The Company endeavours in maintaining a high standard of corporate governance for the enhancement of shareholders’ value and providing transparency, accountability and independence. The Company has fully complied with the required code provisions set out in the Corporate Governance Code and Corporate Governance Report (the “Code”) contained in Appendix 14 to the Listing Rules for the year ended 31 March 2019 with the following exception:
Mr. Tsang Hing Bun (“Mr. Tsang”) was appointed as company secretary of the Company (the “Company Secretary”) with effect from 25 January 2019. Although Mr. Tsang is not an employee of the Company as required under code provision F.1.1 of the Code, the Company has assigned Ms. Kwok Yin Ning, the executive director, as the contact person with Mr. Tsang. Information in relation to the performance, financial position and other major developments and affairs of the Group are speedily delivered to Mr. Tsang through the contact person assigned. Hence, all directors are still considered to have access to the advice and services of the Company Secretary in light of the above arrangement in accordance with code provision F.1.4 of the Code. Having in place a mechanism that Mr. Tsang will get hold of the Group’s development promptly without material delay and with his expertise and experience, the Board is confident that having Mr. Tsang as the Company Secretary is beneficial to the Group’s compliance with the relevant board procedures, applicable laws, rules and regulations. For the year ended 31 March 2019, Mr. Tsang has duly complied with the relevant professional training requirement under Rule 3.29 of the Listing Rules.
Compliance with the Model Code for Securities Transactions by Directors
The Group adopted the code of conduct for securities transactions by Directors (“Securities Dealings Code”) on terms no less exacting than that set out in Appendix 10 of the Listing Rules. Upon the Group’s specific enquiry, all Directors confirmed that during the year ended 31 March 2019, they had fully complied with the Securities Dealings Code.
Board of Directors
The composition of the Board reflects the necessary balance of skills and experience desirable for effective leadership of the Company and independence in decision making.
The Board comprises two executive Directors and three independent non-executive Directors and is accountable to shareholders. The powers and duties of management and control of the business of the Company are generally vested in its Board. It is the duty of the Board to enhance value of the Company to the shareholders. The composition of the Board and biographies of the Directors are set out on pages 10 to 11 of this annual report.
The two executive Directors are responsible for the leadership and control of the Company, overseeing the Group’s businesses, strategic decisions and performances and are collectively responsible for promoting the success of the Company by directing and supervising its affairs.
The three independent non-executive Directors are responsible for ensuring a high standard of financial and other mandatory reporting of the Board as well as providing adequate checks and balances in the Board in order to protect shareholders’ interest and overall interest of the Group.
Each independent non-executive Director has given the Company an annual confirmation of independence pursuant to Rule 3.13 of the Listing Rules. The Company considers that all the independent non-executive Directors are independent and meet the independent guidelines set out in Rule 3.13 of the Listing Rules. Throughout the year ended 31 March 2019, the Board at all times met the requirements of the Listing Rules relating to the appointment of at least three independent non-executive Directors with at least one of them possessing appropriate professional qualifications on accounting or related financial management expertise. The number of independent non-executive Directors has represented at least one-third of the Board.
Roles of Chairman and Chief Executive Officer
The positions of the Chairman and the Chief Executive Officer are held by Mr. Wong Chun Chau and Ms. Kwok Yin Ning respectively. This ensures a clear distinction between the Chairman’s duty to manage the Board and the Chief Executive Officer’s duty to oversee the overall internal operation of the Group.
Division of Responsibilities of the Board and Management
The following types of matters are reserved for the Board’s approval:
- corporate and capital structure;
- corporate strategy;
- policies (including but not limited to those relating to corporate governance);
- business and management;
- key financial matters;
- appointment of Board members, senior management and auditor;
- remuneration of directors and senior management; and
- communication with shareholders and the Stock Exchange.
The matters delegated by the Board to the management’s decision include:
- approval of extension of the Group’s activities not in a material manner into a new geographical location or a new business;
- approval of expenses up to a certain limit;
- approval of connected transactions not requiring disclosure under the Listing Rules;
- approval of the nomination and appointment of personnels other than the members of the Board and senior management;
- approval of press release concerning matters decided by the Board;
- approval of any matters related to routine matters or day-to-day operation of the Group; and
- matters further delegated by the Board from time to time.
Appointment, Re-election and Removal
Under article 84 of the Company’s Article of Association, at each annual general meeting, not less than one third of the Directors for the time being shall retire from office by rotation provided that every Director shall be subject to retirement at an annual general meeting at least once every three years. The Directors to retire by rotation shall include any Director who wishes to retire and not to offer himself for re-election. Any further Directors who have been longest in office since their last re-election or appointment shall also retire by rotation.
Under code provision A.4.1 of the Code, non-executive Directors should be appointed for a specific term, subject to re-election. The term of appointment for each of the independent non-executive Directors appointed by the Company is three years, subject to re-election and other requirements under the Company’s Articles of Association, the Code and the respective letter of appointments.
Number of Meetings and Directors’ Attendance
Regular Board meetings should be held at least four times a year at approximately quarterly intervals for reviewing and approving the financial and operating performance, and considering and approving the overall strategies and policies of the Company.
During the year ended 31 March 2019, the Board held 4 regular Board meetings and 1 additional meeting. The Company held the annual general meeting on 6 August 2018 for the year ended 31 March 2018. The table below sets out the individual attendance record of each Director at the Board meetings and general meeting during the year:
Attendance/Number of meetings
|Name of Directors||Regular Board meetings||Additional Board meeting||General meetings|
|Mr. Wong Chun Chau (Chairman)||4/4||1/1||1/2|
|Ms. Kwok Yin Ning||4/4||1/1||2/2|
|Independent Non-executive Directors
|Ms. Mak Yun Chu||4/4||1/1||2/2|
|Mr. Hung Wai Che||4/4||1/1||2/2|
|Mr. Tang Tat Chi (retired on 16 August 2019)||4/4||0/1||0/2|
The company secretary attended all the scheduled Board meetings to report matters relating to corporate governance, risk management, statutory compliance, accounting and finance.
Under code provision A.6.7 of the Code, independent non-executive Directors and other non-executive Directors should attend general meetings and develop a balanced understanding of the views of the shareholders.
Practice and Conduct of Meetings
Code provision A.1.3 stipulates that at least 14 days’ notice should be given for a regular Board meeting. For other Board and committee meetings, reasonable notices are generally given. Schedules, notices and draft agenda of each meeting are normally made available to Directors in advance in accordance with code provision A.1.3.
Board papers together with all appropriate, complete and reliable information are sent to all Directors at least 3 days before each Board meeting or audit committee meeting to keep the Directors abreast of the latest developments and financial position of the Group and to enable them to make informed decisions. All Directors are given an opportunity to include matters in the agenda for regular Board meetings. The Board and each Director also have separate and independent access to the senior management whenever necessary. With the support of the senior management, the Chairman is ensuring that the Directors receive adequate, complete and reliable information in a timely manner and appropriate briefing on issues arising at Board meetings.
Minutes of all Board meetings recording sufficient details of matters considered and decisions reached are duly kept by the company secretary and opened for inspection by the Directors.
Article 100 of the Company’s Articles of Association requires Directors to abstain from voting and not to be counted in the quorum at meetings for approving transactions in which such Directors or any of their associates have a material interest.
Training and continuing development of Directors
Each Director should participate in continuous professional development to develop and refresh their skills to ensure that he/she has appropriate understanding of the business and operations of the Group and that he/ she is sufficiently aware of his/her responsibilities and obligations under the Listing Rules and relevant regulatory requirements.
The Directors are continually updated with legal and regulatory developments, and the business and market changes to facilitate the discharge of their responsibilities. Continuing briefings and professional development for Directors will be arranged where necessary.
The Company has also from time to time provided the Directors with continuous update on the latest development regarding the Listing Rules and other regulatory requirements, to ensure compliance and enhance their awareness of good corporate governance practices.
All Directors have participated in appropriate continuous professional development and refresh their knowledge and skills during the year. Such professional development was completed either by way of attending briefings, conference, forum, courses and seminars and self-reading which are relevant to the business or directors’ duties.
The Board has set up three Board committees, namely the audit committee, the remuneration committee and the nomination committee, to oversee particular aspects of the Group’s affairs.
The committees are provided with sufficient resources to discharge their duties and, upon reasonable request, are able to seek independent professional advice in appropriate circumstances at the Company’s expenses.
The Company established an audit committee (the “Audit Committee”) on 1 August 2012 which comprises all three independent non-executive Directors. The current members are Ms. Mak Yun Chu (Chairperson), Mr. Leung Siu Kee and Mr. Hung Wai Che.
The Audit Committee is governed by its written terms of reference in compliance with code provision C.3.3 of the Code. Among other things, the primary duties of the Audit Committee are to review and supervise the financial reporting process and internal control system of the Group. During the year, the committee met its responsibilities in reviewing the interim and annual results for the year with the professional accounting firm engaged by the Group, which conducted regular internal audits and report to the committee.
During the year, two committee meetings were held with all the then committees members present (i.e., Ms. Mak Yun Chu, Mr. Tang Tat Chi and Mr. Hung Wai Che) and the Board has taken no different view in respect of the Audit Committee’s recommended reappointment.
The Company established a remuneration committee (the “Remuneration Committee”) on 1 August 2012 which comprises three independent non-executive Directors. The current members are Mr. Hung Wai Che (Chairperson), Ms. Mak Yun Chu and Mr. Leung Siu Kee.
The Remuneration Committee is governed by its terms of reference in compliance with code provision B.1.2 of the Code. The primary duties of the Remuneration Committee include the following:
- making recommendations to the Board on the Company’s policy and structure for all Directors’ and senior management remuneration and on the establishment of a formal and transparent procedure for developing remuneration policy;
- reviewing and approving the management’s remuneration proposals with reference to the Board’s corporate goals and objectives; and
- evaluating the performance and exercising the delegated power of the Board to determine the remuneration packages of all executive Directors and senior management.
During the year ended 31 March 2019, the Remuneration Committee met once with presence of all the eligible members for the time being (i.e. Mr. Hung Wai Che, Ms. Mak Yun Chu and Mr. Tang Tat Chi) and reviewed, determined and made recommendation (as the case may be) on the remuneration package of Directors of the Group.
The Company established a nomination committee (the “Nomination Committee”) on 1 August 2012 which comprises all three independent non-executive Directors and one executive Director. The current members are Mr. Leung Siu Kee (Chairperson), Mr. Hung Wai Che, Ms. Mak Yun Chu and Mr. Wong Chun Chau.
The Nomination Committee is governed by its terms of reference in compliance with code provision A.4.5 of the Code as set out in Appendix 14 to the Listing Rules. The primary duties of the Nomination Committee include:
- reviewing the structure, size and diversity of the Board at least annually and making recommendations on any proposed changes to the Board to complement the issuer’s corporate strategy;
- nominating potential candidates for directorship;
- reviewing the nomination of directors and making recommendations to the Board on terms of such appointment; and
- assessing the independence of independent non-executive Directors.
The Company has adopted the Board Diversity Policy which sets out its approach to achieve and maintain diversity on the Board in order to enhance the effectiveness of the Board. The Company recognises the benefits of Board diversity and endeavours to ensure that the Board has the appropriate balance and level of skills, experience and perspectives required to support the execution of its business strategies. The Company seeks to achieve Board diversity through the consideration of a number of factors, including but not limited to gender, age, cultural and educational background, ethnicity, professional experience, skills, knowledge and length of service. The Company will also take into consideration factors based on its own business model and specific needs from time to time in determining the optimum composition of the Board. The Board has set measurable objectives (in terms of gender, skills and experience) to implement the Board Diversity Policy and review such objectives from time to time to ensure their appropriateness and ascertain the progress made towards achieving those objectives.
The Nomination Committee will review the Board Diversity Policy, as appropriate, to ensure its continued effectiveness from time to time.
The Nomination Committee considers that the current composition of the Board is characterised by diversity after taking into account its own business model and specific needs, whether considered in terms of professional background and skills.
During the year ended 31 March 2019, the Nomination Committee met once with the presence of all members for the time being (i.e. Mr. Tang Tat Chi, Mr. Hung Wai Che, Ms. Mak Yun Chu and Mr. Wong Chun Chau) and (i) reviewed and discussed the structure, size and diversity of the Board to ensure that it has a balance of expertise, skills and experience appropriate to the requirements for the business of the Group and (ii) recommended on the re-election of the retiring Directors.
Directors and Officers Insurance
Appropriate insurance covering on directors’ and officers’ liabilities has been in force to protect the Directors and officers of the Group from their risk exposure arising from the business of the Group.
Directors’ and Auditor’s Responsibilities in Respect of the Consolidated Financial Statements
The Board is responsible for presenting a balanced, clear and understandable assessment of annual and interim reports, other inside information announcements and other financial disclosures required under the Listing Rules and other statutory requirements.
The Directors acknowledge their responsibilities for the preparation of the accounts which give a true and fair view of the financial position of the Group and of its financial performance and cash flows for the year ended 31 March 2019.
The Directors are not aware of any material uncertainties relating to events or conditions that may cast significant doubt upon the Company’s ability to continue as a going concern, therefore the Directors continue to adopt the going concern approach in preparing the consolidated financial statements.
The statement by the auditor of the Company regarding its reporting responsibilities on the consolidated financial statements of the Group is set out in the Independent Auditor’s Report on pages 61 to 68.
The remuneration paid/payable to the auditor of the Group for the year ended 31 March 2019 is set out as follows:
|Services rendered||Paid/payable HK$’000|
|Statutory audit services|
|- HLM CPA Limited||746|
|- Other auditors||452|
Internal Controls and Corporate Governance Policies
The Board has overall responsibility for monitoring the internal control system and corporate governance of the Company. The Board has developed its systems of internal control and risk management and is also responsible for reviewing and maintaining an adequate internal control system and developed and reviewed the corporate governance policies at least once a year to safeguard the interests of the shareholders and the assets of the Company and ensure compliance with legal and regulatory requirements by the Group. During the year, the Board has conducted a review of the effectiveness of the internal control system of the Company and reviewed the corporate governance policy documents and terms of reference of Board committees of the Company and the compliance with the legal and regulatory requirements, including the Code.
Internal Audit And Risk Management
During the Financial Year, the Group has complied with code provision C.2 of the Code by establishing appropriate and effective risk management and internal control systems. Management is responsible for the design, implementation and monitoring of such systems, while the Board oversees management in performing its duties on an ongoing basis and an internal audit on the internal control and risk management systems performed on an annual basis. Main features of the risk management and internal control systems are described as follows:
Risk Management System
The Group has adopted a risk management system which manages the risk associated with its business and operations. The system comprises the following phases:
- Identification: identify ownership of risks, business objectives and risks that could affect the achievement of objectives.
- Evaluation: analyze the likelihood and impact of risks and evaluate the risk portfolio accordingly.
- Management: consider the risk responses, ensure effective communication to the
Board and on-going monitor the residual risks. Based on the risk assessments conducted for the financial year, no significant risk was identified.
Communication with Shareholders
The Company endeavours to maintain an on-going dialogue with the shareholders and in particular to communicate with the shareholders through annual general meetings or other general meetings and encourage their participation.
The Company will ensure that there are separate resolutions for separate issues proposed at the general meetings.
The Company will continue to maintain an open and effective investor communication policy and to update investors on relevant information on the Group’s business in a timely manner, subject to relevant regulatory requirements.
Convening an extraordinary general meeting
Pursuant to article 58 of the Company’s Articles of Association, extraordinary general meetings of the Company (the “EGM”) shall be convened on the requisition of any one or more shareholders holding, at the date of deposit of the requisition, not less than one-tenth of the paid up capital of the Company carrying the right of voting at general meetings of the Company. Such shareholders shall have the right, by written requisition to the Board or the company secretary of the Company, to require an EGM to be called by the Board for the transaction of any business specified in such requisition; and the EGM shall be held within two months after the deposit of such requisition. If within twenty-one days of such deposit the Board fails to proceed to convene such meeting, the requisitionist(s) himself (themselves) may do so in the same manner, and all reasonable expenses incurred by the requisitionist(s) as a result of the failure of the Board shall be reimbursed to the requisitionist(s) by the Company
Putting enquiries to the Board
To ensure effective communication between the Board and the shareholders, the Company has adopted a shareholders’ communication policy (the “Policy”). Under the Policy, the Company’s information shall be communicated to the shareholders mainly through general meetings, including annual general meetings (AGM), the Company’s financial reports (annual, interim and (if any) quarterly reports), and its corporate communications and other corporate publications on the Company’s website and the Stock Exchange’s website. Shareholders may at any time make a request for the Company’s information to the extent that such information is publicly available. Any such questions shall be first directed to Mr. Wong Chun Chau, the Chairman of the Board at the Company’s principal place of business in Hong Kong by post at 902, 9th Floor, Harbour Centre, Tower 2, 8 Hok Cheung Street, Hunghom, Kowloon, Hong Kong or by email to email@example.com. Shareholders may also directly raise questions during the shareholders’ meetings.
Putting forward proposals at Shareholders’ meeting
The number of shareholders necessary for putting forward a proposal at a shareholders’ meeting shall be any number of shareholders representing not less than one-tenth of the paid up capital of the Company carrying the right of voting at general meetings at the date of the request. The request to put forward a proposal must be made to the attention of the Company Secretary within 30 days from the date of the relevant shareholders’ meeting.
The Company believes that maintaining a high level of transparency is a key to enhance investor relations. It is committed to a policy of open and timely disclosure of corporate information to its shareholders and investment public. The Company updates its shareholders on its latest business developments and financial performance through its annual, interim and (if any) quarterly reports. The corporate website of the Company (www.kkgroup.com.hk) has provided an effective communication platform to the public and the shareholders.
During the year, there had been no significant change in the Company’s constitutional documents.
The company is committed to sharing the results with shareholders while striking a balance of continuous development of its business. Given the current financial condition, the possible financial resources needed for business development, the company does not expect to distribute any dividend in the near term since it intends to reserve capital for business development.