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Reminder to offerors – Do not acquire above the offer price within six months after the end of offer period

On 26 May 2016, the Securities and Futures Commission (“SFC”) publicly criticised China New Way Investment Limited (“Offeror”), its four beneficial shareholders and its sole director (together the “Parties”) for the Offeror’s acquisition of shares in China City Construction Group Holdings Limited, formerly known as Chun Wo Development Holdings Limited (“Company”), within six months after the close of an offer at above the offer price in contravention of Rule 31.3 of the Takeovers Code.

Rule 31.3

Rule 31.3 of the Takeovers Code provides that:

“Except with the consent of the Executive, if a person, together with any person acting in concert with him, holds more than 50% of the voting rights of a company, neither that person nor any person acting in concert with him may, within 6 months after the end of the offer period of any previous offer made by him to the shareholders of that company which became or was declared unconditional, make a second offer to, or acquire any shares from, any shareholder in that company at a higher price than that made available under the previous offer. For this purpose the value of a securities exchange offer shall be calculated as at the day the offer became, or was declared, unconditional.”

The purpose of this rule is to provide shareholders with certainty that an offeror will not pay a price higher than the offer price for the shares in the offeree company in the 6-month period after the close of an offer, and as a result, it ensures that all shareholders of the offeree company are treated even-handedly in accordance with General Principle 1 of the Takeovers Code.

Background facts

On 2 January 2015, the Offeror made an unconditional mandatory general offer in cash for the Company’s shares at $1.099 per share. The offer closed on 23 January 2015. The Offeror and parties acting in concert with it were interested in approximately 62.10% of the entire issued share capital of the Company immediately after close of the offer.

On 6 and 7 July 2015, the Offeror made a series of on-market acquisitions of a total of 2,930,000 shares of the Company at prices ranging from $1.19 to $1.50 per share. Such acquisitions were in breach of Rule 31.3.

The Offeror reported the acquisitions to the Takeovers Executive on 27 July 2015. The Parties submitted that the breaches were not intentional, and agreed to the current disciplinary action taken against them.


Offerors should bear in mind the prohibition imposed by Rule 31.3 of the Takeovers Code.

They should also take note of the requirement under Practice Note 20 published by the SFC to confirm in writing within 3 business days of the expiry of 6 months from the end of the offer period that they and their concert parties have complied with Rule 31.3.

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