Jurisdiction - Hong Kong
Reports and Analysis
Hong Kong – Reminder On Annual Report Disclosure Requirements.

23 February, 2015


Legal News & Analysis – Asia Pacific – Hong Kong – Capital Markets




It should now be a busy time for many Hong Kong listed issuers with a 31 December financial year-end preparing their 2014 annual reports for despatch to their shareholders by 30 April 2015.  This client alert reminds Hong Kong listed issuers of some of the disclosure requirements when preparing their annual reports.


Main Board Rules Appendix 16 And The GEM Rules Equivalent


Hong Kong listed issuers’ annual reports must include the information as set out in Appendix 16 (in particular, paragraphs 7 to 35) to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Main Board Rules”) or the Growth Enterprise Market rules (the ”GEM Rules”) equivalent (as the case may be).


Requirements Set Out In Other Parts Of The Main Board/GEM Rules


Apart from the disclosure requirements in Main Board Rules Appendix 16 and the GEM Rules equivalent, there are also disclosure requirements for annual reports set out in other parts of the Main Board/GEM Rules, such as those in relation to:


  • advance to an entity, financial assistance and guarantees to affiliated companies of an issuer and pledging of shares by controlling shareholder;
  • connected transactions;
  • share option schemes;
  • corporate governance report; and
  • continuing disclosure obligations for investment companies and      issuers involving in mining activities.


Hong Kong Companies Ordinance


In addition to the disclosure requirements under Main Board/GEM Rules, Hong Kong incorporated issuers should also comply with the relevant requirements under the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) (the “New Companies Ordinance”).  In this regard, it should be noted that pursuant to the transitional arrangements set out in the New Companies Ordinance, the provisions relating to accounts and directors’ report under the predecessor Companies Ordinance (Chapter 32 of the Laws of Hong Kong) (the “Predecessor Companies Ordinance”) will continue to apply in relation to annual reports for a financial year beginning before the commencement of the New Companies Ordinance on 3 March 2014.  Therefore, issuers with a 31 December financial year-end should comply with the relevant provisions under the Predecessor Companies Ordinance for their 2014 annual reports.


For those Hong Kong incorporated issuers with a financial year beginning on 1 April 2014, the provisions relating to accounts and directors’ report under the New Companies Ordinance will first apply to their annual reports for the year ending on 31 March 2015.  Such provisions lead to various additional disclosures in the directors’ report, such as:


  • a new business review section;
  • directors’ names to be disclosed on a consolidated basis;
  • directors’ interests in transactions, arrangements or contracts entered into by the issuer;
  • permitted indemnity provisions (as defined under section 467 of the New Companies Ordinance);
  • equity-linked agreements (as defined under section 6(3) of the Companies (Directors’ Report) Regulation); and
  • reasons for a director resigning or not seeking re-appointment.


Other Guidance From The HKEx


The Listing Division of The Stock Exchange of Hong Kong Limited (“HKEx”) reviews listed issuers’ annual reports as part of its ongoing monitoring and compliance activities.  It published reports in each of 2013 and 2014 on its review of listed issuers’ annual reports with a focus on certain specific areas (the “Review Reports”).


The Review Reports identified areas where issuers have not fully complied with the relevant disclosure requirements and areas where issuers can improve their disclosures, such as:


  • any significant change in the value of intangible assets and/or goodwill arising from material acquisitions;
  • results of performance guarantees on acquisitions;
  • whether or not the issuer’s transactions with related parties were connected transactions and whether the issuer has complied with the disclosure requirements under Chapter 14A of the Main Board Rules (or the GEM Rules equivalent);
  • results of annual reviews by independent directors and auditors of continuing connected transactions;
  • reasons for the material changes to revenue and/or profit margin;
  • material information about key customers and material risks associated with the reliance on key customers;
  • material changes in financial items including trade receivables, effective tax rates and tax balances, and key performance indicators;
  • actual applications of funds raised through issue of equity or convertible securities, including a breakdown of how the funds were allocated among different uses – This was discussed in our previous client alert “Compliance  reminders – How to avoid issuing clarification announcements?”;
  • certain disclosure requirements relating to biological assets set out in the HKEx’s guidance letter HKEx-GL46-12 that are applicable to listed issuers; and
  • for mineral companies, details of exploration, development and mining production activities and a summary of expenditures incurred in such activities as set out in the HKEx’s guidance letter HKEx-GL47-13.


Listed issuers should also take note of any other guidance materials published by the HKEx from time to time on specific aspects of annual report disclosure requirements.  For instance, the HKEx published in May 2014 a guidance letter HKEx-GL77-14 on listed issuers using contract-based arrangements or structures to indirectly own and control any part of their businesses.  This guidance letter sets out the annual report disclosure requirements for issuers with material business operations through contractual arrangements.


Listed issuers are reminded to follow the HKEx’s guidance and recommendations set out in the Review Reports and other guidance materials when preparing their annual reports.  The HKEx may follow up with listed issuers where their annual report disclosures fall short of the rule requirements and/or its guidance set out therein.


Listing Rule Amendments To Be Effective For Accounting Periods Ending On Or After 31 December 2015


On 6 February 2015, the HKEx published the Consultation Conclusions on Review of Listing Rules on Disclosure of Financial Information with Reference to New Companies Ordinance and Hong Kong Financial Reporting Standards and Proposed Minor/Housekeeping Rule Amendments.  This paper sets out the revised Main Board Rules Appendix 16 and the GEM Rules equivalent which incorporates changes to align the requirements for disclosure of financial information with reference to the disclosure requirements under the New Companies Ordinance.  The changes cover additional disclosures in the directors’ report as introduced in the New Companies Ordinance, which are mentioned in the last paragraph of the section headed “Hong Kong Companies Ordinance” above, except that listed issuers not incorporated in Hong Kong will not be required to disclose the names of the directors of their subsidiaries.


The rule changes will be applicable for annual reports with accounting periods ending on or after 31 December 2015.  That means, issuers with a 31 December financial year-end should comply with the revised Main Board Rules Appendix 16 (or the GEM Rules equivalent) for their 2015 annual reports.


Issuers may, if they wish to, adopt the revised Main Board Rules Appendix 16 (or the GEM Rules equivalent) earlier than the aforesaid effective date, provided that the revised rules should not be adopted for annual reports with an accounting period beginning before 3 March 2014 (e.g. 1 March 2014 – 28 February 2015).


The revised Main Board Rules Appendix 16 and the GEM Rules equivalent will also helpfully provide references to the current disclosure requirements relating to annual reports currently set out in other parts of the Main Board/GEM Rules (see examples under the section headed “Disclosure requirements in other parts of the Main Board/GEM Rules” above) so as to prevent inadvertent omissions of required disclosures.




For further information, please contact:


Ronny Chow, Partner, Deacons

[email protected]


Deacons Capital Markets Practice Profile in Hong Kong



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