Every listed company in Hong Kong is required to publish its preliminary annual results announcement no later than three months after the end of the financial year.
But the unexpected COVID-19 outbreak has called for the revision of that timetable. One of my clients, for example, experienced unprecedented disruption to the audit of its financial statements. As the client’s company secretary, I acted as a communication channel between them and the Hong Kong Stock Exchange (HKEX) to ensure the HKEX was aware of the difficulties that the client encountered. Following an announcement of its unaudited annual results at the end of March, I was relieved that the client was not required to suspend the trading of its shares on the HKEX before the release of its audited annual results in April. This experience had laid a solid base for all parties in handling similar crises in the future.
General meetings of shareholders
Following an announcement of its audited annual results, a listed company in Hong Kong should convene an annual general meeting in compliance with the relevant requirements under its own Articles of Association or the Companies Ordinance (Cap. 622). However, the announcement of the Prevention and Control of Disease (Prohibition on Group Gathering) Regulation (Cap. 599G) presents great challenges. The company secretary of a listed company in Hong Kong must thereafter cautiously review the latest regulations introduced by the government about social distancing and quarantine and the relevant guidance issued by the Companies Registry, the Hong Kong Institute of Chartered Secretaries and the Hong Kong Institute of CPAs for appropriate measures in arranging meetings. None of the proposed arrangements or measures is ideal on its own. However, it is still advisable to consider the following ideas, on a case-by-case basis:
- Pre-registration and proxy voting
- Restrictions on the number of attendees
- Hybrid meetings
- Physical meetings with precautionary measures
Disclosure of inside information
The timely disclosure of inside information is certainly a key issue that has caught the special attention of a company secretary. Under Part XIVA of the Securities and Futures Ordinance (Cap. 571) and Rule 13.09 of the Listing Rules of HKEX, a listed company in Hong Kong must disclose inside information as soon as reasonably practicable when the information has, or ought reasonably to have, come to the knowledge of an officer of the listed company in the course of performing his functions as an officer. The further guidance joint statement issued by the Securities and Futures Commission and the HKEX on 16 March has also specifically drawn attention to the frequently asked questions stating that “if the issuer’s business operations, reporting controls, systems, processes or procedures are materially disrupted by the [COVID-19] outbreak and/or the related travel restrictions, management should assess whether any inside information has arisen under Part XIVA of the Securities and Futures Ordinance and, if so, make a separate announcement as soon as reasonably practicable.”
Nevertheless, it is still worthwhile to reiterate that the board of directors of a listed company should closely monitor any changes in the current and future financial position of the company and maintain effective communication with key senior management, including the company secretary in particular, in times of crisis.
About the e-Series
In an e-Series entitled “Independent Non-Executive Directors – Key Issues and Skills as a Member of Audit Committee, Nomination Committee, Remuneration Committee and Board of Directors,” I share my company secretarial experience and allow participants to learn more about corporate governance best practices. The e-Series course will benefit CPAs who act as a company secretary or an independent non-executive director (INED) of a listed company. From the perspective of a company secretary, the course will provide practical guidance in the proper setting of timetables, agendas and procedures for convening meetings involving audit, nomination and remuneration committees. INEDs in these relevant committees will be taught how to effectively deal with key issues in reviewing, including but not limited to, results announcements, connected party transactions, internal controls and risk management, and other significant or unusual transactions. The course also covers the procedures and skills in handling a meeting as a chairman of a committee and maintaining effective communication with the board of directors. Members can enrol in the e-Series course on the Institute’s website.
Ip Pui Sum, an Institute member, has provided company secretarial services for a number of Hong Kong-listed companies and is familiar with the compliance requirements of the listing rules in Hong Kong. He also provides company secretarial services to small- and medium-sized companies in Hong Kong and has experience in fulfilling the obligations and requirements under the Companies Ordinance.