CORPORATEGOVERNANCEOurCompanywilladoptthefollowingmeasurestomanagethec - PDF document

1 CORPORATEGOVERNANCEOurCompanywilladoptth
CORPORATEGOVERNANCEOurCompanywilladoptthefollowingmeasurestomanagetheconflictofinterestsarisingfromthepossiblecompetingbusinessoftheControllingShareholdersandtosafeguardtheinterestsofour(i)ourindependentnon-executiveDirectorswillreview,onanannualbasis,thecompliancewiththeDeedofNon-competitionbytheControllingShareholders,andthedecisionsonmattersreviewedwillbedisclosedinourannualreports;(ii)anannualdeclarationastofullcompliancewiththetermsoftheDeedofNon-competitionwillbemadebytheControllingShareholders,andwillbedisclosedinourannualreports;(iii)ourDirectorswilloperateinaccordancewithourArticleswhichrequiretheinterestedDirectornottovote(norbecountedinthequorum)onanyresolutionoftheBoardapprovinganycontractorarrangementorotherproposalinwhichheoranyofhisassociatesismateriallyinterested;and(iv)pursuanttotheCorporateGovernanceCode(theCGCodeŽ)setoutinAppendix14oftheListingRules,ourDirectors,includingtheindependentnon-executiveDirectors,willbeabletoseekindependentprofessionaladvicefromexternalpartiesinappropriatecircumstancesatourCompanyscost.WewillfollowthemeasuresintheCGCodewhichsetsouttheprinciplesofgoodcorporategovernanceinrelationto,amongothers,Directors,thechairmanandchiefexecutiveofficer,Boardcomposition,theappointment,re-electionandremovalofDirectors,theirresponsibilitiesandremunerationandcommunicationswithourShareholders.OurCompanywillstateinitsinterimandannualreportswhetherwehavecompliedwiththeCGCode,andwillprovidedetailsof,andreasonsfor,anydeviationsfromitinthecorporategovernancereportwhichwillbeincludedinourannualreport.THISDOCUMENTISINDRAFTFORM,INCOMPLETEANDSUBJECTTOCHANGEANDTHEINFORMATIONMUSTBEREADINCONJUNCTIONWITHTHESECTIONHEADEDWARNINGŽONTHECOVEROFTHISDOCUMENT. RELATIONSHIPWITHOURCONTROLLINGSHAREHOLDERS…252… isintheinterestofourGroupandtheshareholdersofourCompanyasawholetopursuesuchNewOpportunity,includingbutnotlimitedtothenatureoftheNewOpportunityandthedetailsoftheinvestmentoracquisitioncosts(theOfferNoticeŽ)assoonaspracticableaftersuchopportunityarises;(ii)theOfferorwillbeentitledtopursuetheNewOpportunityonlyif(a)ourindependentnon-executiveDirectorshaveservedawrittennoticeontheOfferorandourControllingShareholdersdecliningtheNewOpportunityandconfirmingthattheNewOpportunitywouldnotconstitutecompetitionwiththebusinessofourGroup(theDeclineNoticeŽ),or(b)ourindependentnon-executiveDirectorshavenotservedanoticewithinfifteenbusinessdaysfromourCompanysreceiptoftheOfferNotice;and(iii)ifthereisamaterialchangeinthetermsandconditionsoftheNewOpportunity(oranysubsequentrevisedNewOpportunity)offeredbytheOfferor,ourControllingShareholdersarerequiredto,andshallprocuretheirrespectiveassociateto,referorprocurethereferralofsuchrevisedNewOpportunityinthemannerprovidedforintheimmedi

2 atelyprecedingpoint(i)above,andourindepe
atelyprecedingpoint(i)above,andourindependentnon-executiveDirectorsshallhaveafurtherfifteenbusinessdaysperiodtoprovidearesponsetotheOfferorandourControllingShareholders.WhereourControllingShareholdersand/ortheirrespectiveassociates(otherthanmembersofourGroup)haveacquiredanybusiness,investmentorinterestinanyentityrelatingtotheRestrictedBusinesspursuanttotheimmediatelyprecedingpoint(ii)above,ourrelevantControllingShareholdersand/ortheirrespectiveassociates(otherthanmembersofourGroup)shallprovideuswithpre-emptiveright(thePre-emptiveRightŽ)toacquireanysuchRestrictedBusinessontermsthatarenolessfavourablethanthatofferedtoourControllingShareholdersand/ortheirrespectiveassociates.Whereourindependentnon-executiveDirectorsdecidetowaivethePre-emptiveRightbywayofwrittennotice,ourrelevantControllingShareholdersand/ortheirrespectiveassociates(otherthanmembersofourGroup)mayoffertosellsuchbusiness,investmentorinterestintheRestrictedBusinesstootherthirdpartiesonsuchtermswhicharenomorefavorablethanthosemadeavailabletoourGroup.Fortheabovepurpose,theRelevantPeriodŽmeanstheperiodcommencingfromtheheREDACTED]andshallexpireontheearlierof:(i)thedateonwhichourControllingShareholdersandtheirassociates,individuallyortakenasawhole,ceasetobeourControllingShareholdersforthepurposeoftheListingRules;and(ii)thedateonwhichourSharesceasetobelistedontheHongKongStockExchangeor(ifapplicable)otherstockexchange.TheDeedofNon-competitionisconditionalon(i)theListingCommitteegranting[REDACTEDof,andpermissiontodealin,allourSharesinissueandtobeissuedunderthe[REDACTED]andthetheREDACTED]andourShareswhichmaybeissuedupontheexerciseofthe[REDACTED]andoptionsthathavebeenormaybegrantedundertheShareOptionSchemes,and(ii)theobligationsofthetheREDACTED]underthe[REDACTED]becomingunconditional(including,ifrelevantasaresultofthewaiverofanycondition(s)bythe[REDACTED])andthatthe[REDACTED]notbeingterminatedinaccordancewiththeirtermsorotherwise.THISDOCUMENTISINDRAFTFORM,INCOMPLETEANDSUBJECTTOCHANGEANDTHEINFORMATIONMUSTBEREADINCONJUNCTIONWITHTHESECTIONHEADEDWARNINGŽONTHECOVEROFTHISDOCUMENT. RELATIONSHIPWITHOURCONTROLLINGSHAREHOLDERS…251… DEEDOFNON-COMPETITIONEachofourControllingShareholdershasconfirmedthatnoneofthemnoranyofits/his/hercloseassociatesisengagedin,involvedinorinterestedinanybusiness(otherthanbeingadirectororshareholderofourGroup)which,directlyorindirectly,competesormaycompetewithourbusiness.ToprotectourGroupfromanypotentialcompetition,ourControllingShareholdershavegivenanirrevocablenon-competeundertakinginfavourofourCompany(foritselfandforthebenefitsofitssubsidiaries)pursuanttowhicheachofourControllingShareholdershas,amongothermatters,irrevocablyandunconditionallyundertakentousonajointandseveralbasisthatatanytimeduringtheRe

3 levantPeriod(asdefinedbelow),eachofourCo
levantPeriod(asdefinedbelow),eachofourControllingShareholdersshall,andshallprocurethattheirrespectiveassociatesand/orcompaniescontrolledbythem(otherthanourGroup):(i)not,directlyorindirectly,eitheronitsownaccountorinconjunctionwithoronbehalfof,orthroughanyperson,firmorcompany,amongotherthings,carryon,participateorbeinterested,engagedorotherwiseinvolvedinoracquireorholdanyrightorinterestinorprovideanyfinancialassistance,technicalsupportorbusinessknow-howtoanyotherpersontocarryon(ineachcasewhetherasashareholder,partner,agent,employeeorotherwiseandwhetherforprofit,rewardorotherwise)anyactivityorbusinesswhichcompetesorislikelytocompete,whetherdirectlyorindirectly,withanybusinessofanymembersoftheGroupandanyothernewbusinesswhichtheGroupmayundertakefromtimetotimeafterthe[REDACTED]withinHongKongandsuchotherplacesastheGroupmayconductorcarryonbusinessfromtimetotime(theRestrictedBusiness(ii)toprovideallrelevantinformationrequestedbyourCompanywhichisnecessaryfortheannualreviewbyourindependentnon-executiveDirectorsofitscompliancewithandtheenforcementoftheDeedofNon-competition;(iii)toprocureourCompanytodiscloseonmattersreviewedbyourindependentnon-executiveDirectorsrelatingtothecomplianceandenforcementoftheDeedofNon-competitioneitherthroughourCompanysannualreport,orbywayofannouncement(s)tothepublic;and(iv)tomakeanannualdeclarationinaformdeterminedbyourCompanyonthecompliancewiththetermsoftheDeedofNon-competitioninaccordancewiththeprincipleofvoluntarydisclosureinourCompanyscorporategovernancereportwithintwomonthsafterthedateuponwhichthefinancialperiodofourCompanyends,orifnot,particularsofanynon-compliance,whichdeclaration(oranypartthereof)maybereproduced,incorporated,extractedand/orreferredtoinourCompanysannualreport,corporategovernancereport,itsotherannouncementsorpublications.EachofourControllingShareholdershasunconditionallyandirrevocablyundertakentousthatintheeventthatit/he/sheorits/his/hercloseassociate(s)(otherthananymemberofourGroup)(theOfferorŽ)isgivenorofferedorhasidentifiedanybusinessinvestmentorcommercialopportunitywhichdirectlyorindirectlycompetes,ormayleadtocompetitionwiththeRestrictedBusiness(theŽ),it/he/shewillandwillprocureits/hisassociate(s)(otherthanmembersofourGroup)torefertheNewOpportunitytousinthefollowingmanner:(i)ourControllingShareholdersarerequiredto,andshallprocuretheirrespectiveassociates(otherthanmembersofourGroup)to,refer,ortoprocurethereferralof,theNewOpportunitytous,andshallgivewrittennoticetousofanyNewOpportunitycontainingallinformationconsideredbyourDirectorsnecessaryforourDirectorsandourCompanytoconsiderwhether(a)suchNewOpportunityformspartoftheRestrictedBusiness;and(b)itTHISDOCUMENTISINDRAFTFORM,INCOMPLETEANDSUBJECTTOCHANGEANDTHEINFORMATIONMUSTBEREADI

4 NCONJUNCTIONWITHTHESECTIONHEADEDWARNING
NCONJUNCTIONWITHTHESECTIONHEADEDWARNINGŽONTHECOVEROFTHISDOCUMENT. RELATIONSHIPWITHOURCONTROLLINGSHAREHOLDERS…250… DuringtheTrackRecordPeriodanduptotheLatestPracticableDate,ourGrouphadreliedprincipallyonshareholdersequity,cashgeneratedfromoperationsandborrowingsfromfinancialinstitutionstofinanceourbusiness.Uponcompletionofthe[REDACTED],ourGroupexpectsthatourfutureoperationswillbefinancedmainlybythe[REDACTED]ofthe[REDACTED],internallygeneratedfundsandborrowingsfromfinancialinstitutions.TheamountsduetoorfromourControllingShareholdersandtheirrespectivecloseassociates(otherthanmembersofourGroup)andtheoutstandingloanstoorfromourControllingShareholdersandtheirrespectivecloseassociates(otherthanmembersofourGroup)willbesettledpriortothetheREDACTED].[AllguaranteesfromourControllingShareholdersforourbankborrowingswillbefullyreleasedupon[REDACTED].]Therefore,ourDirectorsbelievethatourfinancialoperationisindependentfromourControllingShareholders.OperationalindependenceSales,marketingandadministrativefunctionsrelatingtoourbusinessarecarriedoutindependentlybyourGroup.Wehavesufficientoperationalcapacityintermsofcapital,equipmentandemployeestooperateourbusinessesindependentlyofourControllingShareholdersandtheirrespectivecloseassociates(otherthanmembersofourGroup).SaveforthefullyexemptcontinuingconnectedtransactionasdetailedinthesectionheadedContinuingconnectedtransactionsŽinthisdocument,theGrouphasnopresentintentionofenteringintoanytransactionswiththeControllingShareholdersortheirrespectivecloseassociates.Assuch,ourDirectorsconsiderthatourGroupsoperationsareindependentofourControllingShareholders.ManagementindependenceOurGroupsmanagementandoperationaldecisionsaremadebyourBoardandourseniormanagementpersonnel.OurBoardconsistsofnineDirectors,ofwhomfourareexecutiveDirectors,twoarenon-executiveDirectorsandthreeareindependentnon-executiveDirectors.EachofourDirectorsisawareofhis/herfiduciarydutiesasaDirectorwhichrequire,amongotherthings,thathe/sheactsforthebestinterestofourGroupandnottoallowanyconflictbetweenhis/herdutiesasaDirectorandhis/herpersonalinterests.Ourindependentnon-executiveDirectorsallhaveextensiveexperienceindifferentfieldsandtheyhavebeenappointedpursuanttotherequirementsundertheListingRulestoensurethatthedecisionsofourBoardaremadeonlyafterdueconsiderationofindependentandimpartialopinions.OurDirectorsbelievethatthepresenceofDirectorswithdifferentbackgroundsprovidesabalanceofviewsandopinions.PleaserefertotheparagraphheadedDirectorsandseniormanagement…DirectorsŽinthisdocumentforthebackgroundofourDirectors.OurBoardactscollectivelybymajoritydecisionsinaccordancewiththeArticlesandapplicablelaws,andnosingleDirectorwillhaveanydecisionmakingpowerunlessotherwiseauthorisedbyourBoard.Int

5 heeventthatapotentialconflictofinteresto
heeventthatapotentialconflictofinterestofamaterialnaturearisesoutofanytransactiontobeenteredintobetweenusandourDirectorsortheirrespectivecloseassociates,theinterestedDirector(s)shallabstainfromvotingattherelevantBoardmeetingsinrespectofsuchtransactionandshallnotbecountedinthequorum.AllourseniormanagementmembersareindependentfromourControllingShareholders.TheyhavesubstantialexperienceintheindustryweareengagedinandhaveservedourGroupforasignificantlengthoftimeduringwhichperiodtheyhavedemonstratedtheircapabilityofdischargingtheirdutiesindependentlyfromourControllingShareholders.Basedontheabove,ourDirectorsaresatisfiedthatourBoardasawholetogetherwithourseniormanagementteamisabletoperformthemanagementroleinourGroupindependently.THISDOCUMENTISINDRAFTFORM,INCOMPLETEANDSUBJECTTOCHANGEANDTHEINFORMATIONMUSTBEREADINCONJUNCTIONWITHTHESECTIONHEADEDWARNINGŽONTHECOVEROFTHISDOCUMENT. RELATIONSHIPWITHOURCONTROLLINGSHAREHOLDERS…249… AsconfirmedbyourDirectors,duringtheTrackRecordPeriodanduptotheLatestPracticableDate,therehadbeennomaterialnon-compliancecommittedbyGuodanBiological.OurControllingShareholdershavenopresentintentiontoinjectGuodanBiologicalintoourGroupbecauseitisnotengagedinthecorebusinessofourGroup.ThebusinessofourGroupisclearlydelineatedfromthatofGuodanBiological,asanalysedbelow.OurGroupGuodanBiological(1)PrincipalbusinessProvisionofinpatientandoutpatienthospitalservicesundertheclinicaldepartmentsofobstetrics,gynaecology,internalmedicine,generalsurgery,stomatology,physicalexamination,ENTandChinesemedicineProduction,saleanddevelopmentofdrugs,inparticulartheproductionandsaleofBalofloxacincapsules(2)CustomersCustomersgenerallyinclude(i)individualpatientsfromthelocalcommunitiesand(ii)businesscorporations,whichpurchaseourhealthcareservices,suchasphysicalexaminationandwork-relatedinjuriesservices,fortheirdesignatedpersons,normallybeingtheiremployees.PleaserefertothesectionheadedBusiness„CustomersŽinthisdocumentfordetails.CustomersgenerallyincludepharmaceuticaldistributorcustomerandhospitalsAccordingly,ourDirectorsconsiderthereisacleardelineationbetweenourbusinessandthoseoftheExcludedCompanies,andtheExcludedCompaniesdonotandwillnotposeanydirectorindirectcompetitionwithourGroup.INDEPENDENCEFROMOURCONTROLLINGSHAREHOLDERSAsattheLatestPracticableDate,noneoftheControllingShareholderswasengaged,orinterested,inanybusinesswhich,directlyorindirectly,competedormightcompetewithourbusinesswhichwasdiscloseableunderRule8.10oftheListingRules.OurDirectorsbelievethatwearecapableofcarryingonourbusinessindependentlyfrom,anddoesnotplacerelianceon,ourControllingShareholdersandtheirrespectivecloseassociates,takingintoconsiderationthefactorssetoutbelow.FinancialindependenceOurGrouphasanindependentfinancialsy

6 stemandmakesfinancialdecisionsaccordingt
stemandmakesfinancialdecisionsaccordingtoourbusinessneeds.OurGrouphassufficientcapitaltooperateourbusinessindependently,andhasadequateinternalresourcestosupportourday-to-dayoperations.THISDOCUMENTISINDRAFTFORM,INCOMPLETEANDSUBJECTTOCHANGEANDTHEINFORMATIONMUSTBEREADINCONJUNCTIONWITHTHESECTIONHEADEDWARNINGŽONTHECOVEROFTHISDOCUMENT. RELATIONSHIPWITHOURCONTROLLINGSHAREHOLDERS…248… OurControllingShareholdershavenopresentintentiontoinjectXisiMedicalintoourGroupbecauseitisnotengagedinthecorebusinessofourGroup.ThebusinessofourGroupisclearlydelineatedfromthatofXisiMedical,asanalysedbelow.OurGroupXisiMedical(1)PrincipalbusinessProvisionofinpatientandoutpatienthospitalservicesundertheclinicaldepartmentsofobstetrics,gynaecology,internalmedicine,generalsurgery,stomatology,physicalexamination,ENTandChinesemedicineProvisionofmedicalcosmetologyservicesincludingaestheticplasticsurgeryservices,aestheticdermatologyservices,aestheticdentistryservicesandaestheticChinesemedicineservices,andrelatedintegratedmedical(2)CustomersTargetcustomersareindividualswithmedicalnecessitiesTargetcustomersareindividualswhowantaestheticmedicaltreatments,forthepurposeofenhancingtheappearance(3)SourcesofpaymentsfromPatientsincludeindividualswho(i)settletheirmedicalbillsviasocialinsuranceprogrammes;(ii)financetheirmedicaltreatmentsbythemselvesand/orbytheircommercialinsuranceproviders;and(iii)aredesignatedpersonsofbusinesscorporationswhichpurchasedourhealthcareservices.PleaserefertotheparagraphheadedBusiness„CustomersŽinthisdocumentfordetails.PatientsofXisiMedicalgenerallyfinancetheirmedicaltreatmentsbythemselvesGuodanBiologicalGuodanBiologicalisacompanyestablishedinthePRCon13April2011.ThesharesofGuodanBiologicalwerelistedontheNEEQ(stockcode:872960)inthePRC.AsattheLatestPracticableDate,GuodanBiologicalwasownedasto15.54%byMr.Li,ourexecutiveDirector,and39.44%byMr.LiJG.GuodanBiologicalsboardofdirectorsconsistedoffiveindividuals,namelyMr.Li,Mr.LiJG,andthreeotherIndependentThirdParties.ItsboardofsupervisorsconsistedofthreeindividualswhoareIndependentThirdParties.Mr.LiandMr.LiJGalsoserveasthechairmanandgeneralmanagerofGuodanBiologicalrespectively.TheprincipalbusinessofGuodanBiologicalistheproduction,saleanddevelopmentofdrugs.THISDOCUMENTISINDRAFTFORM,INCOMPLETEANDSUBJECTTOCHANGEANDTHEINFORMATIONMUSTBEREADINCONJUNCTIONWITHTHESECTIONHEADEDWARNINGŽONTHECOVEROFTHISDOCUMENT. RELATIONSHIPWITHOURCONTROLLINGSHAREHOLDERS…247… OVERVIEWImmediatelyafterthecompletionofthe[REDACTED]andthe[REDACTED](withouttakingintoaccountanyShareswhichmaybeallottedandissuedpursuanttotheexerciseofthe[REDACTEDoranyoptionswhichmaybegrantedundertheShareOptionScheme),thetotalissuedsharesofourCompanywillbeownedasto[49.82]%byGuodanHealthcare(whichiswhol

7 lyandbeneficiallyownedbyMr.Li,ourexecuti
lyandbeneficiallyownedbyMr.Li,ourexecutiveDirector),asto[5.81]%byVictoryUniverse(whichiswhollyandbeneficiallyownedbyMs.Li,thespouseofMr.Li),asto[13.15]%byUnionIndia(whichiswhollyandbeneficiallyownedbyMr.Huang,ournon-executiveDirector),asto[1.52]%byZhengyuanInternational(whichiswhollyandbeneficiallyownedbyMr.Zhou),asto[1.66]%byLifangxinInvestment(whichiswhollyandbeneficiallyownedbyMr.Yang)asto[0.83]%byQianhaiHezhong(whichiswhollyandbeneficiallyownedbyMr.Tan)andasto[2.21]%byRichcomePacific.Mr.Li,hisspouseMs.Li,GuodanHealthcareandVictoryUniversewillbeourControllingShareholdersupon[REDACTED]asdefinedundertheListingRules.GuodanHealthcareandVictoryUniverseareinvestmentholdingcompanies.EXCLUDEDCOMPANIESOFOURCONTROLLINGSHAREHOLDERSDuringtheTrackRecordPeriodanduptotheLatestPracticableDate,ourControllingShareholdersandtheirrespectivecloseassociateshadbeeninterestedincertaincompaniesthatdidnotformpartofourGroup.Whileothersuchcompaniesareengagedinrealestateand/orinvestmentholding,realestatedevelopment,investmentmanagementandconsultancy,advertising,computersoftwaredesign,bankingbusiness,twoofthesecompanies,namely(i)XisiMedical;and(ii)JiangsuGuodanBiologicalPharmaceuticalCompanyLimited*()(Ž,togetherwithXisiMedical,theExcludedCompaniesŽ),whichareengagedin(i)provisionofmedicalcosmetologyservices;and(ii)production,saleanddevelopmentofdrugs.ThefollowingparagraphsillustratewhythereisacleardelineationbetweenourbusinessandthoseoftheExcludedCompaniesandtheExcludedCompaniesdonotandwillnotposeanydirectorindirectcompetitionwithourGroup.XisiMedicalXisiMedicalisacompanyestablishedinthePRCon8June2004.ThesharesofXisiMedicalwerelistedontheNEEQ(stockcode:871107)inthePRC.AsattheLatestPracticableDate,XisiMedicalwasownedasto68.01%byMr.Li,ourexecutiveDirector,and6.74%byShenzhenZhonghangInvestmentHoldingLimitedPartnership*()),whichwasinturnownedasto55%byMs.Liand45%byMr.Li.Mr.Huang,ournon-executiveDirector,alsoowned7.28%ofthesharesofXisiMedical.XisiMedicalsboardofdirectorsconsistedoffiveindividuals,namelyMr.LiRuifang,andfourotherIndependentThirdParties.ItsboardofsupervisorsconsistedofthreeindividualswhoareIndependentThirdParties.TheprincipalbusinessofXisiMedicalistheprovisionofmedicalcosmetologyservices()includingaestheticplasticsurgeryservices(),aestheticdermatologyservices(),aestheticdentistryservices()andaestheticChinesemedicineservices(),andrelatedintegratedmedicalservices(AsconfirmedbyourDirectors,duringtheTrackRecordPeriodanduptotheLatestPracticableDate,therehadbeennomaterialnon-compliancecommittedbyXisiMedical.THISDOCUMENTISINDRAFTFORM,INCOMPLETEANDSUBJECTTOCHANGEANDTHEINFORMATIONMUSTBEREADINCONJUNCTIONWITHTHESECTIONHEADEDWARNINGŽONTHECOVEROFTHISDOCUMENT. RELATIONSHIPWITHOURCONTROLLINGSHAREHOLDERS…