Introduction

The Securities and Futures Commission (the “SFC”) of Hong Kong is proposing amendments to the Companies (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice (Cap. 32L), (the “Class Exemption Notice”). The consultation period started on 16 August 2024, and will conclude on 18 October 2024. This initiative aims to cancel the exemption that permits Mixed Media Offers (“MMOs”) for listing applicants and listed issuers under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

Concurrently, the Stock Exchange of Hong Kong Limited (the "Stock Exchange") has introduced guidance effective from 1 January 2024, to facilitate the electronic submission of prospectuses and accompanying documents necessary for authorisation and registration.

Background

Under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) (“C(WUMP)O”), prospectuses for offering shares or debentures circulated in Hong Kong must comply with specific statutory requirements. Section 38(3) of the C(WUMP)O stipulates that an application form for shares or debentures must be accompanied by a compliant prospectus. This requirement is similar in Section 342(3) for companies incorporated outside Hong Kong.

In 2011, the SFC introduced an exemption via Section 9A of the Class Exemption Notice to allow MMOs, which enabled companies to distribute a printed application form without it being accompanied by a printed prospectus, provided specified conditions were met, including making an electronic prospectus available on designated websites. However, since the introduction of a paperless listing and subscription regime in July 2021, MMOs have seen reduced adoption, with only 31 new listing subscriptions of equity securities utilising this mechanism.

Recent developments

In November 2023, the Fast Interface for New Issuance (the “FINI”) became mandatory for all IPO subscriptions and public offers conducted by listed issuers of equity securities. FINI does not support printed application forms, necessitating issuers that adopt MMOs to rely on intermediaries or share registrars for manual input of orders from printed application forms. 

Additionally, starting from September 2024, the SEHK will implement arrangements to ensure the continued operation of Hong Kong's securities and derivative markets under severe weather conditions. However, listing applicants using MMOs will face logistical challenges, as they must provide printed application forms throughout the public offer period, potentially delaying the listing timetable.

Proposal to abolish MMOs

To enhance the efficiency of regulatory processes and facilitate a fully electronic subscription process, the SFC proposes to remove the MMOs exemption from the Class Exemption Notice. Following this removal, issuers will no longer be able to issue printed application forms accompanied by electronic prospectuses. The SFC believes that the exemption under Section 9A no longer serves a useful purpose, as MMOs have become obsolete, and their removal will not prejudice the interests of investors.

Electronic submission of prospectus
 and accompanying documents

As part of its ongoing efforts to improve operational efficiency, the Stock Exchange has introduced guidance for the electronic submission of prospectuses, effective from 1 January 2024. This initiative aims to streamline the submission process for listing applicants and listed issuers under the C(WUMP)O and the Listing Rules.

Effective date and transitional arrangements

The effective date and the relevant transitional arrangements for adoption of electronic submission of prospectus and accompanying documents for authorisation and registration is as follows:

1.       Effective Date: The electronic submission process officially began on 1 January 2024.

2.       Transitional Period: From 1 January to 30 June 2024, listing applicants and listed issuers can submit documents in either electronic form or hard copy. 

3.       After 1 July 2024, the Stock Exchange will only accept documents submitted electronically.

Electronic submission format requirement

From 1 July 2024, all prospectuses and accompanying documents must be submitted electronically. The documents that must be submitted electronically include:

1.       prospectus and application forms, which must be signed using recognised digital signatures; and

2.       accompanying documents, which can be original documents signed by authorised signatories or certified copies validated by approved certifiers.

Use of digital signatures

Digital signatures are required for (1) signing original copies; and (2) certifying accompanying documents. The SFC has specified that valid digital signatures must be supported by certificates issued by approved authorities in Hong Kong, namely the Hongkong Post Certification Authority (issuing “e-Cert”) and Digi-Sign Certification Services Limited (issuing “ID-Cert”).

Conclusion

The proposed amendments to the Companies (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice, alongside the Stock Exchange's guidance on electronic submissions, represent a significant development in Hong Kong’s financial market. By abolishing the MMOs exemption and mandating electronic submissions for prospectuses and accompanying documents, the SFC and the Stock Exchange aim to enhance operational efficiency, improve tracking of submissions, and provide a smoother experience for listing applicants and listed issuers.