The Hong Kong Stock Exchange (HKEX) has announced rule revisions, most of which will take effect from January 1, 2022.
Amendments to the Main Board Listing Rules Strengthen and Simplify the Listing Regime for Overseas Issuers
After the consultation process in 2021, the Hong Kong Stock Exchange has adjusted the listing conditions for overseas persons in Hong Kong. Mainly reflected in:
1. Introduce a set of common core shareholder protection standards, applicable to all issuers, to provide investors with the same level of protection;
2. Allow eligible issuers to conduct dual primary listings directly, while retaining their existing non-compliant weighted voting rights (WVR) and variable interest entity structures;
3. Expand the secondary listing system for overseas issuers, allowing issuers with a focus in the Greater China region, without a weighted voting rights structure, and operating in traditional industries to be allowed for listing;
4. Standardise some conditional mutual exemptions for dual primary listings and secondary listings.
Amendments to the Main Board Listing Rules in Enhanced Corporate Governance Code and Housekeeping
1. Reorganize the structure of Appendix 14 to enhance fluency and readability, and rename it as “Corporate Governance Code”;
2. Requires that the company culture is aligned with its purpose/values and strategy;
3. Introduce additional requirements related to independent non-executive directors (“independent non-executive directors”) who have served on the board for more than 9 years (“long-serving independent non-executive directors”), and require the establishment of mechanisms to ensure that the board will be able to obtain independent advice;
4. Put an end to single-gender boards by requiring issuers to appoint at least one director of a different gender and requiring numerical goals and timelines for gender diversity at the board level and gender diversity and related disclosures at the workforce level;
5. Authorize the establishment of a nomination committee, chair by the chairman of the board or an independent non-executive director, and compose of independent non-executive directors;
6. Shareholder communication policies to include two-way communication channels;
7. Shorten the release time of ESG reports to be consistent with the annual report.
Amendments to the Main Board Listing Rules set up a Listing Regime in Hong Kong for Special Purpose Acquisition Companies
The Exchange intends to introduce a new regime to allow special purpose acquisition companies (or “SPACs”) to list in Hong Kong. A SPAC is a company that seeks to raise cash fund through an initial public offering and then seeks to acquire or merge with another unlisted company within a specified time frame (referred to as a “SPAC merger transaction”). If it fails to successfully target and complete the SPAC M&A transaction within that period, the funds raised will be returned to investors and the SPAC will be delisted and liquidated.
1. The Exchange has established a “professionals only” SPAC market, where only accredited professional investors are allowed to subscribe or trade SPAC securities. The issuance threshold for the initial listing of SPACs has been reduced from 30 professional investors to 20 institutional professional investors. A SPAC will also need to make distributions to at least 75 professional investors.
2. The SPAC will be required not to have access of 100% of the SPAC IPO proceeds, and in the event of a redemption, the SPAC is obliged to refund 100% of the IPO proceeds, but not the accrued interest, which can be used for SPAC operations.
3. The SPAC will be required to have the same redemption rights and voting rights. The legal person proposal has not been adopted. Therefore, shareholders who voted in favor of the SPAC M&A transaction can still choose to redeem their shares.
4. The scale of mandatory PIPE investment that must be made in the SPAC M&A transaction will be based on a sliding scale. If the SPAC M&A target is valued at less than HK$2 billion, the minimum PIPE investment is 25%, and if the APAC M&A target is valued at HK$7 billion or above, the minimum PIPE investment is 7.5%. At least 50% of PIPE investments are funded by at least 3 institutional investors (defined as investors with assets under management of at least HK$8 billion).
For more listing requirements of Hong Kong companies, Desfran has more than ten years of establishment experience and strict KYC compliance to ensure that every process is carefully planned, which is conducive to the establishment and listing of the company.
Our company will continue to pay attention to the trends of listing in Hong Kong to help you maximize your business development and help your business grow. Feel free to contact us and learn more about listing in Hong Kong.
