Corporate Governance Conference (CGC) 2016 The Mainland and CG – Tell it straight The Road Trodden and What the Future Holds ? 24 September 2016 Speaker : Edward K F Chow JP, BA, FCA, FCPA, FHKIoD
Fast Rewind CSRC / SSE / “A” shares / “H” shares Supervisory committee / INEDs Two tier board - duplication ? Supervisory board vs audit committee Professionalisation of INEDs 2
IFRS – Convergence or equivalence Basle I, II, III, Stress tests AML, KYC, EU directives / standards Risk, fraud, CSR, sustainability Related party transactions 3
G20, G2 AIIB, Belt & Road BIG Banks, shipping, telecom, trains Tencent, Alibaba Rmb based trading 4
FUTURE - WHAT FUTURE ? Over-regulation Compliance vs performance Single tier or two tier board Transferability of top management Go West or take lead to develop China centric framework? Educating private sector entrepreneurs Should regulators and drafters have commercial experience ? 5
Q & A Thank You ! 6
Making it all come together Chinese style? 1
Relatively weak awareness in the Mainland Weak in two senses: (1) unfamiliar with rules, regulations and laws (2) incomplete implementation of internal policies 2
Connected transactions ◦ unaware of the connected persons or the transactions ◦ overlooking the necessary approval and disclosure obligations Inside information ◦ insensitive to the potential corporate actions ◦ inappropriate communication channels leading to failure to preserve confidentiality 3
Example 1 – director s’ failure to obtain the necessary approval on connected transactions and failure to comply with the necessary disclosure obligation Example 2 - using mobile apps by the company’s management to discuss matters containing sensitive information 4
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The President announced through several Wechat group: Subscription accumulated to over 100 billion Subscription attained 18.5 billion Substantial family Attained sales target in Messages leaked to the Made clarification members acquire 8.1 advance Media, share price increased announcement, trading million shares of the Sales for single month to $5.2 by 3% in the resumed in the afternoon Company, price per share attained 20 billion afternoon, closing price is Sales subscription attained is $4.939 $5.14 9.83 billion Trading During National Day - halt for After National Day - Golden Week Holiday Golden Week Holiday Last day of National half day (Peak seasons for (first trading day ) Trading halt Day - Mainland properties Golden Week Holiday transaction ) Sep to Oct Oct 2013 Oct 2013 Oct 2013 2013 Price sensitive information Suspected insider dealings The above information is not The individual obtain profit in the publised and the public have no stock market before the public way to acquire such information know the such information
Share price rose to a high rate temporarily and dropped 7
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Management’s professionalism to enforce the CG policies Providing regular training and update to board members, management and relevant staff Seek professional advice from company secretary or consultants in case of uncertainty 9
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