dealing

(d) False trading

(e) Price rigging

(f) Stock market manipulation

(g) Disclosure of information about prohibited transactions

(h) Disclosure of false or misleading information inducing transactions

6. Disclosure of Interests (Part XV of the Securities and Futures Ordinance)

7. Obligations under The Codes on Takeovers and Mergers and Share Buy-backs

(a) Listing Rule 10.06 on the general mandate

8. Share issues

(a) Pre-emptive requirements of Listing Rule 13.36

(b) General issue mandate

9. For further guidance on the directors’ duties of a listed company, please refer to “A Guide on Directors’ Duties” published by the Companies Registry

10. For further guidance on suggested inserts for the directors’ training presentation, please refer to Addendum 7 to Chapter 30 “Due Diligence Guidelines – Provision of Information to Analysts”.