Chapter 12.16 – Timing and “Bring-Down”

Jones Day (January 2015)

Chapter 12.18 – Quantitative Qualifications for Listing

Chapter 12

Due Diligence Guidelines –

Financial

17. Records

17.1 Standards

Record keeping is the subject of separate due diligence guidance (Chapter 25 “Due Diligence Guidelines – Record Keeping“), and detailed reference should be made to that Chapter.

17.2 Guidance

17.2.1 There are noteworthy cases from other jurisdictions in which underwriters have successfully demonstrated that they undertook sufficient due diligence, even in instances where “red flags” had appeared in areas which in due course were cited as basis for investor lawsuits.

17.2.2 See for example Toolworks (cited above) in which the supplementary steps taken included (i) seeking explanations from the auditors about the company’s accounting, (ii) insistence on written confirmations on certain contracts, and (iii) confirmation of the auditor’s accounting with other accounting firms.

17.2.3 These cases have shown the particular importance of recording supplementary investigations made to address concerns raised by “Red Flags”.

17.3 General Note

17.3.1 Express references in this Chapter to advisability or necessity of record keeping in specific instances do not in any way detract from the general requirements described in Chapter 25 “Due Diligence Guideilnes – Record Keeping“ or imply that record keeping is not necessary in other particular contexts or circumstances.

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.

Chapter 12.16 – Timing and “Bring-Down”

Jones Day (January 2015)

Chapter 12.18 – Quantitative Qualifications for Listing

Importance of Recording Supplementary Investigations

Records in financial due diligence

Red Flags

Recording Supplementary Investigations Made to Address Concerns Raised by Red Flags

Financial Records

Record Keeping

Toolworks case

Hong Kong Stock Exchange Listing Rules

Table of contents

Disclaimer

Hong Kong Sponsor Due Diligence Guidelines

2020 edition

Published by HKCFEF Limited

Copyright 2013-2020 © HKCFEF Limited
Coordinating law firm: Charltons

TERMS OF USE

HKCFEF Limited ("HKCFEF") maintains this website (the "Website") for informational purposes only. Please read this agreement carefully before using the Website and the Hong Kong Sponsor Due Diligence Guidelines (referred to as “this publication” or “these due diligence guidelines”) or any other Materials (defined below) published on this Website.   Access to this Website is subject to the terms and conditions set out below.   Your use of the Website signifies your acceptance of this agreement.   If you do not agree to comply with this agreement, please do not use the Website.

Trademarks and Copyrights

HKCFEF (unless otherwise indicated) either owns the intellectual property rights in the underlying HTML, text, images, audio/video clips, and other content that is made available to you on this Website (including these due diligence guidelines, the "Materials"), or has obtained the permission of the owner of the intellectual property to use the Materials on this Website.

HKCFEF grants you a limited licence to display on your computer, print, download, and use the Materials for non-commercial, personal, or educational purposes only, provided that:

No other use is permitted without the express written permission of HKCFEF. Nothing in this notice confers any right in any copyright of HKCFEF or other copyright owner's content provided on this Website.

Cookies

HKCFEF currently uses "cookies" on this Website to monitor traffic patterns and improve our Website. Our cookies do not collect or disclose any personal information about the person using the browser. They are only used to detect the fact that a given visitor has been to our site before in the past. In other words, these cookies help us to differentiate between first time and repeated visitors.

DISCLAIMER: Use of this Website 

Materials provided on this Website are provided "as is" without warranty of any kind, either expressed or implied, including without limitation warranties of merchantability, fitness for a particular purpose, and non-infringement. HKCFEF specifically does not make any warranties or representations as to the accuracy or completeness of any such Materials.  HKCFEF periodically adds, deletes, changes, improves, or updates the Materials on this Website without notice.  Under no circumstances shall HKCFEF be liable for any loss, damage, liability or expense incurred or suffered which is claimed to have resulted from the use of this Website, including without limitation, any fault, error, omission, interruption or delay with respect thereto. Use of this Website is at your sole risk.  Under no circumstances including, but not limited to, negligence, shall HKCFEF be liable for any direct, indirect, incidental, special or consequential damages, even if HKCFEF has been advised of the possibility of such damages. 

You specifically acknowledge and agree that HKCFEF is not liable for any conduct of any user of the Website.

As a condition of use of this Website, you agree to indemnify HKCFEF from and against any and all actions, claims, losses, damages, liabilities and expenses arising out of your use of this Website, including without limitation any claims alleging facts that if true would constitute a breach by you of this agreement. If you are dissatisfied with any material on this Website or with any part of this agreement, your sole and exclusive remedy is to discontinue using this Website.

Some of the links on this Website may lead to resources outside of HKCFEF. The linked sites are not under the control of HKCFEF and HKCFEF has not reviewed or investigated in any way the information at such linked sites.  HKCFEF makes no representation or warranty as to the contents of any linked site or any link contained in a linked site. HKCFEF is providing these links only as a convenience, and the inclusion of any link does not imply endorsement, representation or warranty by HKCFEF.

Communications made through the electronic mail and/or messaging capabilities of this Website shall in no way be deemed to constitute legal notice to or from HKCFEF or any of its employees, or representatives, with respect to any application or existing or potential claim or cause of action against HKCFEF or any of its employees or representatives. 

DISCLAIMER: Use of the Hong Kong Sponsor Due Diligence Guidelines 

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form, or by any means, electronic, mechanical, photocopying, recording, or otherwise, for any commercial purpose without prior permission, in writing from the publisher. Such written permission must be obtained before any part of this publication is stored in a retrieval system of any nature. These due diligence guidelines are available for personal use only in printed books and from this Website (www.duediligenceguidelines.com).  Quotation of the contents of these due diligence guidelines is allowed provided that it is made with explicit reference to the source and publisher.

This publication is distributed with the understanding, and anyone who accesses or uses this publication will be deemed to agree, that HKCFEF Limited, editors, authors, contributors and endorsers of this publication are not rendering legal, accounting, financial or other professional advice or opinions on specific facts or matters and, accordingly, shall not be responsible for and specifically exclude any liability for any loss or damages sustained by any person in any way from the use of, or reliance on, this publication.  Application of the information provided in this publication to specific situations will depend upon the particular circumstances involved and these due diligence guidelines should not be relied upon as a substitute for obtaining appropriate professional advice.  Before making any decision or taking any action that may affect your business, you should consult a qualified professional.

This publication is intended as a general guide solely designed to provide information on the subjects discussed and is based on the experience of HKCFEF Limited and contributing law firms, accountants and sponsors.  This publication has been compiled from the contributions of the author law firms indicated in each chapter, which have been subject to review, comments and revisions from various industry participants, including other law firms, accountants and sponsors, and the views expressed in each chapter are intended to represent the more generally accepted views among industry participants.

Not all chapters of this third edition have been updated to March 2020. Each chapter is only correct as at the date stated in the relevant chapter.

While all reasonable care has been taken in the preparation of this publication, neither HKCFEF Limited nor any contributing law firm, accountant or sponsor accepts responsibility for any errors it may contain or for any losses or damages howsoever arising from, or in reliance on, any of its contents.  Each of HKCFEF Limited and each of the contributing law firms, accountants and sponsors hereby expressly disclaims any duty or obligation to update any of the information or analysis contained in this publication or to forward any revised due diligence guidelines to any previous recipients.  HKCFEF Limited and the contributing law firms, accountants and sponsors make no representations or warranties of any kind and assume no liabilities or obligations of any kind with respect to the accuracy or completeness of the contents and specifically disclaim any implied warranties of merchantability or fitness of use for a particular purpose. No responsibility for loss or damages occasioned to any person acting or refraining from action as a result of the information or material in this publication can or will be accepted by HKCFEF Limited, editors, authors, contributing law firms or endorsers of this publication. Laws and regulations and interpretations of those laws and regulations change frequently and therefore qualified professionals should be consulted in relation to any laws and regulations mentioned in these due diligence guidelines.  While all reasonable care has been taken in the preparation of this publication, the conduct of IPOs in Hong Kong is an area of regulation subject to ongoing guidance from the Regulators.

References are provided for information only and do not constitute endorsement of or by any websites or other sources. Readers should be aware that the websites and links listed in this publication may change.  Where Exchange Guidance Letters and Listing Decisions are referenced in this publication, readers should be aware that The Stock Exchange of Hong Kong Limited has emphasised that the preparation of such Exchange Listing Decisions and Exchange Guidance Letters are based on facts and circumstances, which may not be a precedent for future cases having a different fact pattern.  Readers should note that Exchange Guidance Letters and Exchange Listing Decisions may be amended from time to time and that reference should be made to the latest published versions. 

Any opinions, findings, conclusions or recommendations expressed in this publication do not reflect the views of the Securities and Futures Commission or The Stock Exchange of Hong Kong Limited, a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited. 

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. 

Amendments

HKCFEF may revise this agreement and/or introduce additional terms and conditions at any time and from time to time.  HKCFEF reserves its exclusive right in its sole discretion to alter, limit or discontinue this Website or any of the Material in any respect. 

No Waiver of HKCFEF's Rights

No act, delay or omission by HKCFEF shall affect its right, powers and remedies under this agreement or any further or other exercise of such rights, powers or remedies.  The rights and remedies under this agreement are cumulative and not exclusive of the rights and remedies provided by law.

Severance

If any provision of this agreement is not or ceases to be legally binding and enforceable, it will not affect the legality, binding effect or enforceability of any other provision.

Access to the Website

HKCFEF reserves the right to deny in its sole discretion any user access to this Website or any portion thereof without notice.

Applicable Law and Jurisdiction

This agreement shall be governed by and construed in accordance with the laws of the Hong Kong Special Administrative Region.