This quarterly update (April to June 2012) highlights recent developments in Hong Kong capital markets practices:


  • Landmark Hontex case triggers repurchase of investors' shares and revocation of sponsor licence: The landmark Hontex case is considered as an important milestone to enhance SFC's power to protect the interests of the investing public. On 20 June 2012, the Court of First Instance granted orders sought by SFC, which are the first of its kind, to require Hontex to make a repurchase offer to investors as a result of its violation of the SFO. Besides taking action against the listed issuer, SFC has also penalised its sponsor. On 22 April 2012, SFC revoked the licence of Mega Capital (Asia) Company Limited to advise on corporate finance and fined it HK$42 million for failing to discharge its sponsor's duties in relation to the IPO application of Hontex.
  • Guidance on disclosure of intended use of proceeds: On 17 April 2012, HKEx published a guidance letter to listing applicants on disclosure of the intended use of proceeds in their listing documents.
  • Guidance on disclosure of hard underwriting agreements: On 25 April 2012, HKEx published a guidance letter on disclosure of hard underwriting agreements in listing documents. A "hard underwriting agreement" refers to an agreement in which the underwriters agreed to undertake to purchase a certain value of shares not taken up under the public offer and/or international placing of an IPO provided that the final offer price is fixed at the low end of an indicative offer price range.
  • Guidance on profit forecast and profit estimate: On 8 May 2012, HKEx published a guidance letter to clarify matters in relation to profit forecast and profit estimate.
  • Guidance on disclosures for listing applicants adopting distributorship business models: On 17 May 2012, HKEx published a guidance letter in relation to the areas of concern and the relevant disclosures which should be made in the listing documents for listing applicants adopting distributorship business models.
  • Guidance on liquidity disclosures: On 15 June 2012, HKEx published two guidance letters to provide guidelines (a) to assist listing applicants and their advisers to prepare liquidity disclosures such as working capital statement, indebtedness statement and commentary on the liquidity and financial resources and capital structure; and (b) on the latest practicable date and the latest date for liquidity disclosures in a listing document.
  • Heavy reliance on parent company not suitable for listing: On 14 April 2012, HKEx published a listing decision in which it decided that the listing applicant's heavy financial and operational reliance on its parent company had resulted in the applicant being not suitable for listing on SEHK.
  • No waiver under Listing Rule 18.04 if there is no clear path to commercial production: On 18 May 2012, HKEx published a listing decision to determine whether (a) there was adequate disclosure in the prospectus regarding allegations made in a complaint apparently against certain previous management members of the listing applicant; and (b) a waiver from the requirement under Listing Rule 18.04 should be granted to the listing applicant.
  • Listing applicant was not required to prepare a competent person's report for its mining interests: On 8 June 2012, HKEx published a listing decision to determine that, subject to certain conditions, the listing applicant was not required to include a competent person's report on certain mining interests it intended to acquire or develop.


  • PRC notice on the issuance of RMB bonds in Hong Kong by non-financial institutions: On 2 May 2012, NDRC promulgated its "Notice on Relevant Matters in relation to the Issuance of RMB Bonds in Hong Kong by Local Non-Financial Institutions". The notice sets out the relevant rules and requirements for the issuance of RMB bonds by PRC non-financial institutions in Hong Kong.

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This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein. Please also read the JSM legal publications