Chapter 12

Due Diligence Guidelines –


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.


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.

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

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