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HKEx Consults On Financial Information Disclosure

by Mary Swire, Lowtax.net, Hong Kong
27 August, 2014

Hong Kong Exchanges and Clearing has published a consultation paper seeking the stockmarket's view on proposed changes to the Listing Rules, relating to the disclosure of financial information, following the enactment of Hong Kong's new Companies Ordinance.

The consultation paper also sets out proposed rule amendments relating to minor policy issues, and a number of housekeeping rule amendments that involve no change in policy direction.

The principle in Main Board Rules in relation to the disclosure of financial information has been that an issuer (whether or not it is incorporated in Hong Kong) should provide disclosures required under the Hong Kong Companies Ordinance. This principle has maintained a level playing field for all issuers.

The additional disclosure provisions introduced in the new Companies Ordinance, which apply to directors' reports or financial statements, include requirements for a new Business Review section; directors' names to be on a consolidated basis; directors' interests to include transactions, arrangements or contracts; disclosure of equity-linked agreements; and the reasons for a director resigning or not seeking re-appointment.

In addition, the paper also provides for the streamlining of disclosure requirements that are already under Hong Kong Financial Reporting Standards; repealing the disclosure requirements in relation to financial conglomerates; and cancelling the Main Board Rules in relation to "bank reporting." The key rationale of this exercise is to remove duplications of disclosures and enhance clarity for all issuers.

Rule amendments would also enhance the stock exchange's compliance and monitoring role relating to the disclosure of financial information, such as a requirement for an issuer to make an announcement when the board of directors decides to revise its published financial statements; and for an issuer to flag prior period adjustments due to correction of material errors in results announcements.

Other proposed Rule amendments that involve minor policy issues cover the disclosure of payment dates for dividends or other distributions by issuers; property valuation for connected transactions; the disclosure of directors' interests in competing businesses in notifiable and/or connected transaction circulars; and delays in the publication of financial results announcements.

Interested parties are encouraged to respond to the consultation paper by October 24, 2014.

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