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On 29 October 2021, the Securities and Futures Commission (SFC) released the “Consultation Conclusions on (i) the Proposed Code of Conduct on Bookbuilding and Placing Activities in Equity Capital Market and Debt Capital Market Transactions and (ii) the ‘Sponsor Coupling’ Proposal”, and announced that the new requirements of the Code of Conduct for Persons Licensed by or Registered with the SFC (New Code Requirements) will come into effect on 5 August 2022 (see our previous legal alert).
On 22 April 2022, The Stock Exchange of Hong Kong Limited (Exchange) published an information paper outlining the consequential amendments (Rule Amendments) to the Rules Governing the Listing of Securities on the Exchange (Listing Rules) which will complement the New Code Requirements. The Rule Amendments will apply to listing applications to be submitted (or re-filed) on or after 5 August 2022 (Effective Date) for the same types of offerings[1] of equity securities or interests as those covered in the New Code Requirements. No specific amendments will be made to the Listing Rules relating to the placing of debt securities.
In addition to the information paper, the Exchange also published a series of Frequently Asked Questions No. 077-2022 (FAQs) to help market participants understand their respective responsibilities and obligations under the Rule Amendments.
The key Rule Amendments are highlighted below:
Written agreement for the appointment of a capital market intermediary (CMI) including an overall coordinator
The appointment by an issuer of a CMI (or an overall coordinator) must be made under a written engagement agreement before the CMI / overall coordinator conducts any specified activities under the New Code Requirements. The written engagement agreement must at least specify the following:
|
Rule Amendments |
Corresponding / relevant New Code Requirements |
For CMI: For overall coordinator: |
For CMI: For overall coordinator: |
Early appointment of overall coordinator(s) in a placing in connection with a new listing
Early appointment All overall coordinator(s) must be appointed no later than 2 weeks following the date of the submission (or re-filing, as the case may be) of the listing application. |
Rule Amendments |
Corresponding / relevant New Code Requirements |
Rule 3A.37 (GEM Rule 6A.44) |
Paragraphs 21.4.1(b)(ii) and (c) |
|
Announcement of appointment / termination A new applicant will be required to publish an announcement on the Exchange’s website (OC Announcement) setting out the name(s) of its overall coordinator(s) appointed on the same date as it files the listing application and publishes the Application Proof. Where an additional overall coordinator is appointed or the engagement of an existing overall coordinator is terminated after the publication of the initial OC Announcement, the new applicant shall publish a further OC Announcement informing the investing public of such change. New applicants permitted to make a confidential filing will be required to publish the initial OC Announcement on the same date as they publish their post hearing information packs on the Exchange’s website. |
Rules 3A.37, 3A.41(2) and 12.01C and Paragraphs 17A and 18 of Practice 22 of the Listing Rules (GEM Rules 6A.44, 6A.46(2) and 16.01C and Paragraphs 16A and 17 of Practice Note 5 of the GEM Listing Rules) |
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Overall coordinator’s declaration Overall coordinator(s) will be required to provide a declaration:
|
Rule 9.11(36) and Appendix 5E to the Listing Rules (GEM Rule 12.26(8) and Appendix 7I to the |
Paragraphs 21.4.2(b)(ii), 21.4.4 and 21.4.5 |
Provision of information to the Exchange The sponsor-overall coordinator (in the case of a Main Board IPO – see details in the section below) or an overall coordinator (in the case of a GEM IPO) is required to submit the following information to the Exchange no less than four clear business days before the date of the new applicant’s Listing Committee hearing:
together with any material changes to the above information submitted and the reasons for such changes as soon as practicable. |
Rules 3A.39, 3A.44 and 9.11(23a) (Note 2) (Note to GEM Rule 6A.42 and GEM Rule 12.23AA (Note 2)) |
Paragraph 21.4.8 |
Appointment of at least one sponsor-overall coordinator (i.e. sponsor coupling) in Main Board IPOs
A Main Board new applicant must ensure that at least one overall coordinator (or one of the companies within its group of companies) is also appointed as a sponsor independent of the new applicant and both appointments are made at the same time and no less than 2 months before the submission (or re-filing, as the case may be) of the listing application to the Exchange. In the case of termination of the engagement of a sponsor-overall coordinator as an overall coordinator and/or a sponsor-overall coordinator to a new applicant after the submission of a listing application (in the case where only its role as an overall coordinator is terminated, regardless of whether it (or one of the companies within its group of companies) remains as a sponsor to the new applicant), if the sponsor-overall coordinator was the sole sponsor-overall coordinator, the new applicant shall file a new listing application not less than 2 months from the date of the formal appointment of a replacement sponsor-overall coordinator, detailing a revised timetable together with the initial listing fee, if it intends to continue with the listing application process. |
Rule Amendments |
Corresponding / relevant New Code Requirements |
Rules 3A.02 (Note), 3A.43 and 3A.45 (Not applicable to GEM applicants) |
Paragraphs 17.1A and 21.4.1(b)(i) |
Associated obligations of issuers and their directors
Assessment of investors To facilitate each syndicate member to meet its obligations and responsibilities under the New Code Requirements and the Listing Rules in a placing in connection with a new listing, the written engagement agreement with each syndicate member must contain the obligations of the new applicant and its directors to provide the syndicate member with, among other things, a list of the directors and existing shareholders of the new applicant, their respective close associates and any nominees engaged by any of the foregoing persons for the subscription or purchase of equity interests, as soon as practicable and in any event at least four clear business days before the date of the new applicant’s Listing Committee hearing. |
Rule Amendments |
Corresponding / relevant New Code Requirements |
Rule 3A.46 (GEM Rule 6A.48) |
Paragraph 21.4.5 |
|
Pricing and allocation An issuer should document the rationale behind its decision on allocation and pricing, in particular where the decision is contrary to the advice, recommendation(s) and/or guidance of the overall coordinator(s). The overall coordinator(s) shall inform the Exchange if decisions made by the issuer amount to non-compliance with the Listing Rules related to, among other things, the placing activities conducted by the overall coordinator(s) or the issuer. |
Paragraph 19 of Appendix 6 (GEM Rule 10.16B) |
Paragraph 21.4.2(c) |
Confirmation of no rebate The announcement of the allotment results of a placing in connection with a new listing should include a confirmation from the new applicant’s directors that no rebate has been, directly or indirectly, provided by the issuer, its controlling shareholder(s), directors or syndicate members to any placees or the public (as the case may be) and the consideration payable by them for each share of the issuer subscribed for or purchased by them is the same as the final offer price determined by the issuer, in addition to any brokerage, Financial Reporting Council (FRC) transaction levy, SFC transaction levy and trading fee payable. All overall coordinators, any other syndicate members and any other distributors involved must certify in writing to the Exchange that the consideration payable by each placee directly or indirectly to the issuer for each share of the issuer subscribed for or purchased by them is the same as the final offer price determined by the issuer, in addition to any brokerage, FRC transaction levy, SFC transaction levy and trading fee payable. |
Note 2 to Rule 12.08 and Form D in Appendix 5 to the Listing Rules (Note 3 to GEM Rule 16.13 and Form D in Appendix 5 to the GEM Listing Rules) |
Paragraph 21.3.7(a) |
Disclosures in the listing document regarding fee arrangements A new applicant will be required to disclose in the listing document the aggregate of the fees (as a percentage of the gross amount of funds proposed to be raised in the subscription tranche and/or the placing tranche) and the ratio of fixed and discretionary fees paid or payable to all syndicate members. A similar existing requirement in HKEX Guidance Letter GL56-13 on the disclosure of the sponsor’s fee in the listing document will be codified. |
Paragraphs 3A and 3B of Appendices 1A and 1E to the Listing Rules (paragraphs 3A and 3B of Appendix 1A to the GEM Listing Rules) |
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Declaration regarding allocation of discretionary fees A new applicant will be required to declare in the form of Form F in Appendix 5 to the Listing Rules (Form E in Appendix 5 to the GEM Listing Rules), which is to be submitted to the Exchange as soon as practicable after the issue of the listing document but before dealings commence, that the allocation of discretionary fees, that is, the absolute amount to be paid, and the time schedule for the payment of the total fees payable to each syndicate CMI have been determined and communicated in writing to each syndicate CMI. |
Paragraph 10A of Form F in Appendix 5 to the Listing Rules (Paragraph 10A of Form |
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Effective date and transitional arrangements
As mentioned above, the Rule Amendments will apply to listing applications to be submitted (or re-filed) on or after 5 August 2022 (i.e. the Effective Date).
New applicants which have submitted listing applications prior to the Effective Date will not be required to comply with the new requirements before their applications lapse, are withdrawn or otherwise terminated, even if their bookbuilding, placing or allocation activities conducted in connection with their proposed offerings take place on or after the Effective Date.
For Main Board new applicants:
(A) |
which have submitted listing applications prior to the Effective Date and will re-file their listing applications on or after the Effective Date; or |
(B) |
which have appointed sponsors before 22 April 2022 (i.e. the date of publication of the Rule Amendments) (Rule Amendments Publication Date) and will submit listing applications for the first time on or after the Effective Date (and in respect of their subsequent re-filings), |
the Exchange provides for transitional arrangements (detailed in item No. 21 of the FAQs and summarised below), under which it would accept an existing independent sponsor (or its group company) being appointed to discharge the role of a sponsor-overall coordinator even though its appointment as an overall coordinator was not made at the same time as its appointment as a sponsor under the Rule Amendments, provided that certain conditions are met.
Transitional arrangements for (A)
Conditions:
Illustrations:
|
Date of lapse of the last listing application |
Date of appointment of the existing independent sponsor as the sponsor-overall coordinator |
Do the transitional arrangements apply? If so, when is the earliest date of re-filing in order to comply with condition (ii)? |
Scenario 1: |
5 May 2022 |
5 June 2022 |
Yes (5 August 2022) |
Scenario 2: |
4 July 2022 |
4 August 2022 |
Yes (4 October 2022) |
Scenario 3: |
4 July 2022 |
5 August 2022 |
No – Condition (ii) is not met |
Scenario 4: |
4 May 2022 |
5 June 2022 |
No – In order to meet condition (ii), the re-filing cannot be made before 5 August 2022, but this would result in condition (iv) not being met |
Transitional arrangements for (B)
Conditions:
Illustrations:
|
Date of appointment of the existing independent sponsor |
Date of appointment of the existing independent sponsor as the sponsor-overall coordinator |
Do the transitional arrangements apply? If so, when is the earliest date of the first submission in order to comply with condition (ii)? |
Scenario 1: |
21 April 2022 |
5 June 2022 |
Yes (5 August 2022) |
Scenario 2: |
21 April 2022 |
4 August 2022 |
Yes (4 October 2022) |
Scenario 3: |
22 April 2022 |
4 August 2022 |
No – Condition (i) is not met |
Scenario 4: |
21 April 2022 |
5 August 2022 |
No – Condition (ii) is not met |
[1] The types of offerings to which the Rule Amendments apply include:
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