HKExLISTINGDECISION

1、PAGE PAGE 4HKEx LISTING DECISIONCite as HKEx-LD74-2 (October 2009)Summary PartiesCompany A a Main Board listed company Target a company listed on the Australian Stock Exchange Vendor a shareholder of the Target SubjectWhether the Exchange would grant a waiver to Company A from the requirement to inc

2、lude an accountants report on the Target in its circular for the AcquisitionListing RuleMain Board Listing Rule 14.67(6)(a)(i)DecisionThe Exchange granted a waiver to Company A on condition that the circular would contain alternative disclosure proposed by Company A in its waiver applicationSUMMARY

3、OF FACTSCompany A agreed to purchase certain interests in the Target (the Acquisition) from the Vendor. The Target was listed on the Australian Stock Exchange (ASX). The Targets business was in line with Company As principal activities.Upon completion of the Acquisition, Company As interest in the T

4、arget would increase from approximately 12% to 20%. The Acquisition constituted a major transaction for Company A.Before the Acquisition, Company A accounted for its interest in the Target as “available for sale equity investment”. Upon completion of the Acquisition, Company As 20% interest in the T

5、arget would be treated as an investment in an associate and accounted for using the equity method of accounting.Company A proposed to include the following information in its circular for the Acquisition instead of an accountants report on the Target:-the Targets published audited financial statemen

6、ts for the preceding three years together with the latest published unaudited quarterly and interim financial information of the Target prepared under Australian accounting standards;-a letter from Company As reporting accountants explaining that there were no differences between Australian accounti

7、ng standards and Hong Kong Financial Reporting Standards (HKFRS) that had material effect on the Targets financial information in the circular; and-the reason for not preparing an accountants report on the Target.Company A applied for a waiver from the requirement to produce an accountants report on

8、 the Target for the following reasons:The Acquisition was a transaction between Company A and the Vendor. The Target was not obliged to assist Company A to prepare an accountants report on it for the Acquisition. Neither Company A nor the Vendor had access to the Targets books and records to prepare

9、 an accountants report on it in accordance with the Listing Rules.The Target would not become a subsidiary of Company A as a result of the Acquisition. Company A had requested the Target to assist in the preparation of the accountants report but it had declined. The Target had published its financia

10、l information on a regular basis under the listing rules in Australia. It was not prepared to disclose any additional financial information. While the Targets financial information was prepared under Australian accounting standards but not HKFRS, the standards adopted by Company A, there should be n

11、o material differences in the reported amounts under the two accounting standards. The Targets accounting policies were materially consistent with Company As. ISSUE Whether the Exchange would grant a waiver to Company A from the requirement to include an accountants report on the Target in its circu

12、lar for the Acquisition.APPLICABLE LISTING RULES OR PRINCIPLESRule 14.67 requires that:a circular issued in relation to an acquisition constituting a major transaction must contain:-(6)(a)(i)an accountants report on the business, company or companies being acquired in accordance with Chapter 4 of th

13、e Exchange Listing Rules provided that, where any company in question has not or will not become a subsidiary of the listed issuer, the Exchange may be prepared to relax this requirement. The accounts on which the report is based must relate to a financial period ended 6 months or less before the ci

14、rcular is issued. The financial information on the business, company or companies being acquired as contained in the accountants report must be prepared using accounting policies which should be materially consistent with those of the listed issuer; .Rule 4.11 requires that:The financial history of

15、results and the balance sheet included in the accountants report must normally be drawn up in conformity with:-(a)Hong Kong Financial Reporting Standards; or(b)International Financial Reporting StandardsANALYSISUnder the Listing Rules, an issuer must ensure that the information in its circular for a

16、 notifiable transaction is accurate and complete in all material respects and not misleading or deceptive. The circular must contain all information necessary to allow the issuers shareholders to make a properly informed decision on how to vote on the transaction. While Rule 14.67(6)(a)(i) provides

17、that the Exchange may relax the requirement for an accountants report where the company to be acquired has not or will not become a subsidiary of the issuer, a request for relaxation will need to be assessed case by case having regard to the facts and circumstances.Here, the Target had not been and

18、would not, as a result of the Acquisition, become Company As subsidiary. Therefore, Rule 14.67(6)(a)(i) applied. In determining whether to relax the accountants report requirement, the Exchange took into account:-Company A did not have access to non-public information of the Target required to prepa

19、re an accountants report on it. Strict compliance with the accountants report requirement by Company A would be impractical.-The Target had been publishing financial information to the market on a regular basis to enable investors to assess its activities and financial position. It was listed on an

20、overseas stock exchange and its financial disclosures were subject to supervision by regulatory authorities. -Company A submitted that there were no differences between Australian accounting standards and HKFRS, the standards adopted by Company A, that had material effect on the Targets financial information in the circular. This was supported by Co