Nip the problem in the bud
FocusM | 31 Aug 2018 00:30
The Minority Shareholder Watchdog Group’s (MSWG) move to put Practice Note 17 (PN17) companies and China-listed companies under its watch is welcomed.
Many of these China-based companies have a history of accounting fraud and other problems, posing a risk to minority shareholders.
However, most investors would argue that prevention is better than cure. Surveillance or monitoring should be done before these companies slip into PN17 status. Once the red flag is raised, minority shareholders will be able to make an informed decision.
Generally, a listed company is classified under PN17 when it is in financial distress, such as when its shareholders’ funds are equal to or less than 25% of its paid-up capital.
If bodies like the MSWG can help monitor listed companies which are posting declining results or showing early signs of financial problems, it can help investors decide whether to dispose of their shares. Other danger signs might include dubious board changes and restructuring exercises.
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