Objective standards needed for law enforcements - Interviewing Warren Lee (2)
During the first part of the interview, Warren Lee, Managing Director of Yu Ming Investment Management finds the 18-month time frame rigid. He also points out the inclarity when the SFC and the SEHK are judging whether to suspend a listed company.
Taking Chapter 13.24 of the Main Board Listing Rules, an issuer shall be suspended if it is regarded as having insufficient operations. “As the rules tightens, companies that are most worried of delisting are those indicated by 13.24.” But what defines “insufficient operations”? The Exchange seems not to provide any standard. “I once helped a company with annual revenue of 500 million and surplus of 25 million. Yet it was still seen as insufficient. For the moment I don’t see a standard, and law enforcement seems rather subjective.” In his view, the message of both regulators are clear: as long as companies run and expand their own businesses and stay away from useless matters, they will not be bothered.
Under the new rules, the kind of company that are not affected is investment companies as defined by Chapter 21. While they are not constrained by Chapter 13.24, they are also not seen as cash companies for holding too much cash, or as new listing applicants for making asset transactions.
Any advice for listed companies? Lee indicates the need of professionals, and asks companies not to think that they can solve the problem by themselves. He takes an old government ad as his metaphor. “By then the government urges us not to handle electric lights by themselves. Otherwise we would be like the female lead character, getting electric shock. It is the same for listed companies. Even if we are to get shocked, let the repairman do so.”