General Mandate Proposals in Hong Kong: ACGA Report
General mandate proposals are gaining attention as companies seek more flexibility in capital management. However, a report issued by the Asian Corporate Governance Association covers a close-up view of case studies, and potential pitfalls associated with general mandates in the H-share market based on findings last year.
Key takeaways from ACGA:
- Three-quarters of the top 100 by market capitalization sought a general mandate in 2023
- Nearly one in ten mandates were opposed by more than 30% of shareholders
- Some issuers are reducing mandate size after resolutions barely pass
- Shareholders push back hard at China Mengniu Dairy with a resounding 49.8% rejecting the mandate
- One in four issuers only sought a 10% mandate, but the majority of dual-class share stocks seek the full 20%
IROs are coming under pressure in their engagements with shareholders on capital issuance proposals. Pre-emptive rights still being a red line for many institutional investors to safeguard their holdings when voting on such requests. What are companies and shareholders doing together in finding an optimal model that works for all? A starting point should include reviewing past results and circulars for the upcoming shareholder meeting followed by a thorough identification process of investor concerns through a well-crafted outreach plan with their investors. Most institutional investors have set their policies on new issuance of stock. In doing so, issuers will overcome the barriers to unlocking a healthy relationship with shareholders on capital proposals and focus on other pressing topics.
Listing Rules in China: What’s New?
On 12 April 2024, the China Securities Regulatory Commission (CSRC) issued a guideline emphasising strict implementation of delisting regulations on STAR Market and ChiNext companies. The landscape of listing rules in China is undergoing significant changes mainly focused on improving the quality of listings, reflecting broader economic reforms and the drive for greater transparency and strengthening of investor protections. There are several areas it has outlined that will be of focus including regulation surrounding M&A deals, as well as remedies for investor compensation.
- Improve quality of listings is the focus in the A-Share Market: Approximately 30 stocks trading at the Shanghai and Shenzhen bourses are bordering the delisting line which is based on combined financial indicators according to the CSRC’s calculations. Another 100 companies may face delisting risk warnings in 2025.
- Distributions of dividends under the spotlight: A-share issuers may be subject to scrutiny for failing to pay adequate dividends to their shareholders. The regulator expects a 30% payout ratio in the final dividend in terms of cumulative cash over a recent 3-year period. China Daily article highlights that in terms of cash amount, that baseline is a cumulative 50 million yuan for main board listings and 30 million for STAR Market and ChiNext issuers.
- There are reports that Companies have scrambled to scuttle plans for initial public offerings in China this year as the securities watchdog tightens rules on share listings in a bearish market. Forty-seven companies pulled their listing plans from China’s stock exchanges so far this year, compared with 29 withdrawals during the same period one year earlier, data from stock exchanges showed. Read more from the Business Standard.
Companies that fall into the latest guideline will have a period of transition to make improvements until the end of 2025 to comply. The latest update seeks to raise the bar among companies trading on the A-share market.
Shareholder Activism in Japan
Hong Kong investment firm Oasis Management is considering submitting shareholder proposals to Japanese cosmetics giant Kao in 2025 with its 3% shareholding to encourage management to cut underperforming products and boost shareholder returns reported by Nikkei Asia.
This approach not only aims to enhance corporate governance but also to ensure that companies are positioned to deliver sustainable, long-term benefits to all stakeholders. Through detailed analysis and shareholder engagement, Oasis Management exemplifies how disciplined activism can serve as a catalyst for significant change in corporate Asia. It underscores the growing influence of shareholder activists in shaping corporate strategies and governance standards in the region, highlighting a trend that is rapidly evolving amidst the dynamic economic landscape of APAC.
