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The Company is committed to maintaining a high standard of corporate governance practices. The Board considers shareholders can maximise their benefits from good corporate governance.
Corporate Governance Principles and the Company’s Practices
A.1. Board of Directors
An issuer should be headed by an effective board which should assume responsibility for leadership and control of the issuer and be collectively responsible for promoting the success of the issuer by directing and supervising the issuer’s affairs. Directors should take decisions objectively in the interests of the issuer.
Regular Board meetings are held at quarterly intervals. In addition, special Board meetings will be held when necessary. Attendance of individual Directors at shareholders’ meetings and board meetings in 2015 are as follows:
|Shareholders' Meeting||Board Meeting|
|Number of meetings||1||4|
|Mr. Ngan Hei Keung||(Chairman)||1/1||4/4|
|Madam Ngan Po Ling, Pauline, BBS, JP||(Deputy Chairman and Managing Director)）||1/1||3/4|
|Mr. James S. Patterson||0/1||1/4|
|Ms. Maggie Gu||(Chief Operating Officer)||1/1||4/4|
|Mr. Ngan Siu Hon, Alexander||(appointed on 21 December 2015)||0/0||0/0|
|Mr. Andrew Ngan||1/1||3/4|
|Independent Non-executive Directors|
|Mr. Leung Shu Yin, William||1/1||4/4|
|Mr. Liu Tieh Ching, Brandon, JP||0/1||4/4|
|Mr. Gordon Ng||0/1||3/4|
Directors are consulted to include matters in the agenda for regular Board meetings.
Dates of regular Board meetings are scheduled at least 14 days in advance to provide sufficient notice to give all Directors an opportunity to attend. For all other Board meetings, reasonable notice will be given.
Directors have access to the advice and services of the Company Secretary to ensure that Board procedures, and all applicable rules and regulations, are followed.
Minutes of the Board, the Audit Committee and the Remuneration Committee are kept by the Company Secretary. Minutes are open for inspection at any reasonable time on reasonable notice by any Director.
Minutes of the Board and Board Committees have recorded in sufficient detail the matters considered by the Board and the Committees, decisions reached, including any concerns raised by Directors or dissenting views expressed. Draft and final versions of minutes of the Board are sent to all Directors for their comments and records respectively.
The Board shall resolve to provide separate independent professional advice to Directors to assist Directors to discharge their duties at the Company’s expense.
A.2. Chairman and Chief Executive Officer
There are two key aspects of the management of every issuer – the management of the board and the day-to-day management of the issuer’s business. There should be a clear division of these responsibilities at the board level to ensure a balance of power and authority, so that power is not concentrated in any one individual.
Code Provision A.2.1 stipulates that the roles of chairman and chief executive officer should be separate and should not be performed by the same individual.
Mr. Ngan Hei Keung is the Chairman of the Company. Mr. Ngan oversees the management of the manufacturing facilities of the Group and also provides leadership for the Board. He ensures that the Board works effectively and discharges its responsibilities, and that all key and appropriate issues are discussed by the Board in a timely manner. Mr. Ngan is also responsible to ensure that all directors are properly briefed on issues arising at board meetings and that all directors receive adequate information, which must be complete and reliable, in a timely manner. Mr. Ngan is the husband of Madam Ngan Po Ling, Pauline, BBS, JP
Madam Ngan Po Ling, Pauline, BBS, JP is the Deputy Chairman and Managing Director of the Company. She is responsible for the marketing activities of the Group’s Manufacturing Business. Madam Ngan is the wife of Mr. Ngan Hei Keung.
The Board considers that there is adequate segregation of duties within the Board to ensure a balance of power and authority.
A.3. Board Composition
The board should have a balance of skills and experience appropriate for the requirements of the business of the issuer. The board should ensure that changes to its composition can be managed without undue disruption. The board should include a balanced composition of executive and non-executive directors (including independent non-executive directors) so that there is a strong independent element on the board, which can effectively exercise independent judgement. Non-executive directors should be of sufficient calibre and number for their views to carry weight.
The Board comprises five Executive Directors, namely Mr. Ngan Hei Keung, Madam Ngan Po Ling, Pauline, BBS, JP Mr. James S. Patterson, Ms. Maggie Gu and Mr. Ngan Siu Hon, Alexander; one Non-executive Director, Mr. Andrew Ngan, and three Independent Non-executive Directors, namely Mr. Leung Shu Yin, William, Mr. Liu Tieh Ching, Brandon, JP and Mr. Gordon Ng. All Directors are expressly identified by categories of Executive Directors, Non-executive Director and Independent Non-executive Directors, in all corporate communications that disclose the names of Directors of the Company.
The Company has complied with Rules 3.10(1) and 3.10(2) of the Listing Rules in relation to the appointment of a sufficient number of independent non-executive directors and an independent non-executive director with appropriate professional qualifications, or accounting or related financial management expertise.
According to Appendix 14 to the Listing Rules, it is recommended that serving more than nine years could be relevant to the determination of a non-executive director’s independence. If an independent non-executive director serves more than nine years, any further appointment of such independent non-executive director should be subject to a separate resolution to be approved by shareholders.
Mr. Leung Shu Yin, William and Mr. Liu Tieh Ching, Brandon, JP have been appointed as independent non-executive directors for more than nine years. The Company has received from Mr. Leung and Mr. Liu confirmations of independence according to Rule 3.13 of the Listing Rules. Mr. Leung and Mr. Liu have not engaged in any executive management of the Group. Taking into consideration of their independent scope of work in the past years, the Directors consider Mr. Leung and Mr. Liu to be independent under the Listing Rules despite the fact that they have served the Company for more than nine year. The Board believes that Mr. Leung’s and Mr. Liu's continued tenure brings considerable stability to the Board and the Board has benefited greatly from the contribution of Mr. Leung and Mr. Liu in relation to their extensive experience in accounting and finance fields, and commercial business field respectively.
Biographies which include relationships of Directors are set out in pages 12 to 15 of the annual report, which demonstrate a diversity of skills, expertise, experience and qualifications among members of the Board.
All Directors attended Corporate Governance training course organised by the Company’s legal advisers, or read the materials provided by the Company’s legal advisers or auditors during the year under review.
The Chairman has held one meeting with all the Independent Non-executive Directors without the presence of other executive Directors to discuss of the Company’s business during the year under review.
A.4. Appointments, Re-election and Removal of Directors – Nomination Committee
There should be a formal, considered and transparent procedure for the appointment of new directors to the board. There should be plans in place for orderly succession for appointments to the board. All directors should be subject to re-election at regular intervals. An issuer must explain the reasons for the resignation or removal of any director.
Code Provision A.4.1 stipulates that non-executive directors should be appointed for a specific term, subject to re-election.
According to the Company’s bye-law No. 87, at each annual general meeting, one-third of the Directors for the time being (or, if the member is not three or a multiple of three, then the number nearest to but not greater than one-third) shall retire from office by rotation provided that every Director (including those appointed for a specific term, the Chairman of the Board and Managing Director of the Company) shall be subject to retirement by rotation or at least once every three years.
All Directors of the Company have a specific term of appointment and all the Non-executive Director and Independent Non-executive Directors of the Company are subject to retirement by rotation and re-election in accordance with the Company’s bye-law No. 87.
All Directors appointed to fill a casual vacancy or as an addition are subject to election by shareholders at the first general meeting after their appointment.
The nomination committee was formed in March 2012 with specific written terms of reference in compliance with the Code. This Committee is chaired by Mr. Liu Tieh Ching, Brandon JP. The other members are Mr. Ngan Hei Keung, Mr. Leung Shu Yin, William, Mr. Gordon Ng and Mr. Ngan Siu Hon, Alexander (appointed on 21 December 2015). During the year of 2015, two nomination committee meetings were held, which were attended by all members of the Committee.
A proposal for the appointment of a new Director will be considered and reviewed by the Board. All candidates must be able to meet the standards as set forth in Rules 3.08 and 3.09 of the Listing Rules. A candidate who is to be appointed as an Independent Non-executive Director should also meet the independence criteria set out in Rule 3.13 of the Listing Rules.
A.5. Responsibilities of Directors
Every director is required to keep abreast of the responsibilities as a director of an issuer and of the conduct, business activities and development of that issuer. Given the essential unitary nature of the board, non-executive directors have the same duties of care and skill and fiduciary duties as executive directors.
Every newly appointed director of the Company is ensured to have a proper understanding of the operations and business of the Group and that he is fully aware of his responsibilities under statue and common law, the Listing Rules, applicable legal and regulatory requirements and the business governance policies of the Group. The Directors are continually updated with legal and regulatory developments, business and strategic development of the Group to enable the discharge of their responsibilities.
All Independent Non-executive Directors take an active role in board meetings to bring in independent judgement to bear on issues of strategy, policy, performance, accountability, resources, key appointments and standards of conducts. They scrutinise the Company’s performance in achieving agreed corporate goals and objectives, and monitor the reporting of performance. They also take the lead where potential conflicts of interests arise and serve the audit and remuneration committees.
Every Director is aware that he/she should give sufficient time and attention to the affairs of the Company.
The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules. All Directors have confirmed, following enquiry by the Company, that they have complied with the required standard set out in Model Code throughout the year ended 31 December 2015.
A.6. Supply of and Access to Information
Directors should be provided in a timely manner with appropriate information in such form and of such quality as will enable them to make an informed decision and to discharge their duties and responsibilities as directors of an issuer
In respect of regular Board meetings, and so far as practicable in all other cases, an agenda and accompanying board papers are sent in full to all Directors in a timely manner and at least 3 days before the intended date of a Board or Board Committee meeting.
Management are regularly reminded by the Company Secretary that they have an obligation to supply the Board and its Committees with adequate information in a timely manner to enable it to make informed decisions. The information supplied must be complete and reliable. The Board and each Director shall have separate and independent access to the Company’s senior management.
All Directors are entitled to have access to Board papers, minutes and related materials. Where queries are raised by Directors, steps are taken to respond as promptly and fully as possible.
B. Remuneration of directors and senior management
B.1. The Level and Make-up of Remuneration and Disclosure
An issuer should disclose information relating to its directors’ remuneration policy and other remuneration related matters. There should be a formal and transparent procedure for setting policy on executive directors’ remuneration and for fixing the remuneration packages for all directors. Levels of remuneration should be sufficient to attract and retain the directors needed to run the company successfully, but companies should avoid paying more than necessary for this purpose. No director should be involved in deciding his own remuneration.
The Company has established a Remuneration Committee with specific written terms of reference as set out in Code Provisions B.1.3 (a) to (f) of the Code. The Remuneration Committee is responsible for making recommendations to the Board regarding the Company’s remuneration policy, and for the formulation and review of the specific remuneration packages of all Executive Directors and senior executives of the Group.
A majority of the members of the Remuneration Committee are Independent Non-executive Directors. This Committee was chaired by Mr. Gordon Ng. The other members were Madam Ngan Po Ling, Pauline, BBS, JP, Mr. Leung Shu Yin, William, Mr. Liu Tieh Ching, Brandon, JP and Mr. Ngan Siu Hon, Alexander (appointed on 21 December 2015).
The meeting of the Committee is held at least once a year or when necessary. The Remuneration Committee held one meeting in 2015, which was attended by all members of the Committee. The Committee had considered the following proposals for the remuneration of Directors and senior management and made recommendation to the Board:
1. Annual salary review policy;
2. Offer of share options as part of the long term incentive schemes; and
3. Performance related bonus.
The Group ensures that the pay levels of its employees, including Directors and senior management, are competitive and employees are remunerated based on their positions and performance. Key employees of the Group are also granted share options under the share option schemes operated by the Company.
Details of the amount of Directors’ emoluments for 2015 are set out in note 35 to the financial statements. Details of the share option schemes of the Company are set out in the Report of the Director and note 35 to the financial statements.
The remuneration of senior management whose names appear in the “Biographical Details of Directors and Senior Management” section are within the following bands:
|HK$500,001 – HK$1,000,000||4||2|
|HK$1,000,001 – HK$1,500,000||-||-|
|HK$1,500,001 – HK$2,000,000||3||3|
|HK$2,000,001 – HK$3,000,000||1||1|
|HK$3,000,001 – HK$3,500,000||-||-|
|HK$3,500,001 – HK$4,000,000||-||-|
|HK$4,000,001 – HK$4,500,000||1||1|
The Remuneration Committee is provided with sufficient resources, including access to professional advice, to discharge its duties if considered necessary.
C. Accountability and audit
C.1. Financial Reporting
The board should present a balanced, clear and comprehensible assessment of the company’s performance, position and prospects.
Management has provided such explanation and information to the Board as would enable the Board to make an informed assessment of the financial and other information put before the Board for approval.
The Directors acknowledge their responsibility to keep proper accounting records and prepare financial statements of each financial period, which shall give a true and fair view of the state of affairs of the Group and of the results and cash flow for that period. In preparing the financial statements for the year ended 31 December 2015, the Directors have made judgements and estimates that are prudent and reasonable and prepared the financial statements on a going concern basis.
A statement by the auditor about his reporting responsibilities is included in the Independent Auditor’s Report on pages 39 to 40 of the annual report for the year ended 31 December 2015.
The Board’s responsibility to present a balanced, clear and understandable assessment extends to annual and interim reports, other price-sensitive announcements and other financial disclosures required under the Listing Rules, and reports to regulators as well as information required to be disclosed pursuant to statutory requirements.
C.2. Internal Controls
The board should ensure that the issuer maintains sound and effective internal controls to safeguard the shareholders’ investment and the issuer’s assets.。
The Board is responsible for the Group’s system of internal controls and for reviewing its effectiveness through the Audit Committee. The Board requires management to establish and maintain sound and effective internal controls. Review of the Group’s internal controls covering financial, operational and compliance controls, and risk management functions on different systems is done on a systematic rotational basis based on the risk assessments of the operations and controls.
C.3. Audit Committee
The board should establish formal and transparent arrangements for considering how it will apply the financial reporting and internal control principles and for maintaining an appropriate relationship with the company’s auditor. The audit committee established by an issuer pursuant to the Listing Rules should have clear terms of reference.
The Company has established an Audit Committee with specific written terms of reference which deal clearly with its authority and duties. The terms of reference of the Audit Committee have included the duties set out in Code Provisions C.3.3 (a) to (n) of the Code, with appropriate modifications where necessary. The Audit Committee has made available its terms of reference, on the website of the Company, explaining its role and the authority delegated to it by the Board.
As set out in the terms of reference, the Audit Committee is responsible for reviewing the financial reporting system and internal control procedures, annual report and financial statements and interim report.
The Audit Committee comprises the one Non-executive Director and three Independent Non-executive Directors of the Company and is chaired by Mr. Leung Shu Yin, William. This Committee held two meetings in 2015 which were attended by all members of the Committee except for Mr. Andrew Ngan who attended one meeting in 2015. All meetings have been attended by the external auditor.
The following is a summary of the work performed by the Audit Committee during the year:
1. Reviewed external auditor management letter and management’s response;
2. Reviewed and recommended to the Board approval of the audit fee proposal for 2015;
3. Considered and recommended to the Board that the shareholders be asked to reappoint the existing auditor as the Company’s external auditor for 2016;
4. Reviewed and approved the Group’s internal audit plan for 2016;
5. Reviewed internal audit reports and brought to the attention of Management on internal control issues;
6. Reviewed the audited financial statements and final results announcement for the year 2014; and
7. Reviewed the Interim Report and the interim results announcement for the six months ended 30 June 2015.
All issues raised by the Committee have been addressed by Management. The work and findings of the Committee have been reported to the Board. During the year, no issues brought to the attention of Management and the Board were of sufficient importance to require disclosure in the Annual Report.
The Board agrees with the Audit Committee’s proposal for the re-appointment of existing auditor as the Company’s external auditor for 2016.
The remuneration of the Group’s external auditor is HK$2,236,000 for audit fees and HK$593,000 for other non-assurance services.
Full minutes of Audit Committee meetings are kept by the Company Secretary. Draft and final versions of minutes of the Audit Committee meetings are sent to all members of the Committee for their comments and records respectively, in both cases within a reasonable time after the meeting.
The Audit Committee does not have a former partner of the Company’s existing audit firm.
The Audit Committee is provided with sufficient resources, including the advice of external auditor, to discharge its duties.
D. Delegation by the Board
D.1. Management Functions
An issuer should have a formal schedule of matters specifically reserved to the board for its decision. The board should give clear directions to management as to the matters that must be approved by the board before decisions are made on behalf of the issuer.
The Board is responsible for formulating overall strategy, monitoring and controlling the performance of the Group whilst managing the Group’s business is the responsibility of Management.
When the Board delegates aspects of its management and administration functions to Management, it has given clear directions as to the powers of Management, in particular, with respect to the circumstances where Management shall report back and obtain prior approval from the Board before making decisions or entering into any commitments on behalf of the Company.
The Company has established schedules of Matters Reserved to the Board for Decision and Matters Delegated to Management. The Board shall review those arrangements on a periodic basis to ensure that they remain appropriate to the needs of the Group.
Matters Reserved to the Board for Decision include:
1. Business plan;
2. Financial statements and budget;
3. Mergers and acquisitions and other substantial investments;
4. Formation of board committees;
5. Appointment and resignation of directors; and
6. Appointment and removal of auditors.
D.2. Board Committees
Board committees should be formed with specific written terms of reference which deal clearly with the committees’ authority and duties.
Apart from Audit Committee (particulars are disclosed under C.3), Remuneration Committee (particulars are disclosed under B.1) and Nomination Committee (particulars are disclosed under A.4), there are no other board committees established by the Board. Where board committees are established to deal with matters, the Board shall prescribe sufficiently clear terms of reference to enable such committees to discharge their functions properly. The terms of reference of board committees shall require such committees to report back to the board on their decisions or recommendations, unless there are legal or regulatory restrictions on their ability to do so.
E. Company Secretary
Ms. Chan Hoi Ying, the Company Secretary of the Company, confirmed that she has taken no less than 15 hours relevant professional training during the financial year.
F. Communication with shareholders
F.1. Effective Communication
The board should endeavour to maintain an on-going dialogue with shareholders and in particular, use annual general meetings or other general meetings to communicate with shareholders and encourage their participation.
At the 2015 Annual General Meeting, a separate resolution was proposed by the Chairman in respect of each separate issue, including the re-election of Directors
The Chairman of the Board and the chairmen of the Audit and Remuneration Committees shall attend the 2016 Annual General Meeting to answer questions of shareholders.
F.2. Procedures for putting forward proposals at general meetings
Any shareholder who wish to put forward proposals at general meetings of the Company shall submit such proposals to the Board in writing for the boards consideration not less than 7 days prior to the date of a general meeting through the Company Secretary.
The Company also published all corporate correspondence on the Company website, www.mainland.com.hk.
F.3. Voting by Poll
The right to demand a poll was set out in the circular to shareholders of the Company dispatched together with the Annual Report. The results of the voting by poll would be published on the websites of the Stock Exchange and the Company respectively.