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Corporate governance enforcement in Hong Kong

This article explores the enforcement of corporate governance in Hong Kong, including fiduciary duties, shareholder rights, jurisdictional issues, and the role of regulators. It also discusses enforcement against sponsors, auditors, and compliance with securities legislation.

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Corporate governance enforcement in Hong Kong

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  1. Corporate governance enforcementin Hong Kong Charles Grieve Director, Corporate Finance Division Securities & Futures Commission Hong Kong

  2. Enforcement of common law duties • Fiduciary duty to the company • Company has to enforce duty • New right for shareholders to sue in the name of the company • Expensive

  3. Enforcement problems • Jurisdictional issues • significant portion of listed companies in PRC • PRC not MMOU signatory • Cross-border listings bring problems • Greater cross-border regulatory co-operation essential • IOSCO APRC helping co-operation

  4. Enforcement of legislation • Shareholder rights enforced by shareholders through the courts • Criminal acts prosecuted by ICAC & police • courts are prepared to hand down hard penalties • Directors obligations by regulators • late filing; proper books and records • depends on courts’ view of seriousness

  5. Enforcement against others • New licensing regime for sponsors - January 2007 • Action against 4 sponsors in last 2 years • settlement of HKS 30 million • Deloitte agreed to refrain from acting as sponsor for 9 months • Regulation of auditors • FRC and AIB • increased oversight

  6. Enforcement of Listing Rules • Limited sanctions • No powers to obtain evidence • Limited appetite to judge on compliance with fiduciary duties • Securities legislation – false and misleading information to regulators

  7. Way forward • SFC to take on key elements of Listing Rules • periodic reporting, ongoing reporting of price sensitive information, transactions that need shareholder approval • statutory powers to investigate, • greater sanctions on individuals: fines, disqualification • egregious cases go to criminal courts • Does not cure jurisdiction problem

  8. Thank you

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