When it’s come to suspension, it’s all about transparency – Interviewing Mike Wong
Listed companies have shown signs of increasing number of delayed delivery of annual or interim result. From past experience, listed companies subject to trading suspension due to failure to announce results within the time limit may face the situation for several years. After the suspension of 18 months, a duration set up by the HKEX, the company may face delisting. Mike Wong, Chief Executive Officer of the Chamber of Hong Kong listed company, said in an interview that if the company faces problem, the best way way is to provide to the market a solution and timetable to allow investors to make appropriate investment decisions. It comes to the company's responsibility to provide accurate and timely information.
Mike Wong pointed out that there are two reasons for delaying the publication of results. One of them is related to information transmission. It may take time to retrieve information and answer questions from the auditor. As such, results can usually be announced and trading resumed within a short period of time. Another reason is that the company is facing a problem and needs time to deal with it. Mike Wong believes that the company should provide solutions and inform the market appropriately. It would be better for the company to provide a timetable as to how it will solve its problem, so that the exchange can consider the situation and let the company resume trading. On the other hand, investors can also understand the matter and thus make investment decisions accordingly.
As to the 18-month suspension period, he points out an HKEX consultation regarding immediate suspension of trading if the auditor issues a disclaimer or an adverse opinion. Yet if trading is suspended for 18 months, delisting becomes necessary. He adds that if the company is facing accounting problems, it would take a year or two to bring order to the chaos, so that the 18-month period may not be insufficient. The Chamber of Hong Kong Listing Companies thus suggests that if the company has shown signs of determination to solve the problem, or there are methods made clear to the auditors to deal with the problem, the Exchange can consider resumption of trading with a flexible perspective.
Thinking from a positive side, he continued, the company is not required to meet the 18-month deadline. Retail investors can also observe the company's performance during this window period, and decide whether to keep holding the shares or sell it all. Even some investors can make speculation trading at this time of period. As long as the company can explain the situation and provide relevant solutions, both parties have the basis to make investment decisions. He also pointed out that the suggestion by the Chamber is all based on transparency; investors have the right to know, and make investment decisions with thorough understanding.
According to the latest consultation summary of the Hong Kong Stock Exchange, if the auditor express adverse audit opinion on the company's results , the company needs to suspend trading, except for two cases, including when the relevant opinions involve only continual operational problems; or when the company has resolved issues related to the non-standard opinion issued by the auditor prior to the publication of the preliminary results.
In addition, the HKEX has also revised the remediation period. As of current regulation, companies which have suspended their trading for 18 consecutive months may face delisting. Yet if the problem that leads to a disclaimer or an adverse opnion is beyond the control of the company, the remediation period can be extended, subject to the Exchange's decision for each individual case. If the suspension is due to the auditor's issuance of adverse opinion or disclaimer from the review on the company's financial year beginning on September 1, 2019 to August 31, 2021, the remediation period may be extended to 24 months.