Listing

Management Requirements

Management Requirements for Mineral Companies

Main Board

A new applicant mineral company that cannot satisfy the profit test, the market capitalisation/revenue/cash flow test or the market capitalisation/revenue test described above may still be accepted for listing if it establishes to the Exchange's satisfaction that its directors and senior management, taken together, have a minimum of 5 years' experience relevant to the exploration and/or extraction activity that the mineral company is pursuing.

Details of such experience must be included in the applicant's listing document. The Exchange expects most companies seeking a waiver from the track record / financial tests based on management experience to be at the development stage, although companies which are in production are not necessarily precluded as they may have junior assets which are yet to be developed. Companies that are in production will however need to be able to show a clear path to profitability in order to be accepted for listing.

GEM

There is no equivalent waiver from the requirement under the GEM Listing Rules for cash flow from operating activities of at least HK$20 million over the 2 preceding years. The Exchange may however waive the 2-year trading record requirement if satisfied that the directors and senior management have a minimum of 5 years' relevant experience. The cash flow requirement must however be met for the shorter trading record period.

Chapter 18

Charltons is experienced in advising mineral companies and their sponsors and underwriters on the Exchange's management experience requirements and making applications for waivers based on management experience. At a preliminary stage we can coordinate the collection and verification of supporting documentation in relation to directors' and senior managements' experience. Mineral companies should note that the minimum 5 years' experience should be relevant to the exploration and/or extraction activity that the mineral company is pursuing. For example, the directors and senior management of a mineral company involved in the exploration and production of base metals should have experience in the base metals sector. Experience in, for example, coal or iron ore exploration and/or production or even more general industry experience may not be deemed relevant for the purposes of satisfying the 5 years' experience requirement.

Independent non-executive directors

There will generally be no maximum number of directors stated in the Articles of Association of an issuer. However, under the Listing Rules, every board of directors of a listed issuer 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.

Duties, Competence and Collective and Individual Responsibility

Listing Rule 3.08 sets out the general criteria directors are expected to meet in the performance of their duties. 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 issuer's affairs only at formal meetings. At a minimum, they must take an active interest in the issuer'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 Listing Rules, the listed issuer must demonstrate to the satisfaction of the Exchange, prior to the proposed appointment, that the person is independent. The listed issuer 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 issuer must consult the Exchange at an early stage.

Every director of a listed issuer must satisfy the Exchange 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 Exchange may request further information regarding the background, experience, other business interests or character of any director or proposed director of a listed issuer.

Board diversity

On 7 September 2012 The Exchange published a consultation paper to seek comments on its proposed amendments to the Corporate Governance Code and Corporate Governance Report (Code) in relation to board diversity.

The Exchange has since made available the consultation paper and consultation conclusions along with a set of associated Frequently Asked Questions.

The amendments to the Code will be effective on 1 September 2013