Due Diligence Guidelines –
17. Labour Issues and Health and Safety
17.1.1 Regarding the preparation of a listing document, a sponsor should perform, without limitation … assess the legality and compliance of the business operations and whether the listing applicant is subject to any material legal proceedings or disputes. [Paragraph 17.6(d)(vii) of the Code of Conduct]
17.1.2 If relevant and material to the Mineral Company’s business operations, information on … project risks arising from … health and safety issues. [Listing Rule 18.05(6)(a)]
17.2.1 Labour practices and health and safety issues are particularly important to Mineral Companies where the nature of their operations leads to a relatively large proportion of the workforce undertaking potentially dangerous activities.
17.2.2 Non-governmental organisations are known to publish reports on companies which are deemed to violate labour laws and practices, highlighting areas of non-compliance with labour laws and practices and health and safety policies. The Exchange is particularly sensitive to reports published during the vetting process and will likely request disclosures addressing issues raised in these reports as well as the sponsor’s view on the report.
17.2.3 In addition, sponsors should note that the Exchange would expect the listing document to disclose the reasons and outstanding liabilities for major accidents that took place during the track record period and up to the latest practicable date.25
17.3 Recommended Steps
17.3.1 The sponsor should obtain from the Mineral Company information on the policies and compliance and material non-compliance with relevant standards, rules and regulations on compensation and dismissal, recruitment and promotion, working hours, rest periods, equal opportunity, diversity and other benefits and welfare of its full-time, part-time and temporary staff.
17.3.2 The sponsor should discuss with management any previous industrial action taken and understand the reasons for such industrial action. The sponsor should also discuss with management the steps taken to address those reasons.
17.3.3 Where the workforce is unionised, the sponsor should discuss with the Mineral Company the status of wage negotiations and other demands of the unions and request minutes of meetings with unions. Where there are “red-flags” on labour issues, the sponsor may also wish to conduct interviews with union representatives to understand the relationship between management and the workforce.
17.3.4 The sponsor should obtain from the Mineral Company information on the policies and compliance and material non-compliance with relevant standards, rules and regulations on providing a safe working environment and protecting employees from occupational hazards.
17.3.5 The sponsor should obtain from the Mineral Company details of the frequency and severity of injuries, the occurrence of any fatalities, and review the Mineral Company’s health and safety policies and procedures, the systems implemented for dealing with health and safety issues and the monitoring of and response to any health and safety failings.
17.3.6 The sponsor should also carry out regular media searches in respect of the Mineral Company, the mineral assets and project name to ascertain if there are any reports or news articles which contradict or are inconsistent with information from management in respect of its labour practices or health and safety practices and, if any, enquire further of the management team whether they were aware of such reports or news articles, the reasons for such contradiction or inconsistency and/or steps taken or being taken to address issues raised in such reports or news articles. If necessary, the sponsor may need to request third party investigations be undertaken to assess the veracity of allegations and also consider the Mineral Company’s suitability for listing.
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.