Jurisdiction - Hong Kong
Hong Kong – Disclosure Of Post-TRP Material Changes.

13 October, 2012


In August 2012, the Exchange published a new guidance letter GL41-12 in relation to prospectus disclosure of material changes in financial, operational and/or trading position after the trading record period. 
The Exchange considers that as a minimum, sponsors and listing applicants should consider whether there is any adverse change which has taken place or is expected to take place in the near future, in the technological, market, economic, legal or operating environment in which the applicant operates.
The guidance letter sets forth various nonexhaustive examples of adverse changes, which will require disclosure if material, including: 
• adverse changes in the trend of financial performance (e.g., revenue, gross profit and/or net profit) compared with the historical financial results disclosed in the prospectus; 
• adverse changes in market interest rates, prices of key products sold/ 
services provided and/or key raw materials; 
• loss of major customers/suppliers or evidence of their deteriorating financial condition/performance; 
• evidence or rumors affecting customers’ acceptance of applicant’s products/services or material product returns/recall requests from customers; 
• litigation/potential litigation from suppliers, customers or other stakeholders; 
• international sanctions on countries/companies with which the applicant has conducted business; 
• loss of permits/licenses/patents or other intellectual property or evidence of changes in laws and regulations which are key to the applicant’s operation; 
• changes in government policies in subsidizing specific industries by way of government grants or preferential tax arrangement or other means; 
• changes in regulations (e.g., prohibiting adoption of structured contracts or other regulatory matters); 
• evidence of obsolescence of or physical damage to the applicant’s key production units/assets/inventories; 
• discovery of news or any adverse developments in existing material litigation/threatened claims; 
• loss of key personnel; 
• significant labor disputes/strikes; or 
• any other material facts which adversely affect or are likely to adversely affect the applicant’s operating environment. 
In addition, listing applicants should note that: 
• qualitative and quantitative disclosures are normally expected to be made in a separate section in the “Summary” and other relevant sections of the prospectus to give significant highlights to investors; 
• where financial performance deteriorates, disclosure of selected figures of updated key operating data (e.g., sales volume, average selling price, production volume, etc.) is expected to be made in the prospectus; and  
• mitigating factors which reduce the potential impact of financial or operational loss does not avoid the need to disclose the adverse changes. 
For a copy of the guidance letter GL41-12, please follow the link: 



For further information, please contact:
Tony Grundy, Partner, Morrison Foerster
John Moore, Partner,  Morrison Foerster


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