Due Diligence Guidelines –
Interviews of Major Business Stakeholders
Paragraph 28(1)(b) of Part A of Appendix 1 to the Listing Rules requires the inclusion in the listing document of:
(b) additional information in respect of major customers (meaning, other than in relation to consumer goods or services, the ultimate customer, and in relation to consumer goods or services the ultimate wholesaler or retailer as the case may be) and suppliers (meaning the ultimate supplier of items which are not of a capital nature) as follows:-
(i) a statement of the percentage of purchases attributable to the group’s largest supplier;
(ii) a statement of the percentage of purchases attributable to the group’s 5 largest suppliers combined;
(iii) a statement of the percentage of revenue from sales of goods or rendering of services attributable to the group’s largest customer;
(iv) a statement of the percentage of revenue from sales of goods or rendering of services attributable to the group’s 5 largest customers combined;
(v) a statement of the interests of any of the directors; their close associates; or any shareholder (which to the knowledge of the directors owns more than 5% of the number of the issued shares of the issuer) in the suppliers or customers disclosed under (i) to (iv) above or if there are no such interests a statement to that effect;
(vi) in the event that the percentage which would fall to be disclosed under (ii) above is less than 30, a statement of that fact shall be given and the information required in (i), (ii) and (v) (in respect of suppliers) may be omitted; and
(vii) in the event that the percentage which would fall to be disclosed under (iv) above is less than 30, a statement of that fact shall be given and the information required in (iii), (iv) and (v) (in respect of customers) may be omitted.
Sub-paragraph 28(1)(b) applies to all issuers whose businesses comprise, in whole or in part, the supply of goods or services of whatever nature, and in the case of service references to customers includes the clients of such issuers.
In relation to consumer goods, references to customers are to the ultimate wholesaler or retailer, except when the issuer’s business incorporates the wholesaling or retailing operation. In all other cases references to customers are to ultimate customer.
References to suppliers are primarily to those who provide goods or services which are specific to an issuer’s business and which are required on a regular basis to enable the issuer to continue to supply or service its customers. Suppliers of goods and services which are freely available from a range of suppliers at similar prices or which are otherwise freely available (such as utilities) are excluded. In particular, it is recognised that an obligation on issuers who are providers of financial services (such as banks and insurance companies) to give information about suppliers would be of limited or no value, and there is therefore no disclosure requirement in respect of suppliers to such issuers.
The Exchange must be consulted if there is any doubt about the application of sub-paragraph 28(1)(b).
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.