Due Diligence Guidelines –
4. Qualifications of a Competent Person
4.1.1 A Competent Person must:
(i) have a minimum of five years experience relevant to the style of mineralisation and type of deposit under consideration or to the type of Petroleum exploration, reserve estimate (as appropriate), and to the activity which the Mineral Company is undertaking [Listing Rule 18.21(1)];
(ii) be professionally qualified and be a member in good standing of a relevant Recognised Professional Organisation, in a jurisdiction where, in the Exchange’s opinion, the statutory securities regulator has satisfactory arrangements … with the [SFC] for mutual assistance … [Listing Rule 18.21(2)]; and
(iii) be independent of the [Mineral Company], its directors, senior management and advisers [and meet the specific requirements of Listing Rule 18.22(1) to (4)]. [Listing Rule 18.22]
4.1.2 For the purposes of [P]aragraph 17.5(c) [of the Code of Conduct], the sponsor should satisfy itself that:
(i) the expert is appropriately qualified, experienced and competent to give the opinion;
(ii) the expert is sufficiently resourced; and
(iii) the expert is independent from the listing applicant and its directors and controlling shareholder(s). [Paragraph 17.7(a) of the Code of Conduct]
4.2.1 Under Listing Rule 18.27, it is the responsibility of the sponsor to ensure that any Competent Person meets the requirements of Chapter 18 of the Listing Rules. To this end, the sponsor should work closely with the listing applicant during the process of engaging a Competent Person for the purpose of preparing the Competent Person’s Report.
4.3 Recommended Steps
4.3.1 Prior to the engagement of the Competent Person, the sponsor should work with the listing applicant in reviewing the proposals/biography of the potential Competent Person and review its engagement letter.
4.3.2 The sponsor should also conduct an interview with the senior personnel of the team from the Competent Person involved in the preparation of the Competent Person’s Report. The interview should cover the past relevant experience of the individuals and the firm providing the report.
4.3.3 The sponsor should also gain an understanding as to whether the Competent Person has previously prepared any technical reports, feasibility studies and/or scoping studies for the listing applicant or for any of its assets.
Minimum years of experience
4.3.4 The sponsor should review the biography and work experience of the individuals providing the report.
4.3.5 The sponsor should request information on previous deals for which the Competent Person has prepared Competent Person’s Reports, and verify such information against publicly available documents evidencing the role of the Competent Person on previous deals.
Professional qualifications and membership
4.3.6 The sponsor should request from the Competent Person its credentials and details of its professional qualifications and membership(s).
4.3.7 The sponsor should obtain written confirmation that the Competent Person is a member in good standing of a Recognised Professional Organisation and that the Recognised Professional Organisation is in a jurisdiction which is a signatory of the IOSCO Multilateral Memorandum of Understanding or is otherwise acceptable to the Exchange as required by Listing Rule 18.21(2). This confirmation may also be built into the engagement letter. A sponsor would not be expected to seek confirmation directly from the professional body.
4.3.8 A confirmation of independence as required by Listing Rule 18.22 should be built into the engagement letter of the Competent Person. Such independence should be confirmed during the due diligence interview with the Competent Person, taking into account any new appointments to the listing applicant’s board and the sponsor should be satisfied that there is no cause to enquire further about the truth of such confirmation.
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.