On 31 March 2021, HKEx published a consultation paper (the “Consultation”) seeking comments on proposed amendments to the Listing Rules in order to enhance and streamline the listing regime for overseas issuers. Capitalised terms are defined in the Consultation.
The key proposals in the Consultation are set out below:-
- Distinction between Recognised Jurisdictions and Acceptable Jurisdictions and Streamlined Requirements with a Single Set of Shareholder Protection Standards
The Listing Rules and the “Joint policy statement regarding the listing of overseas companies” (“JPS”) currently prescribe different requirements as to shareholder protection standards for Recognised Jurisdictions and Acceptable Jurisdictions, leading to gaps in protection standards afforded by the laws of the jurisdiction of incorporation and those of Hong Kong.
It is proposed that the two regimes be merged and that there should be no distinction between Recognised Jurisdictions and Acceptable Jurisdictions.
HKEx also proposes to replace the shareholder protection standards in Chapter 19C and Appendices 3 and 13 to the Listing Rules and the JPS with a single common set of Core Standards applicable to all issuers, to establish a baseline level of investor protection regardless of the issuer’s place of incorporation.
- Amendment of Secondary Listing Requirements
Currently, HKEx offers two routes to secondary listing: the JPS route and the Chapter 19C route.
The HKEx proposes to merge the two routes to secondary listing as they have different eligibility requirements for Overseas Listed Companies which do not have their “centre of gravity” in China. The HKEx will also codify and consolidate requirements of the two routes of secondary listing and codify all secondary listing-related JPS provisions into Chapter 19C of the Listing Rules.
There will also be codification of JPS Automatic Waiver eligibility requirements with modifications including changes to the compliance record requirement period and minimum expected market capitalisation requirement.
It is further proposed that an issuer will be regarded as having a primary listing on HKEx upon its de-listing from the stock exchange on which it is primary listed, subject to certain notification requirements to HKEx.
In relation to Non-“Weighted Voting Right“ (“WVR”) Greater China Issuers seeking a secondary listing, it is proposed that they are no longer required to demonstrate that they are “Innovative Companies” and that they have the option of meeting a minimum market capitalisation at listing of either HK$3 billion or HK$10 billion.
Finally, it is proposed that a Grandfathered Greater China Issuer or a Non-Greater China Issuer is allowed to retain its Non-compliant WVR Structures and/or VIE Structures (subsisting at the time of its secondary listing in Hong Kong) if it de-lists from the Qualifying Exchange on which it is primary listed
- Greater Flexibility in Dual-Primary Listing
It is proposed that Grandfathered Greater China Issuers and Non-Greater China Issuers with Noncompliant WVR and/ or VIE Structures may apply directly for a dual primary listing and retain the non-compliant structures, as long as they meet the eligibility and suitability requirements of Chapter 19C for Qualifying Issuers with a WVR structure
There will also be codification of some conditional Common Waivers for dual-primary listed issuers and the principles for granting Common Waivers
The deadline for comments to the Consultation is 31 May 2021.