Hong Kong: Duties And Liabilities Of Listed Companies’ Directors – An Overview

Last Updated: 8 September 2008

Approximately 1,000 companies are listed on the Stock Exchange of Hong Kong Limited (the "Stock Exchange") now and many of these companies are family controlled or government/state owned enterprises.  In line with global trend towards a higher standard of corporate governance based on the principles of integrity, transparency and accountability, the duties and liabilities of the directors of the listed companies in Hong Kong (the "Directors") have therefore become more stringent over the past few years. 

Even before a Director is appointed, he must satisfy to the Stock Exchange that he has the character, experience and integrity and is able to demonstrate a standard of competence commensurate with his position as the Director.

The obligations of the Directors can mainly be found in the Rules Governing the Listing of Securities on the Stock Exchange (the "Listing Rules"), the Companies Ordinance ("CO") and the Securities and Futures Ordinance ("SFO").  The general duties of directors under common law such as acting honestly and in good faith in the interests of the company as a whole, acting for proper purpose, avoiding conflicts of interest,  applying such degree of skill, care and diligence as may reasonably be expected of a person of his knowledge and experience etc are expressly incorporated into the Listing Rules.

1.     Corporate Governance

The Listing Rules contain a Code on Corporate Governance Practices in Appendix 14 (the "CG Code"), which is a set of guidelines for the Directors.

The CG Code has five sections which cover topics relating to Directors, remuneration of Directors and senior management, accountability and audit, delegation by the board and communication with shareholders. 

The CG Code sets out the principles of good corporate governance and two levels of recommendations : (a) code provisions; and (b) recommended best practices.  All listed companies are expected to comply with, but may deviate from, the code provisions.  The recommended best practices are for guidance only.  The companies may also devise their own code on corporate governance practices on such terms as they may consider appropriate.

The companies are required to stipulate in their interim and annual reports whether they have complied with the CG Code and if not, the areas of non-compliance and the reasons therefor.  

Although compliance of the CG code is voluntary, more companies have chosen to comply with the CG Code as they believe that this will indicate to institutional investors that the company is being run efficiently.

2.     Dealings In The Securities Of The Company

Directors should familiarize themselves with the restrictions and rules on securities transactions by Directors.  Dealings in securities by Directors are governed by the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") in Appendix 10 of the Listing Rules and Parts XIII and XIV of the SFO.  The Model Code sets out a required standard against which the Directors must measure their conduct regarding dealing in securities of their listed companies.  The company may adopt its own code on terms no less exacting than those set out in the Model Code.  Any breach of such required standard will be regarded as a breach of the Listing Rules.

The Directors must ensure that neither they nor the company nor its employees contravene the insider dealing and market misconduct provisions of Parts XIII and XIV of the SFO.  These provisions establish the offences of insider dealing, price rigging, stock market manipulation and other offences.

The Directors who are aware of or privy to any negotiations or agreements related to intended acquisitions or disposals which are notifiable transactions under Chapter 14 of the Listing Rules or connected transactions under Chapter 14A of the Listing Rules or any price-sensitive information must refrain from dealing in the securities of their companies as soon as they become aware of them or privy to them until proper disclosure is made in accordance with the Listing Rules.

During the period commencing one month immediately preceding the earlier of the date of the board meeting for the approval of the company's results for any year, half-year, quarterly or any other interim period and the deadline for the company to publish an announcement of its results for any year, half-year, quarterly or any other interim period, and ending on the date of the results announcements, a Director must not deal in any securities of the company.

Moreover, the company is required to establish a notification procedure for the proposed dealings in shares by the Directors.

The companies must disclose in their interim and annual reports (a) whether they have adopted a code of conduct regarding securities transactions by their Directors on terms no less exacting than the required standard set out in the Model Code; (b) whether their Directors have complied with, or whether there has been any non-compliance with the required standard; and (c) in the event of any non-compliance, details of such non-compliance and an explanation of the remedial steps to address such non-compliance.

3.     Disclosure Of Interests Under The SFO

Part XV of the SFO sets out disclosure obligations for substantial shareholders, Directors and chief executives on the occurrence of certain specified events.  The purpose of Part XV is to improve the transparency of shareholdings in all listed companies by providing the investors with information on details of substantial shareholdings and holdings of directors and chief executives in such companies to enable them to make informed investment decisions.

The Directors must disclose their interests, and short positions, in any shares in a listed company or any of its associated companies and their interests in any debentures of the listed company or any of its associated companies.  Notification to the company and the Stock Exchange of changes in interests must be made within three business days of the relevant dealing.  Failure to make proper and timely disclosure as requires by Part XV is a criminal offence which carries a maximum penalty of a fine of HK$100,000 and imprisonment for two years.

Besides, the company is under a duty to maintain the registers of interests notified by the substantial shareholders, Directors and chief executives.

4.     General Obligations Of Disclosure By The Company

The Directors must ensure that the company complies with its disclosure obligations under the Listing Rules.  These disclosure obligations include general disclosure for price sensitive information as well as certain specific disclosure obligations.

Furthermore, the Directors are responsible for any listing documents issued by the company and for any circular issued in connection with any notifiable transactions and a statement to this effect must be included in the listing document or circular.  The Stock Exchange may also require a responsibility statement by the Directors to be included in the announcements of the company.  The responsibility statement must state that the Directors collectively and individually accept full responsibility for the accuracy of the information contained in the document and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement in the document misleading.

The Directors are also required to ensure that the Stock Exchange is notified upon the occurrence of certain events or the making of certain decision in relation to the company within the time specified in the Listing Rules.

5.     Our Services

Experienced lawyers in our Corporate Finance and Securities Department regularly advise listed companies on regulatory compliance, capital and private fund raising and transactional matters.  If you have any question on the above eNews or any part of the Listing Rules, please do not hesitate to contact us.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions