Due Diligence Guidelines –
Regarding the preparation of a listing document, a sponsor should perform, without limitation … achieve a thorough understanding of the listing applicant, including its business, history, background, structure and systems. [Paragraph 17.6(d)(ii) of the Code of Conduct]
Sponsors should note that the Exchange would expect the information set out in Exchange Guidance Letter GL52-13 to be disclosed in the listing document:
(a) Measures taken to secure stable and sufficient utility supplies, alternative suppliers, and salient terms of the utility contracts.
(b) Comparison of utility fees with market rates.
(c) Any material disruptions as a result of shortage of utilities and the risks associated with the availability and stability of the supplies.24
16.3 Recommended Steps
16.3.1 The sponsor should understand the extent of the Mineral Company’s reliance on infrastructure necessary to conduct its operations (electricity (including power generation if relevant), water, other key supplies etc.) and the risks of each.
16.3.2 The sponsor should discuss with the Mineral Company and the Competent Person the infrastructure necessary to conduct the operations and risks, and to identify where infrastructure is lacking and how/when it will be available and at what cost to the Mineral Company (if any).
16.3.3 The sponsor should review (with the assistance of lawyers in relevant jurisdictions) the laws and regulations and any licences or contracts relating to electricity and water supply, and discuss with management and the Competent Person the risks of interruptions or price increases.
24. Paragraph 3.19 of Exchange Guidance Letter GL52-13.
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.