No.1 April 2003
*****
Disclosure of Interests under the Securities and Futures Ordinance *****
Deemed interests
A director is taken to be interested in the interests of his
spouse and minor children (not being themselves directors of the
listed company), any company which he controls (ie. a company of
which he controls the exercise of one third of more of the
voting power at general meetings or whose directors are
accustomed or obliged to act in accordance with his directions
or instructions) and trusts. As under the previous disclosure
regime, a director must also disclose his interest under a
discretionary trust.
The provisions relating to cessation of interests are the same
as for substantial shareholders.
Exemptions
The exemptions available to directors are limited to those in
respect of basket derivatives, bare trustees and collective
investment schemes, all as outlined under 'substantial
shareholders' above.
In particular, the exemptions available to substantial
shareholders in respect of de minimis changes, lending shares
under the SBL Rules and bonus and rights issues are not
available to directors.
Information to be disclosed
Where a director makes an 'Initial Notification' he is required,
in the case of an on-exchange transaction, to disclose the
highest price and the average price paid for the interest in the
4 months preceding the date of the relevant event prompting
notification. In an off-exchange transaction he must disclose
the nature of the consideration and the highest and average
amounts of considerations paid for the interest within the same
4 month period.
Subsequent notifications of acquisitions or disposals of
interests must state, in on-exchange transactions, the highest
and average price paid or received (or if no price is paid, that
fact) and in off-exchange transactions the nature of the
consideration and the highest and average price paid or received
(or if no price is paid, that fact).
The amount and nature of consideration need not be stated in the
case of 'equity derivatives'. This does not apply to the grant
to a director of equity derivatives by a listed company or any
associated company or to the assignment of such rights in which
case the price or consideration paid or received must be
disclosed.
Penalties for failure to disclose
Failure to make disclosure within the required time frame or the
making of false or misleading statements constitute a criminal
offence liable to the same fines and periods of imprisonment as
for substantial shareholders.
Registration of Substantial Shareholders' Interests and Short Positions
As under the previous legislation, listed companies are required
to maintain a register of interests and short positions
disclosed to them. This register may be the same as the register
required by the previous legislation, adapted to include the
additional information required to be disclosed by Part XV.
Details must be entered on the register within 3 business days
following the day of receipt of information by the listed
company and the index must be updated within 10 business days of
a name being entered on the register. In addition, the register
must disclose details of any party holding shares pursuant to a
concert party agreement (see above).
If the register is not kept at the company's registered office,
a listed company must inform the Registrar of Companies of its
whereabouts using the prescribed form of notice now available on
the SFC website.
Investigations of shareholders by a listed company
Under the SFO a listed company has the power to investigate the
identity of holders of interests and short positions in its
shares and also the ownership of equity derivatives where the
underlying shares of such derivatives are shares in that listed
company. As under the previous legislation, a listed company may
be required to exercise its powers of investigation on the
request of members.
The listed company is then under a duty to inform the Stock
Exchange, the SFC and, in the case of authorised financial
institutions only, the Hong Kong Monetary Authority of any
information received. This notification must be given before the
end of the business day after the day on which the duty arises.
The listed company must prepare a report of the information
received pursuant to any such investigation and make that report
available at its registered office within 10 business days of
the end of the investigation and must deliver a copy of the
report to the SFC and the Stock Exchange. Information received
following an investigation must also be recorded in its register
of interests and short positions.
Offences
It is an offence for anyone to fail, without reasonable excuse,
to comply with an investigation made by a listed company or to
make a false or misleading statement in response to such
investigation.
Further, a listed company and every officer who is in default
commits an offence if they fail to prepare a report and deliver
it to the SFC and the Stock Exchange within the specified
periods.
Please note that this summary is for general information
purposes only. Specific legal advice should be sought when
appropriate.
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