The definition of "Prospectus" in Section 2(1) of the Companies Ordinance (Cap 32) (the "CO") has been amended with effect from 3 December 2004 in accordance with the Companies (Amendment) Ordinance 2004 to exclude the documentation for 12 types of offer set out in the new Seventeenth Schedule to the CO ("the New Schedule").

Offers excluded from the prospectus regime

If an offer falls within one of the following categories, it is excluded from all requirements of the CO prospectus regime: -

  1. an offer to professional investors within the definition of Part 1 of Schedule 1 to the Securities and Futures Ordinance (Cap 571) (the "SFO") which include registered intermediaries, banks, authorized insurers, collective investment schemes and certain individuals and enterprises meeting a minimum asset requirement;
  2. an offer to not more than 50 persons ("limited numbers exemption");
  3. an offer in respect of which the total consideration payable for the shares or debentures does not exceed HK$5 million or its foreign currency equivalent ("small offer exemption");
  4. an offer in respect of which the minimum denomination of, or the minimum consideration payable by any person for shares, or in respect of debentures, the minimum principal amount to be subscribed or purchased, is not less than HK$500,000 or its foreign currency equivalent ("minimum denomination exemption");
  5. an offer in connection with an invitation made in good faith to enter into an underwriting agreement;
  6. an offer in connection with a takeover or merger or a share repurchase which is in compliance with the SFC Codes;
  7. an offer of shares in a company free of charge to any or all shareholders in the company or, as an alternative to a dividend or other distribution to all shareholders of a particular class in the company;
  8. an offer of shares or debentures of a company to a qualifying person of that company or a company within the same group;
  9. an offer by a charitable institution or trust of a public character mentioned in section 88 of the Inland Revenue Ordinance (Cap 112) or, educational establishment within the meaning of section 2(1) of the Sex Discrimination Ordinance (Cap 480);
  10. an offer to members of a club or association where the proceeds of the offer are to be applied for the purposes of club or association;
  11. an offer in respect of an exchange of shares or debentures in the same company which does not result in an increase in the issued share capital of the company or in an increase in the aggregate principal amount outstanding under the debentures; and
  12. an offer in connection with a collective investment scheme authorized under section 104 of the SFO.

In fact, some of the above exclusions such as an offer to professional investors and an offer in connection with an underwriting agreement are not new but were previously covered by similar provisions under the Protection of Investors Ordinance (Cap 335), which was repealed by the SFO in April 2003.

The limited numbers exemption provides statutory backing for the market’s view that an offer made to a limited number of individuals should not be an offer that requires a registered prospectus. In addition, the New Schedule clarifies how the limited numbers exemption and small offer exemption apply in the case of a series of offers made over time. Such offers are aggregated if the offers are: (a) of the same class of shares or debentures; (b) made by the same person; (c) open at any time within a period of 12 months; and (d) made without registering a prospectus.

Combination of exemptions possible

Interestingly, with the exception of the small offer exemption and minimum denomination exemption, it is possible to combine any of the other exclusions under the New Schedule. This means that except for the small offer exemption and minimum denomination exemption one can structure an offer into separate parts, provided each part falls within one of the exclusions, so that the whole offer will fall outside the prospectus regime. For example, an offer to an unlimited number of professional investors and to not more than 50 ordinary investors will be exempted under the New Schedule.


These amendments have created more certainty for issuers and market intermediaries, making it a straight forward matter to determine the scope of, and take advantage of, private placement and "professional" investor distribution channels. The amendments also serve to remove some of the inconsistencies between the CO and the SFO.

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