Introduction

The latest issue of the Takeovers Bulletin (Issue No. 71) published in December 2024 by the Securities and Futures Commission (“SFC”) gives guidance to companies on, among others, filing requirements on the WINGS portal, the official platform for electronic forms and submission services (“WINGS Portal”). Apart from the new guidance under the Takeovers Bulletin, this newsletter serves as a recap on existing key disclosure principles of Rule 22 of The Codes on Takeovers and Mergers and Share Buy-Backs (the “Takeovers Code”).

Dealing disclosure obligations under Rule 22

Under Rule 22 of the Takeovers Code, parties involved in an offer and their associates must disclose their transactions in the relevant securities of both the offeree company and offeror, conducted for themselves or on behalf of discretionary clients or non-discretionary clients during the offer period. These disclosures should be made through the Rule 22 Dealing Disclosure Online Submission system on the WINGS Portal (“Rule 22 Filings”) and each dealings are subject to specific disclosure requirements.

For example, for dealings in securities for their own account by offerors and offerees, along with their associates, dealings during the offer period must be publicly disclosed no later than 12.00 noon on the business day following the date of the transaction in writing to the Takeovers and Mergers Executive (the “Executive”) using the prescribed forms available on the SFC’s website, which will be subsequently posted on the SFC’s website and on the website of the Stock Exchange of Hong Kong Limited (the “Stock Exchange”) (“Public Disclosure”). On the other hand, for dealings by associates for discretionary clients where the associate is an exempt fund manager, and/or dealings by parties and by associates for non-discretionary clients, the dealings should be privately disclosed in writing to the Executive using the prescribed forms on the SFC’s website, but such forms will neither be published on the SFC’s nor the Stock Exchange’s website (“Private Disclosure”).

Details to be included in Public Disclosure and Private Disclosure are also different. For Public Disclosure, the following particulars, among others, shall be disclosed:

1.      number of relevant securities purchased or sold;

2.      prices received or paid;

3.      the person’s identity, specifying the ultimate beneficial owner or controller;

4.      for dealings by an associate, an explanation of how such status arises;

5.      if the disclosure is made by a 5% shareholder, a statement to that effect; and

6.      the total amount and percentage of relevant securities the person will control and own.

On the other hand, for Private Disclosure other than dealings in options or derivatives which requirements under Public Disclosure equally applies, only items 1 to 3 are required to be disclosed in the specimen disclosure form.

New guidance

The Takeovers Bulletin has not put forward any changes on the disclosure obligations but instead mainly addresses two aspects: (1) same-day, same-price trade and (2) presentation of non-Hong Kong Dollars currency-denominated trades.

Same-day, same-price trade

If multiple trades occur on the same day at the same price, they should be combined for the Rule 22 Filings. For instance, if a party executes five trades of 1,000 shares each at HK$1.25 on a particular day, only one entry of 5,000 shares at that price should be reported. However, if the trades occur at different prices, each trade should be reported separately.

Non-HKD trades

To avoid any confusion arising from the exchange rate used by a party, for trades conducted in currencies other than Hong Kong dollars (such as those on overseas exchanges or the Renminbi counter of the Stock Exchange of Hong Kong), it is neither necessary nor appropriate to convert these into Hong Kong dollars. Instead, the disclosure should reflect the transaction's original currency with the currency denomination noted in the “Submission Remarks” box when the Rule 22 Filings are made.

Takeaway

New guidance issued by the SFC aims to provide a clearer overall view of the trading activity. Coupled with the existing dealing disclosure obligations, the Rule 22 regime is now further refined to enhance transparency and regulatory compliance. If there are any uncertainties about Rule 22 or the submission process, you may consider to consult the Executive directly or seek legal advice on the same.