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Management Requirements for Mineral Companies

There will generally be no maximum number of directors stated in the Articles of Association of a company. However, under the HKEX Listing Rules, every board of directors of a listed company must include at least three independent non-executive directors. At least one of the independent non-executive directors must have appropriate professional qualifications or accounting or related financial management expertise.

Every independent non-executive director must satisfy the HKEX that he has the character, integrity, independence and experience to fulfil his role effectively. The HKEX may stipulate a minimum number of independent non-executive directors which is higher than three if, in the opinion of the HKEX, the size of the board or other circumstances of the listed company justify it.

In assessing the independence of a non-executive director, the HKEX will take into account the following factors, none of which is necessarily conclusive. Independence is more likely to be questioned if the director:

  1. holds more than 1% of the total issued share capital of the listed company;
  2. has received an interest in any securities of the listed company as a gift, or by means of other financial assistance, from a core connected person or the listed company itself. However, the director will still be considered independent if he receives shares or interests in securities from the listed company or its subsidiaries (but not from core connected persons) as part of his director’s fee or pursuant to share option schemes established in accordance with the HKEX Listing Rules;
  3. is or was a director, partner or principal of a professional adviser which currently provides or has within two years immediately prior to the date of his proposed appointment provided services, or is or was an employee of such professional adviser who is or has been involved in providing such services during the same period, to: (a) the listed company, its holding company or any of their respective subsidiaries or connected persons; or (b) any person who was a controlling shareholder or, where there was no controlling shareholder, any person who was the chief executive or a director (other than an independent non-executive director), of the listed company within two years immediately prior to the date of the proposed appointment, or any of their close associates;
  4. currently, or within one year immediately prior to the date of the person’s proposed appointed, has or had a material interest in any principal business activity of or is involved in any material business dealings with the listed company, its holding company or their respective subsidiaries or with any connected persons of the listed company;
  5. is on the board specifically to protect the interests of an entity whose interests are not the same as those of the shareholders as a whole;
  6. is or was connected with a director, the chief executive or a substantial shareholder of the listed company within two years immediately prior to the date of his proposed appointment;

    (Any person cohabiting as a spouse with, and any child, step-child, parent, step-parent, brother, sister, step-brother and step-sister of, a director, the chief executive or a substantial shareholder of the listed issuer is, considered to be connected with that director, chief executive or substantial shareholder. A father-in-law, mother-in-law, son-in-law, daughter-in-law, grandparent, grandchild, uncle, aunt, cousin, brother-in-law, sister-in-law, nephew and niece of a director, the chief executive or a substantial shareholder of the listed issuer may in some circumstances also be considered to be so connected. In such cases, the listed company will need to provide the HKEX with all relevant information to enable the HKEX to make a determination);

  1. is, or has at any time during the two years immediately prior to the date of his proposed appointment been, an executive or director (other than an independent non-executive director) of the listed company, of its holding company or of any of their respective subsidiaries or of any core connected persons of the listed company; and

    (An “executive” includes any person who has any management function in the company and any person who acts as a company secretary of the company);

  1. is financially dependent on the listed company, its holding company or any of their respective subsidiaries or core connected persons of the listed company.

Directors must satisfy the required levels of skill, care and diligence. Delegating their functions is permissible but does not absolve them from their responsibilities or from applying the required levels of skill, care and diligence. Directors do not satisfy these required levels if they pay attention to the company’s affairs only at formal meetings. At a minimum, they must take an active interest in the company’s affairs and obtain a general understanding of its business. They must follow up anything untoward that comes to their attention.

Where a proposed independent non-executive director fails to meet any of the independence guidelines set out in the HKEX Listing Rules, the listed company must demonstrate to the satisfaction of the HKEX, prior to the proposed appointment, that the person is independent. The listed company must also disclose the reasons why such person is considered to be independent in the announcement of his appointment as well as in the next annual report published after his appointment. In cases of doubt, the listed company must consult the HKEX at an early stage.

Director Competence

Every director of a listed company must satisfy the HKEX that he has the character, experience and integrity and is able to demonstrate a standard of competence commensurate with his position as a director of a listed issuer. The HKEX may request further information regarding the background, experience, other business interests or character of any director or proposed director of a listed issuer.

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