Do Hong Kong incorporated listed companies need to draft their annual general mandates to issue and repurchase shares differently in view of the New Companies Ordinance (New CO)?

Yes, for shareholder resolutions to be passed on or after 3 March 2014, the 20 percent and 10 percent listing rule limits for the issue of additional, or repurchase, of shares (as the case may be) should refer to "the number of shares in issue (subject to adjustment in the case of subdivision and consolidation of shares)" rather than to "issued share capital" (which is the existing term used in the Listing Rules).

This is so because in a par value regime in which Hong Kong company law operates prior to 3 March 2014, "issued share capital" means the "aggregate nominal value of shares in issue", and the latter wording is typically used in general mandate resolutions. "Aggregate nominal value of shares in issue" is closely related to the number of shares in issue because it simply means the par value of the shares times the number of shares in issue. However, in a no par regime (such as the one adopted under the New CO), "issued share capital" (or simply "share capital") refers to everything received by the company on issue of shares, and this has little to do with the number of shares in issue. Care should therefore be taken in preparing resolutions giving the mandates which are proposed to be passed on or after the commencement date of the New CO (i.e., 3 March 2014).

Are the provisions of the listing rules consistent with the New CO?

No, suggestions have been made to the Hong Kong Stock Exchange for amendments to be made, or FAQs to be issued, in respect of the relevant parts of the Listing Rules to provide guidance to Hong Kong incorporated issuers whose general mandates need to be prepared in a manner consistent with a no par value regime which would take effect on 3 March 2014.

Does the New CO impact on mandates already given prior to 3 March 2014?

No, the transitional arrangements under the New CO would take care of that, but resolutions passed on or after 3 March 2014 would be affected.

For listed companies with share option schemes, do they need to have a general mandate to issue shares in place every year in order to be able to grant options under the schemes?

Yes, as a matter of Hong Kong company law, the shareholder approval given when the scheme is adopted would only cover options granted before the next annual general meeting (AGM) and will expire on conclusion of the AGM.

Does the change to a no par system under the New CO apply to listed companies incorporated outside Hong Kong in jurisdictions that continue to operate in a par value environment, such as in Bermuda and the Cayman Islands?

No, the change affects Hong Kong incorporated issuers only.