The Stock Exchange of Hong Kong Limited announced various minor and housekeeping amendments to the Main Board Listing Rules and GEM Listing Rules on 17 February 2006. The amendments come into effect on 1 March 2006.
The Minor and Housekeeping Amendments
The minor and housekeeping amendments mainly relate to the following matters :-
Disclosure of "advances to entities"
Rules 13.13 to 13.16 of the Main Board Listing Rules and Rules 17.15 to 17.18 of the GEM Listing Rules require disclosure of advances to entities where certain thresholds are exceeded. Before the amendments were made, five tests (i.e. assets ratio, profits ratio, revenue ratio, consideration ratio and equity capital ratio) were required to be applied. The applicable tests have now been amended to only the assets ratio test. The amendments also introduced a new Rule 13.15A to the Main Board Listing Rules and Rule 17.17A to the GEM Listing Rules that exclude trade receivables from advances to entities in the calculation of the assets ratio where the trade receivables (other than as a result of the provision of financial assistance) arose in the ordinary and usual course of business of the issuer and the transaction from which the trade receivables arose was on normal commercial terms.
Rules 14.04 and 14A.10 of the Main Board Listing Rules and Rules 19.04 and 20.10 of the GEM Listing Rules have been amended. Listed securities houses are now exempted from the disclosure and shareholder approval provisions in respect of IPO financing and securities margin financing provided by them in the ordinary and usual course of business and upon normal commercial terms.
Disclosure of pre-acquisition financial information
A new Rule 4.05A of the Main Board Listing Rules and Rule 7.04A of the GEM Listing Rules have been introduced to require the disclosure by a new listing applicant of pre-acquisition financial information on any material subsidiary or business acquired during the trading record period (if such an acquisition if made by a listed issuer would have been classified at the date of application as a major transaction or a very substantial acquisition) in an accountant’s report for a listing document.
Removal of directors
Paragraph 4(3) of Appendix 3 and paragraph 5(1) of Appendix 13B of the Main Board Listing Rules and paragraph 4(3) of Appendix 3 and paragraph 5(1) of Appendix 11B of the GEM Listing Rules have been amended to provide that a director may be removed by an ordinary resolution instead of a special resolution.
Notifiable transactions and connected transactions
Circulars required for discloseable transactions should also include transactions that do not involve any acquisition or disposal of assets, such as in the case of financial assistance transactions.
Rule 14A.14 of the Main Board Listing Rules and Rule 20.14 of the GEM Listing Rules have been clarified. "Continuing connected transaction" includes not just provision of goods or services but also financial assistance.
Accounting matters and the pro forma rules
For a new listing applicant without any published audited consolidated financial statements, any comparison for classifying acquisitions required under the relevant Listing Rule should be made instead to the new applicant’s latest audited consolidated financial statements in the accountants’ report.
A combination of balance sheets of affiliated companies is not pro forma financial information as required under Rule 4.29 of the Main Board Listing Rules and Rule 7.31 of the GEM Listing Rules.
Furthermore, Rule 14.69(7) of the Main Board Listing Rules and Rule 19.69(8) of the GEM Listing Rules have been amended to clarify that in respect of a circular issued in relation to a very substantial acquisition, a separate management discussion and analysis statements are required, one on the existing group and one on the business or company acquired or to be acquired.
Minor amendments have been made to Chapter 15A of the Main Board Listing Rules to facilitate the listing of callable bull/bear contracts and other types of structured products which may be developed in the future.
The amendments to the Main Board and GEM Listing Rules have created more certainty for issuers and also have reflected the requirements of the Companies Ordinance. Other minor amendments include the change in the definition of "subsidiary" to reflect amendments made to the definition of "subsidiary" in the Companies Ordinance and the change in timing for the release of results announcement pursuant to Rule 13.45 of the Main Board Listing Rules from 4:00 pm to 4:15 pm. The amendments come into effect on 1 March 2006.
Experienced lawyers in our Corporate Commercial Department advise on a wide range of corporate finance issues as well as regulatory compliance with the Listing Rules for Hong Kong listed companies. Please contact us if you have any queries.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.