The Chamber of Hong Kong Listed Companies, which has about 100 members, is opposed to Hong Kong Exchanges and Clearing banning firms from issuing new shares at a discount of more than 20 per cent. The HKEx will change the listing rules in the first half of the year to improve corporate governance standards. As part of the changes, it will add a rule banning companies from issuing new shares at a discount of more than 20 per cent to the market price unless the companies are in serious financial difficulties and have urgent need for funds. The move is in response to criticism that some companies are issuing new shares at a discount of 60 per cent or 70 per cent, substantially diluting the interest of small investors. The chamber's honorary chief executive, Patrick Sun Ting-wah, a former deputy chairman of the stock exchange listing committee, said the rule would make it difficult for companies to raise funds. 'During weak market situations, it is not unusual for a company to issue shares at a discount of more than 20 per cent. The price at which a placement can be executed should purely be a matter of market forces,' he said. A HKEx official said it decided to make the change after a year-long consultation in which it considered the opinion of all market sectors. In January last year, the exchange issued proposals to improve corporate governance. While it is going ahead with many of them, it has given up on some key proposals after strong opposition from large companies on cost concerns. It will not introduce compulsory quarterly reporting until at least 2005, and it will not force companies to disclose directors' salaries by name. However, Mr Sun did not believe watering down the proposals would make Hong Kong lag other markets. He said each market should consider its own situation. The chamber was also opposed to the exchange's plan to amend listing rules to exclude controlling shareholders from voting to approve the general mandate for the company to issue new shares in the coming year. 'The controlling shareholders should not be discriminated against and barred from voting. All shareholders should be treated fairly and equally,' Mr Sun said. The chamber also called for the exchange to allow a two-year grace period, instead of one year as planned, for firms to meet with a new rule increasing the minimum number of non-executive directors to three from two. RULE REVAMP The rules change is aimed at protecting small investors from discounted new share issues that dilute their interests The stock exchange has pushed back the introduction of compulsory quarterly reporting to at least 2005