Introduction

On 19 November 2021, The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) published the conclusions (the “Conclusions”) to its consultation regarding proposals to enhance and streamline the listing regime for overseas issuers, which commenced on 31 March 2021 (the “Consultation”). Under the Consultation, “overseas issuers” refers to issuers incorporated or otherwise established outside Hong Kong and the People’s Republic of China (the “Overseas Issuers”). The proposals in the Consultation was made with a view to continuing developing Hong Kong as a listing and capital raising hub and attract global investments.

The proposals

The major proposals to be adopted are summarised herein below.

Shareholder protection standards

Under the existing regime, shareholders of non-Hong Kong issuers must be afforded shareholder protection at least equivalent to that provided in Hong Kong. In assessing whether the requisite level of equivalence is attained, different approaches will be taken for companies incorporated in different jurisdictions. For instance, companies incorporated in Singapore are required to demonstrate compliance with the provisions in Appendix 3 of the Listing Rules and the JPS Key Shareholder Protection Standards, whereas companies incorporated in the Cayman Islands have to comply with the provisions in Appendix 3 to the Listing Rules and incorporate in their articles of association a number of provisions set out in the same Appendix.

However, as stated in the Conclusions, the Stock Exchange will remove the distinction between companies of different jurisdictions. A baseline level of shareholder protection requirements will be adopted for all issuers concerning matters such as notice and conduct of general meetings, members’ right to remove directors, reservation on auditor appointment etc.

Secondary listing

The current regime prohibits companies with a centre of gravity in Greater China from secondary listing in Hong Kong, save and except where they meet the requirements for listing under Chapter 19C.

Pursuant to the Conclusions, secondary listing requirements for Greater China issuers without a weighted voting rights structure will now be relaxed by removing the “Innovative Company” condition as well as lowering the market capitalisation requirement from HK$10 billion to HK$3 billion.

Change of listing status

The Stock Exchange also proposed to issue a guidance letter on (a) the migration of majority of trading to the Stock Exchange’s markets of secondary listed overseas issuers’ shares and (b) the de-listing of their shares from overseas exchanges of primary listing. The said guidance letter shall set out the Exchange’s intended approach to secondary listed issuers in the event of the triggering of the trading migration requirement or a de-listing.

Further, the Stock Exchange proposed that issuers de-listed from an overseas exchange of primary listing would be required to comply with all the Listing Rules applicable to a primary listed issuer on the Stock Exchange immediately upon its de-listing, unless waivers and/or grace periods have been granted by the Stock Exchange to the issuer based on its specific circumstances.

Reporting accountants and auditors

Pursuant to the Joint policy statement regarding the listing of overseas companies, any non-Hong Kong audit firm acting as the auditor of a listed issuer or acting as a reporting accountant for listing documents and circulars must (i) have an international name and reputation; (ii) be a member of a recognised body of accountants, and (iii) be subject to independent oversight by a regulatory body in a jurisdiction that is a signatory to the International Organization of Securities Commissions Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information.

In the Conclusions, the Stock Exchange stated that the requirement of the Financial Reporting Council Ordinance (“FRCO”) that a non-Hong Kong audit firm seeking to act as the auditor of a listed issuer or the reporting accountant for an initial public offering, a reverse takeover or a very substantial acquisition after the Stock Exchange issues a statement of “no objection” must be recognised by the FRCO will now be codified.

Conclusion

The above proposals, amendments to the Listing Rules and the new guidance materials will take effect from 1 January 2022 with transitional arrangements set out in the Conclusions. These new reforms are expected to enhance the Stock Exchange’s reputation as the global listing venue of choice and broaden investment opportunities for Hong Kong investors, whilst maintaining high standards of shareholder protection.