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On 16 June 2017, a public consultation was launched by The Stock Exchange of Hong Kong Limited (the “Exchange”) on a package of proposals to reform the Hong Kong’s listing regime through two separate papers:
This client alert provides an overview of the proposals discussed in the New Board Concept Paper. Please refer to our client alert for an overview of the proposals in the GEM/ Main Board Reform Consultation Paper.
Proposed introduction of a New Board for “New Economy” companies
The Exchange proposes to introduce a “New Board” to attract companies from “New Economy” sectors with one or more of the following characteristics that currently prohibit them from listing in the local bourse:
What are “New Economy” companies?
The Exchange explains that “New Economy” companies for the purposes of listing on the New Board may encompass industries include biotechnology, health care technology, internet & direct marketing retail, internet software & services, IT Services, software, technology hardware, storage & peripherals.
In light of the evolving nature of technology and the interactive relationship between the traditional and new economic sectors, no fixed definition is proposed. The Listing Committee will retain the ultimate discretion to determine the listing eligibility for the New Board on a principle-based approach.
Two segments: New Board PRO and New Board PREMIUM
The Exchange proposes that the New Board be divided into two segments to cater to the different needs of different types of issuers and investors: New Board PRO and New Board PREMIUM.
See below a summary of the key features of the two segments:
|New Board PRO||New Board PREMIUM|
Early-stage / pre-profit New Economy companies
N.B. The Exchange may refuse an application for listing on the New Board PRO if it has reason to believe that the applicant could meet the eligibility requirements for New Board PREMIUM, GEM or the Main Board
New Economy companies meeting Main Board financial and other key requirements, but unable to meet certain criteria:
Professional investors only
|Same as Main Board
(open to both retail and professional investors)
Admission financial criteria
||Same as Main Board|
Minimum public float and number of investors at the time of listing
|25%; 100 investors||Same as Main Board
(25%; 300 investors)
|Offer mechanism||Placement||Public offer|
|Suitability assessment||“lighter touch” approach||Same as Main Board|
|Listing adviser||Financial advisers
(Type 6 licence holders)
|Approval authority||Listing Department
(authority delegated from Listing Committee)
|Weighted voting rights (“WVR”) structure||Permitted (see further details in the section headed “Weighted voting rights structure permitted” below)|
|Continuous listing obligations||
Need to comply with the standards similar to the Main Board:
Automatic delisting if continuously suspended for 90 days
Automatic delisting if continuously suspended for 6 months
Weighted voting rights structure permitted
As mentioned above, applicants to the New Board are allowed to adopt a WVR structure. As to how to regulate issuers with a WVR structure, the Exchange invites views on two possible approaches:
When will the New Board be launched?
There will be a two-month public consultation period ending on 18 August 2017 for the New Board proposals. If there is market support for the proposals, the Exchange aims to finalise detailed New Board listing rules in early 2018.
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