Corporate Governance 3 - Corporate Governance
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Questions and Answers

What is the aggregate value threshold for immediate announcement of a transaction under Rule 905?

  • 5% of the listed group's latest Audited Net Tangible Assets
  • 3% of the listed group's latest Audited Net Tangible Assets (correct)
  • 1% of the listed group's latest Audited Net Tangible Assets
  • 10% of the listed group's latest Audited Net Tangible Assets
  • Under which condition must a listed issuer obtain shareholders' approval for an IPT?

  • When it is equal to or more than 5% of NTA (correct)
  • When it is below $100,000
  • When it is valued at less than 5% of NTA
  • When it is part of a series of transactions exceeding $100,000
  • What is the purpose of the de minimis rule regarding transactions under $100,000?

  • To prevent aggregation of transactions by the stock exchange
  • To ensure that minor transactions do not require disclosure
  • To allow companies to circumvent reporting by splitting transactions
  • To exempt all small transactions from reporting (correct)
  • What does Rule 907 require an issuer to disclose?

    <p>The aggregate value of IPTs entered into during the financial year</p> Signup and view all the answers

    What is one way companies try to evade the $100,000 materiality threshold?

    <p>By splitting transactions into smaller amounts below $100,000</p> Signup and view all the answers

    What authority does the stock exchange have regarding transactions below $100,000?

    <p>To aggregate such transactions and treat them as one</p> Signup and view all the answers

    What is the materiality threshold set for IPTs to avoid disclosure if transactions are aggregated?

    <p>$100,000</p> Signup and view all the answers

    The listing rules apply to which of the following types of transactions?

    <p>An inclusive list of various transaction types</p> Signup and view all the answers

    Which of the following transactions does not require immediate announcement under the listing rules?

    <p>A transaction valued at $50,000</p> Signup and view all the answers

    What type of transactions do not require shareholder approval according to listing rule 915?

    <p>Pro-rata shares grants</p> Signup and view all the answers

    Which of the following transactions is considered a transaction requiring disclosure under rule 916?

    <p>Lease of property for 2 years with an interested person</p> Signup and view all the answers

    Which of the following does NOT represent an exception in listing rule 915?

    <p>Directors' annual bonuses</p> Signup and view all the answers

    What is the purpose of the general shareholders mandate allowed under Listing Rule 920?

    <p>To provide general approval for recurrent transactions</p> Signup and view all the answers

    Which of the following statements correctly describes an IPT as outlined in the content?

    <p>IPTs do not include transactions at publicly quoted rates</p> Signup and view all the answers

    Which of the following is NOT an exception for shareholder approval as discussed in the content?

    <p>Mixed-use property acquisitions</p> Signup and view all the answers

    Under which condition can leases of property be exempt from getting shareholder approval?

    <p>For leases with an interested person lasting no more than 3 years</p> Signup and view all the answers

    Which area is identified as needing announcement and disclosures under rule 916?

    <p>Co-investment in joint ventures</p> Signup and view all the answers

    What type of remuneration is specifically mentioned as exempt from being categorized as IPT?

    <p>Golden and Perishwood payments</p> Signup and view all the answers

    What obligation remains even when certain transactions do not require shareholder approval, according to rule 916?

    <p>Announcement and report disclosures are still required</p> Signup and view all the answers

    What is required if a company deviates from the principles established in the code?

    <p>The company must justify the deviation and explain compliance with applicable principles.</p> Signup and view all the answers

    How many provisions exist under the code, and what is their application basis?

    <p>52 provisions applied on a comply or explain basis.</p> Signup and view all the answers

    What characterizes the practice guidance within the corporate governance framework?

    <p>It consists of non-binding guidelines representing best practices.</p> Signup and view all the answers

    What are the 13 principles in the code meant to embody?

    <p>Overarching and non-disputable statements for good corporate governance.</p> Signup and view all the answers

    Which entity issues the practice guidance for corporate governance?

    <p>The MES and overseen by the Corporate Governance Advisory Committee.</p> Signup and view all the answers

    What is the primary concern related to Interested Person Transactions (IPTs)?

    <p>They may lead to conflicts of interest.</p> Signup and view all the answers

    Which rule emphasizes the need to focus on the economic and commercial substance of IPTs?

    <p>Rule 902</p> Signup and view all the answers

    Which of the following statements accurately defines a controlling shareholder?

    <p>Someone who exercises control over the listed issuer, regardless of ownership percentage.</p> Signup and view all the answers

    Who is classified as an associate in the context of IPTs?

    <p>Immediate family members of directors and controlling shareholders.</p> Signup and view all the answers

    What does listing rule 904 empower the stock exchange to do?

    <p>Deem any person as an interested person regardless of their formal classification.</p> Signup and view all the answers

    Why is the definition of an interested person significant in corporate governance?

    <p>It defines who can influence financial decisions impacting shareholders.</p> Signup and view all the answers

    What is the intended purpose of Chapter 9 in the Listing Manual?

    <p>To regulate the conduct and risk of IPTs.</p> Signup and view all the answers

    What is the primary purpose of obtaining a general mandate from shareholders?

    <p>To lay out control measures for safeguarding shareholders' interests</p> Signup and view all the answers

    What necessitated the revisions of the Corporate Governance Code through its iterations?

    <p>The need to align with global best practices</p> Signup and view all the answers

    What distinguishes the principles of the Code from its provisions?

    <p>Principles must always be followed, while provisions can be explained if not followed</p> Signup and view all the answers

    What advantage does the comply or explain approach provide?

    <p>It allows flexibility in adopting governance practices while ensuring accountability</p> Signup and view all the answers

    How often must the general mandate be renewed?

    <p>Annually</p> Signup and view all the answers

    Under rule 710, what information is a listed issuer required to provide about its governance practices?

    <p>A description of practices with specific reference to the code's provisions</p> Signup and view all the answers

    Which of the following is true about the compliance requirements of the Corporate Governance Code?

    <p>The code's provisions offer a choice between compliance and detailed explanations</p> Signup and view all the answers

    What was the primary inspiration behind the development of the Corporate Governance Code?

    <p>The UK combined code developed from the Cadbury report</p> Signup and view all the answers

    What characteristic defines the comply or explain governance approach?

    <p>A balancing method between strict laws and voluntary practices</p> Signup and view all the answers

    What happens if a listed issuer chooses not to comply with some provisions of the Code?

    <p>They must provide an explanation and describe alternative practices followed</p> Signup and view all the answers

    Study Notes

    Corporate Governance: Interested Person Transactions (IPTs)

    • IPTs can influence an issuer and its subsidiaries/associated companies to engage in transactions with interested persons
    • Interested persons may:
      • Be directors
      • Be CEOs
      • Be controlling shareholders
      • Or their associates
    • Chapter 9 of the Listing Manual outlines rules for regulating IPTs
    • The economic and commercial substance of an IPT matters, not just the legal form
    • An associate includes:
      • Spouse
      • Child
      • Adopted child
      • Stepchild
      • Sibling
      • Parent
      • Trustee for immediate family members
      • Any company in which the controlling shareholder has a stake of 30% or more
    • A controlling shareholder holds 15% or more voting shares or has control
    • A transaction reaching 3% of the latest audited net tangible assets (NTA) of the listed group requires immediate announcement
    • An IPT exceeding 5% of the listed group's NTA requires shareholder approval
    • Transactions below $100,000 are exempt from these rules
    • Disclosure of the aggregate value of all IPTs in a financial year is required in the annual report, unless the transactions are below $100,000 or under a shareholder mandate

    Comply or Explain Regime

    • A compromise approach to corporate governance
    • Companies must comply with mandatory principles
    • If variation from principles, the company must explain the rationale for the variation
    • Provides flexibility
    • Principles are separate from provisions of Code; principles are mandatory, provisions are "comply or explain"
    • This regime is detailed by rules, principles, and practice guidance in Chapter 9

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    Description

    This quiz covers the regulations and implications of Interested Person Transactions (IPTs) as outlined in Chapter 9 of the Listing Manual. It includes definitions of interested persons, the significance of transaction substance, and the thresholds for disclosure and approval. Test your understanding of how IPTs influence corporate governance.

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