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On 19 November 2021, The Stock Exchange of Hong Kong Limited (Exchange) published the consultation conclusions on its proposals to enhance and streamline the listing regime for overseas issuers published in March 2021 (see our previous client alert).
The Exchange will adopt all the proposals with minor modifications.
Under the revised listing regime for overseas issuers:
The amended Listing Rules will become effective from 1 January 2022.
Salient points of the revised overseas issuers listing regime are set out below.
Shareholder protection standards
Shareholders of non-Hong Kong issuers must be afforded shareholder protection at least “equivalent to” that provided in Hong Kong (Equivalence Requirement).
The Exchange has adopted different approaches in evaluating compliance with the Equivalence Requirement:
The Equivalence Requirement and the distinction between Recognised Jurisdictions and Acceptable Jurisdictions will be removed.
A baseline level of shareholder protection requirements (Core Standards), largely derived from the JPS, will be adopted for all issuers (including Hong Kong issuers and PRC issuers) concerning:
The Core Standards should be set out in the issuer’s constitutional documents unless the Exchange is satisfied that the domestic laws, rules and regulations to which the issuer is subject provide for the same protection.
|Existing listed issuers will have to ascertain if they are in full compliance with the Core Standards, otherwise they would have until their second annual general meeting following 1 January 2022 to make any necessary amendments to their constitutional documents to conform to the Core Standards.|
Secondary listing requirements
Companies with a centre of gravity in Greater China are prohibited from secondary listing in Hong Kong except where they meet the stringent requirements for listing under Chapter 19C of the Listing Rules (e.g. it is an “Innovative Company”, listed on a Qualifying Exchange, with a minimum market capitalisation of HK$10 billion and revenue of at least HK$1 billion). This is regardless of whether they have WVR structures.
Provisions for the two secondary listing routes are scattered in different documents:
Secondary listing requirements for Greater China Issuers without a WVR structure will be relaxed by:
The Exchange may reject a secondary listing application if a material part of the applicant’s business was listed on the primary listing market by way of a reverse takeover.
|Note:||Where a secondary listing applicant was primary listed on an overseas exchange through a de-SPAC transaction that was not subject to the IPO due diligence requirements or eligibility requirements applicable to new listings, it is an indicator that the secondary listing application may constitute an attempt at regulatory arbitrage, and the Exchange will apply the reverse takeover test to such companies as a safeguard.|
The two secondary listing routes will be codified with modifications (e.g. removing the “Innovative Company” requirement for all companies without a WVR structure as mentioned above).
Secondary listed issuers’ conversion to primary listing status
The Listing Rules do not set out the requirements that apply in the circumstances of: (a) secondary listed issuers that de-list (voluntarily or involuntarily) from their exchange of primary listing; or (b) issuers that voluntarily choose to transfer from a secondary to a dual-primary listing.
Chapter 19C of the Listing Rules provides for mandatory conversion to a primary listing status only for Greater China Issuers listed under that chapter and only if the majority of trading in their securities migrates to the Exchange. Chapter 19C also sets out transitional arrangements such as a 3-year transitional period for certain continuing transactions.
A secondary listed issuer will be regarded as a primary listed issuer in the event of:
Route 1 – For issuers delisted from the overseas exchange:
Route 2 – For issuers that become primary listed in Hong Kong as a result of Trading Migration:
Route 3 – For issuers that become dual primary listed in Hong Kong as a result of Primary Conversion:
Grandfathered Greater China Issuers and Non-Greater China Issuers with WVR and/or VIE Structures
Grandfathered Greater China Issuers and Non-Greater China Issuers may retain their existing WVR and/or VIE structures without amending them to comply with all Exchange requirements provided that they meet the stringent eligibility requirements of Chapter 19C of the Listing Rules.
The WVR and/or VIE structures of Grandfathered Greater China Issuers will continue to be grandfathered following conversion to primary listing status (under either of Routes 1, 2 or 3 discussed above).
The existing WVR and/or VIE structures of such issuers will also be grandfathered if they apply for dual primary listing directly.
As mentioned above, the amended rules will become effective from 1 January 2022.
Companies which submit applications before 1 January 2022 but expect to be listed on or after 1 January 2022 will be assessed under the new regime and are expected to demonstrate how they are able to comply with the requirements under the new regime.
In the event that an overseas issuer secondary listed in Hong Kong would like to proceed with a change of listing status prior to 1 January 2022, the Exchange will consider the matter on a case-by-case basis by reference to the approach set out in the Guidance Letter for Change of Listing Status (contained in Appendix VI to the consultation conclusions).
 “Overseas issuers” mean issuers incorporated or otherwise established outside Hong Kong and the People’s Republic of China.
 A “Qualifying Exchange” means The New York Stock Exchange, Nasdaq Stock Market or the Main Market of the London Stock Exchange plc (and belonging to the UK Financial Conduct Authority’s “Premium Listing” segment).
 A “Grandfathered Greater China Issuer” means a Greater China Issuer which is (a) primary listed on a Qualifying Exchange on or before 15 December 2017; or (b) controlled by corporate WVR beneficiaries as at 30 October 2020 and primary listed on a Qualifying Exchange after 15 December 2017, but on or before 30 October 2020.
 A “Non-Greater China Issuer” means an issuer with a centre of gravity outside of Greater China which is primary listed on a Qualifying Exchange.
 “JPS” means the “Joint policy statement regarding the listing of overseas companies” first published jointly by the Exchange and the Securities and Futures Commission in 2007, updated on 27 September 2013, and last amended on 30 April 2018.
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