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Techwatch 179

October 2017



Members’ handbook update

Handbook update no. 204 to 205

Update no. 204 relates to the issuance of Hong Kong (IFRIC) Interpretation 23 Uncertainty over Income Tax Treatment.

Update no. 205 relates to the amendments to HKAS 1 Presentation of Financial Statements; HKAS 7 Statement of Cash Flows; and HKAS 12 Income Taxes.

 

Financial reporting

Institute’s letter to IASB Chairman

The Institute wrote to the International Accounting Standards Board Chairman to express concerns and provide recommendations regarding two provisional IASB decisions on the definition of a business.

 

Institute’s comment on IASB Exposure Draft

The Institute commented on the IASB Exposure Draft ED/2017/2 Improvements to IFRS 8 Operating Segments.

 

Corporate finance

Institute comments on new board and GEM review consultations

As reported in TechWatch no. 176, Hong Kong Exchanges and Clearing (HKEX) released a consultation to seek public feedback on a package of proposals to enhance Hong Kong’s listing framework, improve market quality and attract a broader range of companies to come to list in Hong Kong.

As indicated in its submission, the Institute welcomes the current review of Hong Kong’s listing regime to identify areas where the regime could be strengthened and expanded in order to meet the evolving needs of investors and issuers and enhance Hong Kong’s competitiveness as a global capital centre.

The Institute has no objection, in principle, to the establishment of a new board to attract potential issuers which do not fit into the current listing regime and to HKEX exploring the feasibility of permitting companies with different voting right structures to be listed in Hong Kong. However, more considerations should be given when determining whether to restrict the new board to any particular industries. In addition, investor protection to safeguard the interests of ordinary shareholders should be upheld in order not to compromise the core values of Hong Kong as an international financial centre.

The Institute also considers that HKEX should provide a clear roadmap and mechanism of how a listed issuer could migrate its listing from one board to another, when the characteristics of an issuer have changed due to growth and development.

 

HKEX updates guidance to help improve listing document quality and clarity

With the aim of improving the quality and clarity of listing documents, HKEX has updated two Guidance Letters – HKEX-GL86-16 and HKEX-GL56-13.

 

HKEX-GL86-16 changes

  • New recommended page limits
    HKEX has adopted a recommended 20- page limit for each of the “History and Development” and “Applicable Laws and Regulations” sections of listing documents. This is in addition to the recommended 10-page limits for the “Summary and Highlights” and “Industry Overview” sections.

 

  • Possible suspension of vetting
    HKEX may exercise its discretion to suspend vetting for listing applications submitted after 11 September 2017 if:
    -    the listing document does not comply with the recommended page limits for specific sections; or        
    -    information in the “Summary and Highlights” section is almost entirely copied-and-pasted from other sections, or does not contain explanation of material fluctuation of key financial data. If vetting is suspended, the applicant must redraft relevant sections of the listing document to fully comply with HKEX-GL86-16 for vetting to resume.  Suspension of vetting is not a return or rejection of the application so there is no need to upload the revised Application Proof onto the HKEXnews website and the initial listing fee will not be forfeited.

 

HKEX-GL56-13 changes

  • Possible return of listing application
    If fundamental issues in a GEM listing application, such as the applicant’s business model or operations, are not clearly understandable after two rounds of comments from HKEX, it may be evidence that the listing application disclosure is not substantially complete and HKEX may return the application.

 

The updated Guidance Letters are available on the HKEX website.

Sponsors are reminded of their duty to conduct proper due diligence and assist the applicants in preparing replies to comments from the Listing Department. They also have to be prepared to answer questions at Listing Committee and GEM Listing Approval Group hearings. Unresponsive or unclear answers to comments or questions may result in a return or rejection of the listing application.

 

Restructuring and insolvency

Institute comments on Open-ended Fund Companies Rules and Code

The Institute issued a submission responding to the consultation paper on the Securities and Futures (Open-ended Fund Companies) Rules and Code on Open-ended Fund Companies (OFC). The submission suggests that more should be said as to how the provisions on creditors’ voluntary windings up under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) would be applied to OFCs. Drafting changes are also proposed in relation to some of the provisions on audits of OFCs.

 

Official Receiver’s Office Tender Notice

The Official Receiver’s Office (ORO) has issued a tender notice for taking up of appointments as provisional trustees under section 12(1A) of the Bankruptcy Ordinance. More details are available on the ORO website under “Tender Notices”.

 

Taxation

Announcements by the Inland Revenue Department

Members may wish to be aware of the following matters:

  • Advancing Ruling Cases No. 61 and No. 62, on amalgamation
  • Stamp Duty statistics (July 2017)
  • Hong Kong and Saudi Arabia enter into tax pact

 

Anti-money laundering notices

Members should note the following notices and publications in relation to anti-money laundering/counter-financing of terrorism :

  • Government notice 6235: An updated list of terrorists and terrorist associates has been specified under the United Nations (Anti-Terrorism Measures) Ordinance.
  • Specially designated nationals and blocked persons list, published by the U.S. Treasury’s Office of Foreign Assets Control. More details on the Resource Centre of the Treasury.

 


Please refer to the full version of TechWatch 179, available as a PDF on the Institute’s website: www.hkicpa.org.hk