The Securities and Futures Commission (the SFC) and the Stock Exchange of Hong Kong launched a joint consultation on 3 December 2010 on proposed changes to the requirements for property valuation disclosure in prospectuses and circulars for issuers and listing applicants.
The objectives behind the proposals are to remove an unnecessary burden on listed corporates, and to require meaningful disclosure to enhance the quality of information provided to investors.
Under current regulations, the Companies Ordinance requires a company to include in its prospectus a valuation report for all its interests in land or buildings if those, as shown in the company’s last accounts, exceed 10% of its assets or have a value of not less than HK$3 million. Further, the Listing Rules state that an applicant must include valuations of, and information on, all its interests in land or buildings in its listing document.
In practice, in the case of IPOs, the proposals would no longer require issuers to conduct a valuation and disclose valuation information if the carrying amount of a property is below 1% of the issuer’s total assets. The total carrying amount of property not requiring valuation will be capped to 10% of an issuer’s total assets. It is also proposed to allow summary disclosure of valuation reports if the market value of a property is below 5% of an issuer’s total property interests that are required to be valued.
The detailed valuation reports will still be required to be made available for public inspection, and an overview of property not covered by a valuation report to be included in the circular.
Should they receive a favourable response from market participants, these proposals should result in more streamlined disclosure documents.