The major amendments include:
- the requirement to submit an application proof of the listing document for the Hong Kong Stock Exchange’s (“SEHK”) vetting and publication on its website(a) an 8-week moratorium period;(b) confidential filing
- the Post Hearing Information Pack (“PHIP”) regime;
- an accelerated process for the review of decisions to return applications;
- a streamlined regulatory commenting process; and
- revisions to sponsor’s undertaking and declaration.
Submission of the application proof of the listing document for SEHK’s vetting and publication on its website
An applicant must submit its application proof, in both English and Chinese, for SEHK’s vetting and for publication on its website. The SEHK has included in Guidance Letter HKEx-GL 56-13 a prescribed list of information to be disclosed in an application proof for the document to be considered substantially complete. Where certain information can only be finalised at the later date, such information may be omitted or inserted in brackets for updates during the vetting by SEHK.
If the information is permitted to be omitted from the application proof for vetting, it should not be disclosed in an application proof for publication. For the purpose of publication on SEHK’s website, unless consent is obtained for further redactions, an applicant may redact an admission proof only to the extent necessary for the documents not to constitute a prospectus under Section 2(1) of the Companies Ordinance, or an advertisement under Section 38B(1) of the Companies Ordinance or an invitation to the public in breach of Section 103 of the Securities and Futures Ordinance.
Any information included in both admission proofs for vetting and publication must be accurate as at the date of the listing application or shortly before then. An application must include appropriate disclaimer and warning statements in English and Chinese on SEHK’s website and in the admission proof published to advise readers of the legal status of these documents.
- An 8-week moratorium on returned listing applications
The application proof is expected to be substantially complete (except for information that by its nature can only be finalised at a later date) when the listing application is submitted. Where a listing application is returned by reason of it being considered not to be substantially complete, there will be an 8-week moratorium before a fresh listing application can be made.
Upon a listing application being returned, the names of the sponsor and the listing applicant, together with the return date will be published on SEHK’s website.
- Confidential filing
The new Listing Rules provides for confidential filings of listing applications under limited circumstances, this would include circumstances where the applicant has already been listed on a recognised overseas stock exchange (15 stock exchanges have been identified by the SEHK to date) for not less than 5 years and has a large market capital of at least US$200 million. The SEHK may waive or modify the publication requirements for the admission proof when an applicant envisages difficulties in complying with the publication requirement (e.g. where the publication of the application proof conflicts with the laws of the foreign jurisdiction which the application is subject to or unduly prejudices an applicant’s continuing listing status on an overseas stock exchange).
New PHIP regime
The existing requirement to publish a WPIP will be replaced by the publication of a PHIP sharing similar contents. The PHIP is required to be published when the material comments have been addressed after the listing hearing and before the earlier of distribution of the red herring and commencement of book building.
Accelerated review process for returned listing applications
The new Listing Rules implement an accelerated process for reviewing a decision of the Listing Division to return a listing application or a decision of the Listing Committee to endorse the return decision either following the initial 3-day check process or once the application has been accepted for detailed vetting. The review process is governed by Guidance Letter HKEx-GL 61-13 which sets out detailed guidance on the logistics in every stage. Each of the applicant and sponsor has the right to have a return decision and the Listing Committee’s decision that endorses the return decision reviewed.
Streamlined application and regulatory commenting process
The new Listing Rules shortened the application process by allowing a majority of documents to be submitted to the SEHK with the listing application (including the profit forecast, cash flow memorandum and the advanced draft of the sponsor’s working capital confirmation). The regulatory commenting process has also been streamlined to focus on major issues such as eligibility, suitability, sustainability and any material disclosure deficiencies.
Revised sponsor’s undertaking and declaration
A composite sponsor undertaking and statement of independence will be required by the SEHK at the time of submission of the listing application. The sponsor’s declaration has also been amended to require sponsors to report to the SEHK when it becomes aware of any material information that concerns non-compliance of legal or regulatory requirements relevant to listing.
The transitional period
As abovementioned, the new Listing Rules will take effect on 1 October 2013. During the transitional period, some of the proposed changes would be suspended and intermediary arrangements during the interval will be put in place to ensure a smooth transition, which may encourage certain new applicants to submit their applications before the end of the transitional period. A number of the intermediary arrangements are set out below:
- From 1 October 2013 to 31 March 2014, both dates inclusive, the requirement for application proofs to be published on SEHK’s website has been suspended;
- From 1 October 2013 to 31 March 2014, both dates inclusive, in the case of a returned application, the implementation of the requirement to publish the name of the applicant and sponsor, and the date of the decision to return an application on SEHK’s website has been suspended;
- From 1 October 2013 to 30 September 2014, both dates inclusive, the SEHK will perform an initial 3-day check process for all listing applications based on the criteria set out in a prescribed 3-day checklist in Guidance Letter HKEx-GL 56-13 and will only accept an application for detailed vetting after successful completion of such checks. In the case where a listing application is considered not to be substantially complete or if there are non-compliance issues, the listing application form, the application proof and other documents will be returned. The 3-day checklist and the Guidance Letter HKEx-GL 56-13 are available here.
Role of sponsors
Pursuant to the new paragraph 17 of Code of Conduct, all sponsors in the team must be appointed not less than 2 months before submission of Form A1 or Form 5A. When a sponsor is appointed, it should advise the Stock Exchange as soon as practicable. The appointment of sponsors has to be done by an engagement letter in writing, a copy of which must be submitted to the SEHK by way of notification. The engagement letter must state the obligations of the sponsors for the applicant and its directors. If a sponsor ceases to act for an applicant at any time, irrespective of whether a listing application has been submitted, the sponsor must inform the SEHK of its reasons of ceasing to act.
The roles of sponsors under the new Listing Rules have also been enhanced. Some duties of a sponsor pursuant to the new Listing Rules include:
- the duty to ensure that the applicant’s application proof for vetting clearly and adequately discloses information which a reasonable investor would require to make a fully informed investment decision and the information disclosed must be accurate and complete in all material respects;
- the duty to come to a reasonable opinion that the information in the application proof is substantially complete before its submission to the SEHK;
- the duty to ensure that the applicant complies with all the relevant Listing Rules and apply for waivers to those Listing Rules that the applicant will not be able to comply with; and
- the duty to arrange for publication on the applicant’s behalf of all application proofs, PHIPs and statements on SEHK’s website in accordance with the prescribed time limit.
Further, sponsors will be subject to civil and criminal liability under Sections 40, 40A and 342F of the new Companies Ordinance which will be effective later in 2014. The above note contains a summary only of the changes to the Listing Rules in relation to the submission of listing applications. A webcast explaining such changes is available here. Market practitioners are expected to keep abreast of the new guidance letters published by the SEHK when preparing their listing applications, which are available here.