Listing Rules amendments to codify general waivers and principles relating to IPOs and listed issuers
Introduction
On 28
August 2020, the Stock Exchange of Hong Kong Limited (the “Stock Exchange”) published
conclusions to the consultation paper on “Codification of General Waivers and
Principles relating to initial public offerings (the “IPOs”) and Listed Issuers and
Minor Rule Amendments”. Amendments will be made to both the Main Board Listing
Rules and the GEM Listing Rules to, among others, codify the waivers from the
Main Board Listing Rules and the GEM Listing Rules which were approved by the
Securities and Futures Commission of Hong Kong (the “SFC”) pursuant to Rule 2.04 of the
Main Board Listing Rules or Rule 2.07 of the GEM Listing Rules (the “General Waivers”) and waivers
which have been granted on multiple occasions to new applicants and/or listed
issuers on the basis of similar principles and conditions (the “General Principles”). The proposed
amendments will take effect from 1 October 2020.
Codification of General Waivers
The key
changes to the Listing Rules include the codification of some General Waivers
to:
(1) exempt
bonus or capitalisation issues by People’s Republic of China (the “PRC”) incorporated issuers from
shareholders’ approvals in general meetings and separate class meetings, if the
issuers make bonus or capitalisation issues to existing shareholders on a pro
rata basis;
(2) modify
the calculation of consideration ratio for a PRC incorporated issuer whose
domestic shares are listed on a PRC exchange, where the market capitalisation
of the PRC listed domestic shares will be determined based on the average
closing price of those shares for the five business days immediately preceding
the transaction; and
(3) allow
the listed issuer’s stock code to be displayed prominently in the corporate or
shareholder information section of its financial reports.
Codification
of General Principles
Disclosure
of financial information of acquisition of businesses after the Track
Record Period
After
the amendment, application for waivers from the requirements regarding the
disclosure of financial information of subsidiaries or businesses acquired or
to be acquired after track record period may be made by a new applicant if:
(1) all of
the percentage ratios for the acquisition are less than 5%;
(2) where
the acquisition will be financed by the proceeds from the IPO, the new
applicant has obtained the requisite exemption from the SFC; and
(3) where
the new applicant’s principal activities involve acquisition of equity
securities, the new applicant does not have control or significant influence
over the underlying company or business. Alternatively, where a business or a
subsidiary is acquired by a new applicant, the historical financial information
is unavailable and it would be unduly burdensome to obtain it, and the new
applicant has disclosed the information required for the announcement for a
discloseable transaction in its listing document.
Disclosure
of financial information of the overseas
banking companies
Waiver will be added for overseas banking companies from strict compliance of the requirements under Rule 4.10 of the Main Board Listing Rules (Rule 7.11 of the GEM Listing Rules) regarding the disclosure of financial information, if the applicant can demonstrate that (1) it is regulated by a foreign regulator similar to the Hong Kong Monetary Authority, which provides adequate supervision, and (2) alternative financial disclosure in its listing documents regarding capital adequacy, loan quality, loan provisioning and guarantees, contingencies and other commitments has been made in listing document, which is sufficient for potential investors to make a fully informed investment decision.
Other
General Principles
Codification
of other General Principles include:
(1) the
waiver from the requirements regarding the change of financial year period;
(2) the
waiver from disclosing actual consideration of aircrafts acquired by airline
operator;
(3) in the
case of a spin-off of a listed issuer’s subsidiary (the “SpinCo”), allowing the issuer to
determine the share option scheme limit of the SpinCo with reference to the
SpinCo’s shares in issue as at the date of the SpinCo’s listing;
(4) the waiver
of the exercise price requirement for issuers dually listed on the Stock
Exchange and a PRC exchange; and
(5) exempting
banking or insurance companies from including a working capital statement,
subject to appropriate alternative disclosures in listing documents and
circulars.
New
Guidance Letter regarding requirements of a company secretary
Under
Rule 3.28 of the Main Board Listing Rules (Rule 5.14 of the GEM Listing Rules)
(“R3.28”), a listed issuer is
required to appoint as its company secretary an individual who, by virtue of
his academic or professional qualifications or relevant
experience, is, in the opinion of the Stock Exchange, capable of discharging
the functions of company secretary. In short, the Stock Exchange generally
considered a Hong Kong certified public accountant, a Hong Kong solicitor or
barrister or a chartered secretary is a person holding an acceptable
qualification. The Main Board Listing Rules (as well as the GEM Listing Rules)
also set out exhaustive criteria in assessing the relevant experience of an
individual as company secretary. The Stock Exchange has in the past granted
R3.28 waivers to allow issuers’ existing employees who are familiar with their
operations and boards to be the issuer’s company secretary for a specified
period.
After
considering the comments received, the Stock Exchange decided not to proceed
with the proposed amendment. Instead, the Stock Exchange has published a new
guidance letter HKEX-GL108-20 (the “Guidance Letter”) to provide
clarifications and guidance on the application of R3.28 waivers. According to
the Guidance Letter, factors that will be considered by the Stock Exchange when
granting a R3.28 waiver include:
(1) whether
the issuer has principal business activities primarily outside Hong Kong;
(2) whether
the issuer is able to demonstrate the need to appoint a person who does not
have the acceptable qualification nor relevant experience as a company
secretary; and
(3) why the
directors consider the person to be suitable to act as the issuer’s company
secretary.
A R3.28
waiver, if granted, will be for a fixed period of time and on the conditions that
the proposed company secretary must be assisted by a person who possesses the
qualifications or experience as required under R3.28 and is appointed as a
joint company secretary throughout the waiver period. The Stock Exchange has
also tightened the waiver condition whereby a R3.28 waiver will be revoked if
the issuer has committed material breaches to the rules.
For enquiries,
please feel free to contact us at: |
E: cc@onc.hk T:
(852) 2810 1212 19th Floor, Three
Exchange Square, 8 Connaught Place, Central, Hong Kong |
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. |