Chapter 18

Due Diligence Guidelines –

Interaction with Third Parties including Expert Advisers1

3. Resources

3.1 Standards

…[T]he sponsor should:… satisfy itself that:… the expert is sufficiently resourced. [Paragraph 17.7(a)(ii) of the Code of Conduct]

3.2 Guidance

3.2.1 The sponsor should assess the sufficiency of the expert’s resources to satisfy itself that the expert is sufficiently resourced to undertake the required work. Although the Code of Conduct is silent on the sponsor’s obligation to assess the sufficiency of the resources of non-expert third parties, it would be good practice for a sponsor to apply Paragraph 17.7(a)(ii) of the Code of Conduct to non-expert third parties as well.

3.2.2 When assessing whether the third party is sufficiently resourced, the sponsor should consider the third party’s time and manpower commitment to the assignment, and whether appropriate staffing is involved. In this connection, the sponsor should satisfy itself that there is on-going staffing of properly qualified and experienced personnel throughout the course of the transaction and that the team includes senior members and/or leaders to guide and supervise junior team members.

3.2.3 Similar to the due diligence procedures discussed in section 2 above, this assessment may include interviewing the third party as well as the exchange of written materials.6

3.3 Recommended Steps

3.3.1 The sponsor should request the third party to provide information in relation to its resources, which should include:

(a) core team members involved in the assignment, their seniority levels and their relevant experience (covered in paragraph 2.3.1 above);

(b) the size and composition of the team involved in the assignment; and

(c) the overall level of capacity of the third party and the actual time it is able to commit to the assignment in question (as among competing demands).

3.3.2 The sponsor should request such information together with other necessary information to assess the third party’s qualification, experience and competency, as set out in paragraph 2.3.1 above. The sponsor should request the information from the third party and review its responses in a similar manner as discussed in paragraphs 2.3.2 to 2.3.5 above.

Endnotes

5. Paragraph 14(a) of Practice Note 21 to the Listing Rules: Typical due diligence enquiries in relation to the expert sections of the listing document include interviewing the expert, reviewing the terms of engagement (having particular regard to the scope of work, whether the scope of work is appropriate to the opinion required to be given and any limitations on the scope of work which might adversely impact on the degree of assurance given by the expert’s report, opinion or statement) and reviewing publicly available information about the expert to assess:

(a) the expert’s qualifications, experience and resources; and

(b) whether the expert is competent to undertake the required work.

6. See Note 5 above.