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On 25 May 2018, The Stock Exchange of Hong Kong Limited (Exchange) released its conclusions from responses to its “Consultation Paper on Delisting and Other Rule Amendments” published in September 2017.
The Exchange noted strong support for its proposals and decided to implement them with minor modifications. The Listing Rule amendments will become effective on 1 August 2018 (Effective Date).
The table below summarises the key changes to the Listing Rules and compares them with the current position:
New regime from the Effective Date
|Delisting framework for Main Board issuers|
|The current Main Board Listing Rules set out delisting procedures applicable only in two specific circumstances:
The current rules do not provide a process for delisting under the other criteria. The rules set out the general principle that the continuation of a suspension for a prolonged period without the issuer taking adequate action to obtain restoration of listing may lead to the Exchange cancelling the listing. The rules however do not specify what amounts to “prolonged period” or “adequate action”.
|There will be a separate delisting criterion (Fixed Period Delisting Criterion) allowing the Exchange to delist an issuer after a trading suspension of 18 continuous months (Prescribed Fixed Period).|
|For all the other delisting criteria, there will be a new delisting process (New Delisting Process), under which the Exchange may:
(i) publish a delisting notice specifying a period of time for the issuer to remedy the relevant issues (Specific Remedial Period) to avoid delisting (Note (1)), or
(ii) delist the issuer immediately in appropriate circumstances (Note (2)).
This process is similar to the one currently applicable to issuers that are no longer suitable for listing.
(1) The Exchange will impose a Specific Remedial Period ending earlier than the Prescribed Fixed Period if it considers that the issuer:
(a) given the nature of the issues to be remedied, ought to remedy the issues and resume trading within a shorter period (for example, insufficient public float); or
(b) has failed to take adequate action to remedy the issues, prolonging the duration of suspension. For example, the Exchange may impose a Specific Remedial Period of 6 months on an issuer which does not take adequate action to remedy the matters rendering it no longer suitable for listing.
(2) The Exchange may delist an issuer immediately only in exceptional circumstances where the matters triggering the application of a delisting criterion are fundamental to the general principles for listing and are beyond remedy. This may happen, for example, where an issuer becomes no longer suitable for listing after its management and controlling shareholder are found by a court to have operated a fraudulent scheme to overstate its business and profits.
|Practice Note 17 will be removed because the Exchange may delist PN 17 companies under either the Fixed Period Delisting Criterion or the New Delisting Process.|
|Delisting framework for GEM issuers|
|The GEM delisting framework is similar to that of the Main Board except that GEM Listing Rules provide for a delisting procedure applicable to all the existing delisting criteria. Under this procedure, the Exchange may publish a delisting notice specifying a period (ordinarily, of 6 months) within which the issuer must remedy the issues to avoid delisting.||There will also be a separate Fixed Period Delisting Criterion similar to that under the revised Main Board Listing Rules, but the prescribed fixed period for GEM issuers will be 12 months.
For GEM issuers that are suspended as at the Effective Date, the prescribed fixed period will commence from the Effective Date.
For the avoidance of doubt, where the Exchange has made a decision to commence the delisting procedures and imposed a notice period for delisting, such decision and notice period will continue to have effect on the issuer concerned. This is notwithstanding that the actual cancellation of listing has not taken place as at the Effective Date.
The Exchange has also issued a new guidance letter GL95-18 providing guidance to long suspended issuers on the operation of the new delisting regime, their general obligations and the Exchange’s regulatory actions during the resumption process, and guidance specific to certain types of suspension cases.
Long suspended issuers should note that under the new regime, the Exchange would cancel the listing of a long suspended issuer upon the expiry of the remedial period if the issuer has not remedied the issues causing the suspension and re-complied with the Listing Rules. This remedial period sets a deadline referenced to the resolution of the relevant issues and resumption of trading, as opposed to submission of a resumption proposal as in the current regime. A suspended issuer must therefore devise its own resumption plan with a timeframe to ensure that the relevant issues are remedied and the Listing Rules are re-complied as soon as practicable and, in any event, before the remedial period ends to avoid delisting.
The Exchange has indicated that it will closely monitor the delisting process after implementation of the new delisting regime and may revise the procedures or policies from time to time. It also intends to revisit the duration of the prescribed fixed periods for the Fixed Period Delisting Criterion and may consider shortening these fixed periods at an appropriate time.
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