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Hong Kong Stock Exchange publishes a consultation paper on further expansion of the Paperless Listing Regime

2024-08-30

Introduction

On 16 August 2024, the Stock Exchange of Hong Kong Limited (the “Stock Exchange”) published a consultation paper (the “Consultation Paper”) seeking public feedback on proposals to further expand the paperless listing regime and the related amendments of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”). This article will highlight and summarise several key amendments proposed under the Consultation Paper.

Proposals

Electronic Instructions from Securities Holders to Issuers: Under the current Listing Rules, issuers are only required to disseminate corporate communications to their securities holders by electronic means but are not required to put in place mechanisms to receive instructions electronically from securities holders.

The Stock Exchange proposes to require issuers (to the extent permitted by laws and applicable regulations) to put in place mechanisms to provide an option to securities holders to send the following instructions to issuers electronically:

1.       instructions regarding a meeting for securities holders, including an indication as to attendance at such meeting and Proxy-related instructions (“Meeting Instructions”); and

 

2.       instructions made in response to actionable corporate communications, save for those in response to any provisional allotment letter in connection with a rights issue (“Non-Meeting Instructions”).

 

Real-time Electronic Payment of Corporate Action Proceeds: Under the current Listing Rules, there is no specified method that an issuer must use to pay Corporate Action Proceeds[1] to its securities holders. Currently, the distribution of paper cheques by post is the most common method by which issuers pay Corporate Action Proceeds. However, this method does not result in payment on the announced payment date due to the need for the securities holder to deposit the cheque with a bank and wait for the cheque to clear.

The Stock Exchange proposes to amend the Listing Rules to require issuers to provide an option for securities holders to receive Corporate Action Proceeds by Clearing House Automated Transfer System (“CHATS”, a payment system in Hong Kong operated by the Hong Kong Interbank Clearing Limited), which provides service of payment on the announced payment date. The Stock Exchange further proposes that issuers bear any outward charges arising from the payment of Corporate Action Proceeds to securities holders by CHATS so that the securities holders will not be deterred from choosing to receive such proceeds by CHATS, contrary to the purpose of the proposal.

Electronic Subscription Monies: There is currently no requirement in the Listing Rules stipulating how subscription monies must be paid to listed issuers for offers made to their existing securities holders. Issuers are not obliged to provide an electronic payment option.

The Stock Exchange proposes to require listed issuers to provide an option for securities holders to pay subscription monies via electronic means for offers conducted by listed issuers to existing securities holders. It is also proposed to require issuers to disclose, to their securities holders, how they may pay subscription monies (including the issuers’ functional electronic payment details). The Stock Exchange expects securities holders to continue to bear any charges incurred when paying subscription monies electronically.

Abolition of MMOs: The Stock Exchange proposes that mixed media offers for public offers of equity securities no longer be available to issuers, which would mean that:

1.       a public offer of equity securities, collective investment schemes and debt securities could no longer be made available in printed form;

 

2.       subscriptions for a public offer of equity securities and by a collective investment scheme would be required to be made through online electronic channels only; and

 

3.       subscriptions for a public offer of debt securities will continue to be conducted through their well-established channels.

 

Hybrid General Meetings and E-voting: The current Listing Rules do not stipulate the form in which a general meeting must be held or the means by which votes must be cast for the purpose of the meeting.

The Stock Exchange proposes to require the issuers to ensure their constitutional documents enable them to hold hybrid general meetings and allow E-voting to the extent permitted by laws and applicable regulations. The Stock Exchange does not propose to mandate hybrid general meetings or E-voting and issuers.

Applicability of the paperless proposals by issuer type

The Stock Exchange proposes to apply the above proposals to different types of issuers listed on the Stock Exchange as follows:

Proposal No.

1

2

3

4

5

Type of Issuer

Electronic Instructions from securities holders to issuers

Real-time electronic payment of Corporate Action Proceeds

Electronic subscription monies

Abolition of Mixed Media Offers

Hybrid general meeting and E-voting

Meeting Instructions

Non-Meeting Instructions

Issuer of equity securities

Yes

Yes

Yes

Yes

Yes

Yes

Collective investment scheme

No

No

Yes

Yes

Yes

No

Issuer of structured products

No

Yes

No

No

No

No

Public debt issuer

Yes

No

No

No

Yes

No

Professional debt issuer

No

No

No

No

No

No

Conclusion

The proposed amendments show that the Stock Exchange is determined to further expand the use of electronic channels to enhance operational efficiencies and sustainability. The consultation period will conclude on 18 October 2024.

 

 

 


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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.

Published by ONC Lawyers © 2024



[1] Defined as “Proceeds paid by an issuer to securities holders in connection with its corporate actions, including but not limited to the distribution of dividends and other entitlements, refunds in respect of applications for, and/or (where applicable) excess applications in connection with, rights issues, open offers and offers made to a specified group of such holders on a preferential basis; and payment in connection with takeovers and privatisations”

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