INTRODUCTION
The objective of this report is to examine the effectiveness of board of directors of China Primary Energy Holding Limited in terms of the communication and other forms of engagement with shareholders. The following passage will discuss the topic above in three main areas that are the degree of compliance with Hong Kong GEM Corporate Governance codes, the impact of ownership structure on company’s performance and the effectiveness of communication with shareholders.
BACKGROUND INFORMATION
China Primary Energy Holding Limited (China Primary) is an investment holding company, engaging in the manufacture and sale of polyethylene (PE) pipes as well as trading of composite materials. It is listed on Growth Enterprise Market of the Stock Exchange of Hong Kong Limited (GEM) since 13 December 2001 (HKEXnews 2016a). The major business activity has shifted to the transmission and distribution of nature gas since 2014, as a result of the policy announced by the People’s Republic of China (PRC) government to encourage the use of clean energy (China Primary 2015). The China Primary Group acquired two target companies doing natural gas business, indicating the expected future development and expansion in the nature energy field. DEGREE OF COMPLIANCE WITH CODES The Hong Kong GEM Corporate Governance Code (CG Code) is a non-statutory document issued under the Rules Governing the Listing of Securities, which only apply to companies listed on the Stock Exchange of Hong Kong (Mok 2014). …show more content…
The CG Code sets out the principles of good corporate governance and two levels of recommendations that are code provisions and recommended best practices, for companies to voluntarily regulate themselves with a relatively high degree of flexibility. This report focuses on section E: Communication with shareholders. E.1 Effective communication The board of directors should maintain an on-going dialogue with shareholders in the way of annual general meetings or other general meetings to facilitate effective communication and encourage shareholders to get involved in the company (CG Code E.1 p. 18). China Primary has put the communication with shareholders in a prior position and attached it with great emphasis, to guarantee high standards of disclosure and financial transparency for shareholders, through reports and announcement (China Primary 2015, p. 38). The first provision under this section suggests the chairman of the board to propose a separate resolution for each separate issue and to avoid packing resolutions together (CG Code E.1.1). According to its annual corporate governance report (China Primary 2011, 2012, 2013, 2014, 2015), ‘separate resolutions are opposed at shareholders’ meetings on each substantial issue’ as safeguard to protect shareholders’ interest and rights. And it is also obvious in its many …show more content…
And it is also mentioned in the corporate governance report that the chairman should be able to answer questions of shareholders in all general meetings (CG Code E.1.2 p. 37). Besides, there is a blank form online for members to fill if they cannot attend the meeting and need to find proxy. Referring to the Directors’ Attendance Record at Meetings, Ms. Ma Zheng, the chairman of the board, and Mr. Wan Tze Fan Terence, the committee chairman, did attend the general meeting held in 2012 and 2013 (China Primary 2012, 2013). However, they did not attend the general meeting during the year ended 31 December 2014 and 2015 (China Primary 2014, 2015) as required in the provision, which does not comply with the
The objective of this report is to examine the effectiveness of board of directors of China Primary Energy Holding Limited in terms of the communication and other forms of engagement with shareholders. The following passage will discuss the topic above in three main areas that are the degree of compliance with Hong Kong GEM Corporate Governance codes, the impact of ownership structure on company’s performance and the effectiveness of communication with shareholders.
BACKGROUND INFORMATION
China Primary Energy Holding Limited (China Primary) is an investment holding company, engaging in the manufacture and sale of polyethylene (PE) pipes as well as trading of composite materials. It is listed on Growth Enterprise Market of the Stock Exchange of Hong Kong Limited (GEM) since 13 December 2001 (HKEXnews 2016a). The major business activity has shifted to the transmission and distribution of nature gas since 2014, as a result of the policy announced by the People’s Republic of China (PRC) government to encourage the use of clean energy (China Primary 2015). The China Primary Group acquired two target companies doing natural gas business, indicating the expected future development and expansion in the nature energy field. DEGREE OF COMPLIANCE WITH CODES The Hong Kong GEM Corporate Governance Code (CG Code) is a non-statutory document issued under the Rules Governing the Listing of Securities, which only apply to companies listed on the Stock Exchange of Hong Kong (Mok 2014). …show more content…
The CG Code sets out the principles of good corporate governance and two levels of recommendations that are code provisions and recommended best practices, for companies to voluntarily regulate themselves with a relatively high degree of flexibility. This report focuses on section E: Communication with shareholders. E.1 Effective communication The board of directors should maintain an on-going dialogue with shareholders in the way of annual general meetings or other general meetings to facilitate effective communication and encourage shareholders to get involved in the company (CG Code E.1 p. 18). China Primary has put the communication with shareholders in a prior position and attached it with great emphasis, to guarantee high standards of disclosure and financial transparency for shareholders, through reports and announcement (China Primary 2015, p. 38). The first provision under this section suggests the chairman of the board to propose a separate resolution for each separate issue and to avoid packing resolutions together (CG Code E.1.1). According to its annual corporate governance report (China Primary 2011, 2012, 2013, 2014, 2015), ‘separate resolutions are opposed at shareholders’ meetings on each substantial issue’ as safeguard to protect shareholders’ interest and rights. And it is also obvious in its many …show more content…
And it is also mentioned in the corporate governance report that the chairman should be able to answer questions of shareholders in all general meetings (CG Code E.1.2 p. 37). Besides, there is a blank form online for members to fill if they cannot attend the meeting and need to find proxy. Referring to the Directors’ Attendance Record at Meetings, Ms. Ma Zheng, the chairman of the board, and Mr. Wan Tze Fan Terence, the committee chairman, did attend the general meeting held in 2012 and 2013 (China Primary 2012, 2013). However, they did not attend the general meeting during the year ended 31 December 2014 and 2015 (China Primary 2014, 2015) as required in the provision, which does not comply with the