Before amendment the Main Board Listing Rule 3.

08, the HKEX required the listed issuer must fulfill to Main board rules. fter an amendment of the Listing rules are added more requirement of the Main board. !t means that the monitor organi"ation is in#reased b$ ris% management #ontrol. ll monitor organi"ation is not fo#used on the &rofit ma%ing, the$ 'ill fo#us on #om&an$ #or&orate go(ernan#e &ur&ose, and it is trend of all o(er the 'orld. )hen, the monitor organi"ation 'ill add the #riteria of the board of dire#tors. )he Board of *ire#tors has t'o t$&es, one is an E+e#uti(e dire#tor, other one is an ,on e+e#uti(e dire#tor. )he Rule required as a dire#tor must fulfill the - .uide on *ire#tors *uties/, Both the E+e#uti(e dire#tor and non e+e#uti(e dire#tor are e+&e#ted b$ the E+#hange to be guided b$ the .uidelines for *ire#tors and the .uide for !nde&endent ,on0e+e#uti(e *ire#tor &ublished b$ the Hong Kong !nstitute of *ire#tors 1hen the amendment is not announ#ed, the Main Board rules is onl$ required the listed issuer, is not the issuer. !t means that the liabilities 'ill not transfer to the natural &erson or subsidiar$ or 2oint 3enture. ll #om&an$ is se&arated and inde&endent. 4nder 3.08 Main Board Rule, )he Board of *ire#tors of a listed an issuer is #olle#ti(el$ res&onsible for the management and o&erations of the Listed issuer. )he E+#hange e+&e#ts the dire#tors, both #olle#ti(el$ and indi(iduall$, to fulfill fidu#iar$ duties of s%ill, #are and diligen#e to a standards at least #ommensurate 'ith the standard established b$ the Hong Kong La'. ##ording to the .uide on *ire#tors5 *uties, !n general the res&onsibilities and liabilities of deri(e from (arious sour#es, in#luding the #onstitution of the #om&an$, #ase la' and statute la'. !f a &erson does not #om&l$ 'ith his duties as a dire#tor he ma$ be liable to #i(il or #riminal &ro#eedings and ma$ e disqualified from a#ting as a dire#tor. )his means that e(er$ dire#tor must, in the &erforman#e of his duties as a dire#tor, the .eneral &rin#i&le as a follo'ing6 7rin#i&les one6 )o a#t in good faith for the benefit of the #om&an$ as a 'hole. dire#tor of a #om&an$ must a#t in good faith in the best interests of the #om&an$. )his means that a dire#tor o'es a dut$ to a#t in the interests of all its shareholders, &resent

and future. !n #arr$ing out this dut$, a dire#tor must ha(e regard to the need to a#hie(e out#omes that are fair as bet'een its members. 7rin#i&les t'o6 )o use &o'ers for a &ro&er &ur&ose for the benefit of members as a 'hole. dire#tor of a #om&an$ must e+er#ise his &o'ers for a -&ro&er &ur&ose/. )his means that he must not e+er#ise his &o'ers for &ur&ose that are different from &ur&oses for 'hi#h the$ 'ere #onferred. )he &rimar$ and substantial &ur&ose of the e+er#ise of dire#tors5 &o'ers must be for the benefit of the #om&an$. !f the &rimar$ moti(e is found to be for some other reasons, then the effe#ts of his e+er#ise of his &o'er ma$ be set aside. )his dut$ #an be brea#hed e(en if he a#ted in good faith. 7rin#i&le three6 ,ot to delegate &o'ers e+#e&t 'ith &ro&er authori"ation and dut$ to e+er#ise inde&endent 8udgment in relation to an$ e+er#ise of his &o'ers. 7rin#i&le four6 )o e+er#ise #are, s%ill and diligen#e. dire#tor of a #om&an$ must e+er#ise reasonable #are, s%ill and diligen#e that 'ould be e+er#ised b$ a reasonabl$ diligent &erson 'ith the general %no'ledge, s%ill and e+&erien#e that ma$ reasonabl$ be e+&e#ted of a &erson #arr$ing out the fun#tions #arr$ing out b$ the dire#tor in relation to the #om&an$ and the general %no'ledge, s%ill and e+&erien#e that the dire#tor has. 7rin#i&le fi(e6 )o a(oid #onfli#ts bet'een &ersonal interests and interests of the #om&an$. dire#tor of a #om&an$ must not allo' &ersonal interests to #onfli#t 'ith the interests of the #om&an$. 7rin#i&le si+6 ,ot to enter into transa#tions in 'hi#h the dire#tors ha(e an interest e+#e&t in #om&lian#e 'ith the requirements of the la'. dire#tor of a #om&an$ has #ertain duties 'here he has a material interest in an$ transa#tion to 'hi#h the #om&an$ is, or ma$be, a &art$. 4ntil he has #om&lied 'ith these duties, he must not , in the &erforman#e of his fun#tions as a dire#tor, authori"e , &ro#ure or &ermit the #om&an$ to enter into a transa#tion. 9urthermore, he must not enter into transa#tion 'ith the #om&an$, unless he has #om&lied 'ith the requirements of the la'. )he la' requires a dire#tor to dis#lose the nature of his interest in res&e#t of su#h transa#tions. 4nder #ertain #ir#umstan#es the #onstitution ma$ &res#ribe &ro#edures to se#ure the a&&ro(al of dire#tors or members in res&e#t of &ro&osed transa#tions. dire#tor must dis#lose the rele(ant interest to the e+tent required. 1here a&&li#able, he must se#ure the requisite a&&ro(al of other dire#tors or members.

7rin#i&le se(en6 ,ot to gain ad(antage from use of &osition as a dire#tor. dire#tor of a #om&an$ must not use his &osition as a dire#tor to gain dire#tl$ or indire#tl$ an ad(antage for himself, or someone else, or 'hi#h #auses detriment to the #om&an$ 7rin#i&le eight6 ,ot to ma%e unauthori"ed use of #om&an$5s &ro&ert$ or information. dire#tor of a #om&an$ must not use the #om&an$5s &ro&ert$ or information , or an$ o&&ortunit$ that &resents itself to the #om&an$, of 'hi#h he be#omes a'are as a dire#tor of the #om&an$. )his is e+#e&t 'here the use or benefit has been dis#losed to the #om&an$ in general meeting and the #om&an$ has #onsented to it. 7rin#i&le ,ine6 ,ot to a##e&t &ersonal benefit from third &arties #onferred be#ause of &osition as a dire#tor. dire#tor or former dire#tor of a #om&an$ must not a##e&t an$ benefit from a third &art$, 'hi#h is #onferred be#ause of the &o'ers he has as dire#tor or b$ 'a$ of re'ard for an$ e+er#ise of his &o'ers as a dire#tor. )his is unless the #om&an$ itself #onfers the benefit, or the #om&an$ has #onsented to it b$ ordinar$ resolution, or 'here the benefit is ne#essaril$ in#idental to the &ro&er &erforman#e of an$ of his fun#tions as dire#tor. 7rin#i&le ten6 )o obser(e the #om&an$5s memorandum and arti#les of asso#iation and resolution. dire#tor of a #om&an$ must a#t in a##ordan#e 'ith #om&an$5s #onstitution. He must also #om&l$ 'ith resolutions that are made in a##ordan#e 'ith #om&an$5s #onstitution. 7rin#i&le ele(en6 )o %ee& &ro&er boo%s of a##ount. dire#tor of a #om&an$ must ta%e all reasonable ste&s to ensure that &ro&er boo%s of a##ount are %e&t so as to gi(e a true and fair (ie' of the state of affairs of the #om&an$ and e+&lain its transa#tions. )o a(oid brea#hing the fraudulent trading &ro(isions in se#tion :;< of the #om&anies =rdinan#e >?a& 3:@, a dire#tor must not allo' the #om&an$ to in#ur further #redit %no'ing that there is no reasonable &ros&e#t of a(oiding insol(en#$. )he 7rin#i&le is &ro(ided the guide to the #om&an$ dire#tor, ho' to a#t on, ho' to a(oid, ho' to &rote#t himself. Ho'e(er, before the amendment, Main board rule is not set the standard of the dire#tor le(el of s%ill, #are and diligen#e. fter the amendment, the main board rules is e+&anded the e+tent of the requirement. !f the dire#tor #ould not understand, he #an referen#e the #om&an$ registr$. nd the other hand, 'h$ the Main board rules issue the amendmentA

!n s&ite of the #om&arati(el$ small number of &ubli# #om&anies, #om&an$ la' in &ra#ti#e is &rimaril$ dire#ted to'ards this t$&e of #om&an$. =n the one hand, this is a&&ro&riate be#ause the rights of shareholders of a &ubli# #om&an$, being remote from its o&erations, need quite elaborate legal s$stems to ensure their &rote#tion. !n addition, &ubli# #om&anies and their subsidiaries dominate the e#onom$ to an e+tent quite dis&ro&ortionate to the smallness of their number. =n the other hand, the em&hasis on the &ubli# #om&an$ has resulted in a gro'ing trend in #or&orate go(ernan#e 'hi#h is, in a number of res&e#ts, o(er elaborate for &ri(ate #om&anies #om&an$5s obligations to its #ustomers, su&&liers and em&lo$ees or its 'ider &ubli# obligations in res&e#t of su#h issues as the &rote#tion of the en(ironment are not affe#ted b$ its #or&orate status and form little &art of #om&an$ la'. Ho'e(er, the me#hanisms for enfor#ing a #om&an$5s #om&lian#e 'ith these obligations are hea(il$ affe#ted b$ its #or&orate status, and a great deal of the burden falls on dire#tors &ersonall$. #om&an$5s liabilities to #reditors ma$ #reate substantial &ersonal liabilities for its dire#tors if the business of the #om&an$ has been #arried on 'ith intent to defraud #reditors and the #om&an$ be#omes insol(ent Ho'e(er, the la' has ne(er had an$ &roblem in im&uting the state of mind of the indi(iduals 'ho #an be held to be a #or&oration5s -mind and 'ill/ to the #or&oration itself. )he mind and 'ill of a #om&an$ is normall$ held to reside in its board of dire#tors. 1here questions arise #on#erning the #riminal liabilit$ of #om&anies, it is &ossible for the dire#tors of a #om&an$ to be found #riminall$ liable on its behalf Bimilarl$, the #ons#ien#es of the members of the board of dire#tors ma$ be held to re&resent the #ons#ien#e of the #om&an$ 'here moral rather than legal issues are at sta%e. )he !nstitute belie(es that #om&anies should be a &ositi(e for#e for good in the #ommunities in 'hi#h the$ o&erate, and that #om&anies, their dire#tors and their em&lo$ees ha(e a great deal to #ontribute to the solution of man$ so#ial and en(ironmental &roblems, &arti#ularl$ in su#h areas as edu#ation and training, &ollution, urban rene'al and the stimulation and &ro&agation of an enter&rise #ulture &ro&er balan#e of interests must be maintained though. *ire#tors do not ha(e a totall$ free hand to a#t &urel$ as their &ersonal #ons#ien#es di#tate. #om&an$ ma$ ma%e #haritable, &oliti#al and other similar gifts, in#luding e+ gratia &a$ments, if it is

e+&ressl$ >in its Memorandum of sso#iation@ or im&liedl$ em&o'ered to do so. !n ma%ing su#h gifts or &a$ments, dire#tors are go(erned b$ rules similar to those 'hi#h a&&l$ to an$ other &a$ment made 'ithin their general &o'er of management on behalf of the #om&an$. )o be (alid, the &a$ment must be for the benefit of the #om&an$ and made bona fi de in the interests of the #om&an$. !n the absen#e of an e+&ress &o'er in its ob8e#ts #lause, it must also be reasonabl$ in#idental to its business. s Bo'en 2.said in Hutton (. 1est ?or% Rail'a$ in C883 !n &ubli# #om&anies there 'ill generall$ be a #lear distin#tion bet'een dire#tion, management and o'nershi& and the board5s fun#tion 'ill be dire#ted &rimaril$ to'ards ma%ing strategi# de#isions. )he dire#tors of &ubli# #om&anies o&erate under a tighter regime sin#e &ubli# #om&anies, es&e#iall$ if the$ are listed, are sub8e#ted to far more stringent #ontrols than &ri(ate #om&anies. )he ?om&anies =rdinan#e im&oses more rigorous &ro(isions on &ubli# #om&anies in areas su#h as6 Maintenan#e of #a&italD *istribution of &rofits, Loans to dire#tors, 9inan#ial assistan#e for the a#quisition of shares in the #om&an$ and issue and &ur#hase b$ the #om&an$ of its o'n shares. !f the #om&an$ is listed on )he Bto#% E+#hange of Hong Kong Limited >-BEHK/@ >either on the Main Board or on the .ro'th Enter&rise Mar%et >.EM@@, the ?om&anies =rdinan#e im&oses stri#ter &ro(isions in these areas, &arti#ularl$ in relation to the distribution of &rofits and finan#ial assistan#e for the a#quisition of shares in a #om&an$. !n addition, the &ro(isions of the BEHK5s -Rules .o(erning the Listing of Be#urities on )he Bto#% E+#hange of Hong Kong Limited/ >-MB Rules/@ or the -Rules go(erning the Listing of Be#urities on the .ro'th Enter&rise Mar%et of )he Bto#% E+#hange of Hong Kong Limited/ >-.EM Rules/@ must be #om&lied 'ith the Rules regulate (arious transa#tions 'hi#h the #om&an$ ma$ 'ish to embar% u&on, in#luding transa#tions bet'een the #om&an$ and dire#tors themsel(es. )he Be#urities and 9utures =rdinan#e >?a&. <;C@ also in#ludes &ro(isions designed solel$ for the regulation of listed #om&anies and those in(ol(ed 'ith su#h a #om&an$ Bub8e#t to some e+#e&tions, a subsidiar$ #om&an$ is &rohibited from being a member >or shareholder@ of its holding #om&an$ >s.:8 >C@ of the ?om&anies =rdinan#e@. )he aims of this are t'ofold6 9irst, to &re(ent the dire#tors of a holding #om&an$ maintaining themsel(es in offi#e indefinitel$ 'ith the (otes of the subsidiar$ #om&an$D Be#ond, to &re(ent the #a&ital of the holding #om&an$ being indire#tl$ de&leted b$ the &ur#hase of its shares b$ the subsidiar$.

*ire#tors are entitled to an$ information the$ require in order to &erform their fun#tions. )he$ are entitled to rel$ on the information su&&lied b$ management as long as the$ ha(e no grounds for sus&e#ting that it is misleading or 'rong. *ire#tors should re#ei(e #om&lete and a##urate information suffi#ientl$ in ad(an#e of a meeting to ha(e time to stud$ it. )he ?. ?ode states that management has an obligation to ensure the board re#ei(es adequate, #om&lete, reliable and timel$ information to enable it to ma%e informed de#isions. *ire#tors should not al'a$s rel$ &urel$ on 'hat is (olunteered b$ management and should ma%e further enquiries if ne#essar$. ##ordingl$, the board should ha(e se&arate and inde&endent a##ess to the #om&an$5s senior management. Listed #om&anies are required under the ?. ?ode to establish remuneration #ommittee 'hi#h #onsists mostl$ of inde&endent non0e+e#uti(e dire#tors >!,E*s@. )he$ 'ould ha(e &o'er to a&&ro(e s&e#ifi# remuneration &a#%ages and &erforman#e based &a$ments, as 'ell as to a&&ro(e termination &a#%ages. Ea#h !,E*5s &a$ should not be (oted on b$ himself. !n addition, the Listing Rules no' require that remuneration of dire#tors be dis#losed on a named basis in the #om&an$5s annual re&ort. *ire#tor should &a$ &arti#ular attention to the information 'hi#h the #om&an$ &uts out. !f the$ ha(e not e+er#ised due #are to ensure that su#h information is a##urate and not misleading, the$ ma$ be#ome &ersonall$ liable to an indi(idual 'ho relies on the information to his detriment for business &ur&oses. !n addition, the dire#tors ma$ in#ur &ersonal liabilit$ under (arious ordinan#es, for e+am&le, ma%ing untrue statements in a &ros&e#tus >s.E0 of the ?om&anies =rdinan#e@. )he$ ma$ also in#ur #i(il liabilit$ in #ontra#t, the torts of negligen#e and de#eit, or for misre&resentation. PART I strong bod$ of &ubli# o&inion #onsiders that #om&anies and their dire#tors should be more 'idel$ -a##ountable/. 1hat is meant b$ this is not the stri#t a##ountabilit$ 'hi#h dire#tors alread$ o'e to the #om&an$, nor the sim&le dis#harge of their e+tensi(e duties relating to a##ounts and dis#losure #reated b$ legislation, but a 'illingness to &ro(ide adequate information about the #om&an$5s affairs to an$ &art$ 'ith an interest in the #om&an$. reasonable attitude to'ards (oluntar$ dis#losure of information about the #om&an$ is a &rerequisite for satisfa#tor$ relationshi&s 'ith all the &arties asso#iated 'ith a #om&an$. !f #om&anies do not ma%e adequate (oluntar$ dis#losure, the$ 'ill undoubtedl$ fa#e further ill0#onsidered attem&ts to se#ure

#hanges b$ legislation. Listed #om&anies must in addition &a$ attention to the general and s&e#ifi# dis#losure requirements set out in the Main Board and .EM Listing Rules. )he Rules #ontain a blan%et dis#losure requirement that a listed #om&an$ must %ee& the E+#hange, the listed #om&an$5s members and other holders of its listed se#urities informed as soon as reasonabl$ &ra#ti#able of an$ information relating to the grou& >in#luding information on an$ ma8or ne' de(elo&ments in the grou&5s s&here of a#ti(it$ 'hi#h is not &ubli# %no'ledge@ 'hi#h6 !s ne#essar$ to enable them and the &ubli# to a&&raise the &osition of the grou&D or is ne#essar$ to a(oid the establishment of a false mar%et in its se#uritiesD and might be reasonabl$ e+&e#ted materiall$ to affe#t mar%et a#ti(it$ in and the &ri#e of its se#urities. !n addition, the Rules ha(e a multitude of s&e#ifi# dis#losure obligations 'hi#h &ertain to a (ariet$ of matters, in#luding6 #ir#umstan#es 'here dis#losure is required 'hen the listed grou& enters into transa#tions, s&e#ifi# e(ents ha&&ening to the listed grou&. lso, the Rules require that some transa#tions be s&e#ifi#all$ dis#losed and sometimes shareholders5 a&&ro(al is required and the dire#tors are res&onsible for ensuring that the #om&an$ #om&lies 'ith su#h requirements. Main Board and .EM listed #om&anies are also required to &ost their annual re&orts, interim re&orts and finan#ial statements on the HKE+ and .EM 'ebsites for &ubli# (ie'ing 'hen the$ dis&at#h these #or&orate #ommuni#ations to shareholders. 9or listed #om&anies, the ?. ?ode requires a #lear di(ision of the management of the board and the da$0to0da$ management of the #om&an$5s business, to ensure a balan#e of &o'er and to a(oid o(er0#on#entration of &o'er in an$ one indi(idual. ##ordingl$, the ?. ?ode requires se&aration of the roles of ?hairman and ?hief E+e#uti(e =ffi#er. 4nder the Listing Rules, #om&anies must dis#lose in their ?or&orate .o(ernan#e Re&ort the identit$ of the ?hairman and the ?hief E+e#uti(e =ffi#er and 'hether these t'o roles are segregated and the nature of an$ relationshi& >in#luding finan#ial, business, famil$ or other materialFrele(ant relationshi&>s@@, among members of the board and in &arti#ular, bet'een the ?hairman and the ?hief E+e#uti(e =ffi#er. !n fa#t, it is interesting to note that the ?. ?ode5s re#ommended &ra#ti#es in#lude that the ?hairman should be &rimaril$ res&onsible for dra'ing u& and a&&ro(ing board

meeting agendas. )o ta%e res&onsibilit$ for ensuring that good #or&orate go(ernan#e &ra#ti#es and &ro#edures are establishedD and en#ourage all dire#tors to ma%e a full and a#ti(e #ontribution to the board5s affairs and ta%e the lead to ensure that the board a#ts in the best interest of the #om&an$, fa#ilitate effe#ti(e #ontribution of non0 e+e#uti(e dire#tors and ensure #onstru#ti(e relations bet'een e+e#uti(e and non0 e+e#uti(e dire#tors. nd hold meetings at least annuall$ 'ith the non0e+e#uti(e dire#tors >in#luding inde&endent non0e+e#uti(e dire#tors@ 'ithout the e+e#uti(e dire#tors &resent. 9or listed #om&anies, the amended Listing Rules require that at least one of the inde&endent non0e+e#uti(e dire#tors must ha(e a&&ro&riate &rofessional qualifi#ations or a##ounting or related finan#ial management e+&ertise. 9urthermore, in order to assess the -inde&enden#e/ of the !,E*s, )he Hong Kong E+#hanges and ?learing Limited ta%es into a##ount the follo'ing, e.g. 'hether the dire#tor6 Holds more than CG of the total issued share #a&ital of the listed #om&an$ and 'hether the shares 'ere obtained as a gift from, or b$ means of finan#ial assistan#e, from a #onne#ted &erson or the listed #om&an$. !s a dire#tor, &artner or &rin#i&al of a &rofessional ad(iser &ro(iding or ha(ing 'ithin the $ear &rior to his a&&ointment &ro(ided ser(i#es, or is an em&lo$ee of su#h &rofessional ad(iser 'ho is or has been in(ol(ed in &ro(iding su#h ser(i#es during the same &eriod, to holds more thanCG of listed #om&an$, its holding #om&an$ or an$ of their res&e#ti(e subsidiaries or #onne#ted &ersonsD or related to a #ontrolling shareholder or #hief e+e#uti(e or a dire#tor >other than an !,E*@, of the listed #om&an$ 'ithin the $ear &rior to his a&&ointment, or an$ of their asso#iates.