Due Diligence Guidelines –
5. Validity and Accuracy of Licences/ Rights/ Permits
5.1.1 A sponsor should conduct the following independent due diligence steps: … in relation to material matters, independently obtain information from sources outside the listing applicant, such as searches of public filings and databases, external confirmations, third-party data about competitors and the engagement of external agents to perform relevant checks. [Paragraph 17.6(e)(v) of the Code of Conduct]
5.1.2 The sponsor should confirm that it has independently verified the validity and accuracy of the applicant’s licences/rights/permits, including inspection of records maintained by the competent authorities. [Paragraph 4.8(e) of Exchange Guidance Letter GL46-12]
5.2.1 The sponsor should follow the guidance set out in Chapter 8 “Due Diligence Guidelines – Business Model”, Chapter 13 “Due Diligence Guidelines – Internal Controls” and Chapter 17 “Due Diligence Guidelines – Legal and Regulatory Compliance and Legal Proceedings and Disputes” in relation to assessing the legality and compliance of business operations.
5.3 Recommended Steps
5.3.1 The sponsor should, if it considers it necessary in light of the breadth of the listing applicant’s activities, discuss with lawyers in relevant jurisdictions to identify all regulated activities material to the listing applicant’s business and the relevant regulators and competent authorities. The sponsor should obtain details of all the material licences, rights or permits held by the listing applicant.
5.3.2 The sponsor should work with lawyers in relevant jurisdictions to verify such licences, rights and permits with the competent authorities wherever practicable and to ensure to the extent reasonably practicable that such licences, rights and permits have not been revoked or cancelled. Where appropriate and practicable, the sponsor should interview the relevant competent authorities or otherwise obtain assurance as to the continued existence of such licences, rights and permits. However, it is acknowledged that competent authorities are under no compulsion to cooperate and any failure by a relevant authority to participate in an interview or provide any requested regulatory assurance does not mean that the sponsor has failed to perform adequate due diligence. In such event, the sponsor should however seek an opinion from lawyers in the relevant jurisdiction with regard to the continued existence of any material licences, rights or permits.
5.3.3 The sponsor should check that the biological assets or agricultural property corresponds to or are covered by the relevant licences, rights and permits.
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.