On Tuesday, the Hong Kong Stock Exchange published its eagerly awaited changes to the Listing Rules to implement the changes made necessary as a result of the Securities and Futures Commission’s revisions to the sponsors’ regime. The Listing Rule changes will apply to listing applications submitted on or after 1 October 2013, which is also the effective date for the revised sponsors’ regime. Below is a brief summary of the key features of the amended Listing Rules.
Publication of the A1 proof of the listing document on the Stock Exchange’s website
As was envisaged during the SFC’s consultation process, the A1 proof of the listing document (with appropriate redactions such that it will not constitute a prospectus under the Companies Ordinance or fall foul of the Securities and Futures Ordinance advertisement regime) will be required to be published on the Stock Exchange’s website. However, the Stock Exchange has deferred the implementation date for this requirement until 1 April 2014. Also deferred until this date is the requirement to submit the A1 proof in Chinese.
The Listing Rules do make provision for confidential filings of listing applications where the applicant has already been listed on a recognised stock exchange for not less than 5 years and has a market capital of at least US$200 million. The Stock Exchange may also waive or modify the publication requirements for the A1 proof, for example in a spin-off from an overseas listed parent company.
8 week moratorium on returned listing applications
The A1 proof is expected to be substantially complete (except in relation to information that by its nature can only be finalised and incorporated at a later date) when the listing application is submitted. Where the Stock Exchange or the SFC return a listing application on the basis that it is not considered to be substantially complete, there will be an 8 week moratorium before a fresh listing application can be made.
Where a listing application is returned, the names of the sponsor and the listing applicant, together with the return date will be published on the Stock Exchange’s website. However, as with the requirement to publish the A1 proof, the implementation of this requirement has also been deferred until 1 April 2014.
Initial 3-day check of listing applications during a transitional period
During a transitional period from 1 October 2013 to 30 September 2014, the Stock Exchange will implement an initial 3-day check process for all listing applications and will only accept an application for detailed vetting after successful completion of such checks. Based on criteria set out in a prescribed checklist (the Initial 3-day Checklist), the Stock Exchange will carry out an initial assessment of the listing application and reserves the right to reject applications where there are grounds rendering it not substantially complete. Where the application is rejected in the 3-day period, the A1 proof will not need to be published on the Stock Exchange’s website but the sponsor’s and applicant’s names and the date of return will be published (although as mentioned above, this requirement has been deferred until 1 April 2014). The 8 week moratorium will, however, apply from the date of the return letter.
The Stock Exchange or SFC may also reject an application following the initial 3-day check after qualitative assessment if it is not substantially complete. In such a case, the A1 proof will (after 1 April 2014) have been published on the Stock Exchange’s website but the files will cease to be accessible. The SFC and Stock Exchange will review the effectiveness of the initial 3-day check system during the first six months to determine if it should continue for the full transitional period or beyond.
Replacement of the WPIP regime with the new PHIP regime
From 1 October 2013, the current requirement to publish a WPIP will be replaced by a new requirement to publish a Post Hearing Information Pack (PHIP). New guidance letters (GL56-13 and GL57-13) have been published setting out guidance on the publication of the PHIP and the information that should be redacted (which also apply to the A1 proof to be published on the Stock Exchange’s website) and other logistical arrangements.
Accelerated review process for returned listing applications
The revised Listing Rules implement an accelerated process for reviewing a decision by the Stock Exchange to return a listing application either following the initial 3-day check process or once the application has been accepted for detailed vetting. The Stock Exchange has published guidance letter GL61-13 which supplements the Listing Rules and provides detailed guidance on how the review process will operate with a timetable showing each stage of the review process.
Streamlined application and regulatory commenting process
The revised Listing Rules streamline the application process with the majority of documents previously submitted in stages to the Stock Exchange now being required to be submitted with the A1 listing application (including the profit forecast and cash flow memorandum and advanced draft of the sponsor’s working capital confirmation). The regulatory commenting process has also been streamlined, focusing on major issues such as eligibility, suitability, sustainability, any material disclosure deficiencies and regulatory compliance.
Revised sponsors’ rules, undertakings and declaration
The Listing Rules and the sponsors’ undertakings and declarations have been amended to reflect the new sponsors’ regime implemented by the SFC. Among the changes, the revised rules require sponsors to be appointed not less than 2 months prior to the filing of the listing application and set out increased obligations on the listing applicant to assist sponsors.
The Stock Exchange has also produced a series of guidance letters and has updated some existing guidance letters to supplement the revised Listing Rules and aid interpretation of the new regime. The guidance letters cover a variety of topics including for instance guidance on material non-compliance incidents and guidance on confirmations required on expert opinions and accountants’ reports, pro forma financial information and profit forecasts in A1 proofs and subsequent draft listing documents.
In respect of the accountants’ report, pro forma financial information and accountants’ report on the profit forecasts, the guidance provides that signed copies are expected to be included in the A1 proof. Where the financial information is not in final form, it must be in advanced form and the reporting accountants must provide a confirmation that no significant adjustment is expected to be made to the draft reports based on the work done to date.
The guidance letters can be found here.
A copy of the revised Listing Rules can be found here.