Article by Dieter Yih, Mandy Yim, Gigi Wong and Fiona Tai

Originally Published 5th December 2008

New amendments to the Listing Rules in Hong Kong will take effect from 1 January 2009, following the publication by the Hong Kong Stock Exchange ("HKEx") of the Consultation Conclusions on Proposals in the 2008 Combined Consultation Paper ("Consultation Conclusions").

The Consultation Conclusions are published in response to the Combined Consultation Paper on Proposed Changes to the Listing Rules first published in January 2008. The Consultation Conclusions introduced amendments to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited ("Main Board Rules") and the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited ("GEM Rules").

The changes to these two sets of rules (together, the "Listing Rules") will be adopted to address policy issues in relation to corporate governance and initial listing criteria, as well as to improve the clarity, certainty and efficiency of the Listing Rules. These changes will take effect from 1 January 2009.


1. Use of websites for communication with shareholders

A listed issuer will now be able to deem consent from its shareholders to have corporate communications made available to them solely via the company's website. The listed issuer will need to ask the shareholders individually for their consent, and there will be a waiting period of 28 days before consent will be deemed. Consent will not be deemed where the listed issuer's request for consent is sent less than 12 months after a previous request is made for the same class of corporate communication. A shareholder will continue to be entitled to receive a printed, hard copy of corporate communications free of charge upon giving notice to the listed issuer about his change of communication preference.

2. Information gathering power

The power of HKEx in gathering information from listed issuers is now codified for:

  • any information that HKEx reasonably considers appropriate to protect investors or to ensure the smooth operation of the market, and
  • any other information or explanation that HKEx may reasonably require for the purpose of investigating a suspected breach of or verifying compliance with the Listing Rules.

3. Qualified accountant

The requirement for a qualified accountant to be employed by a listed issuer will be removed. Simultaneously, the code provisions of Appendix 14 (Code on Corporate Governance Practices) to the Listing Rules regarding internal controls will be amended to make specific references to the oversight role of the audit committee, as well as to the directors' responsibility to conduct an annual review of the adequacy of the staffing of the financial reporting function.

4. Review of sponsor's independence

A sponsor will be required to demonstrate independence during the period between the date of submission of the Form A1 (Application for Listing) and the date of listing.

5. Bonus issues of a class of securities new to listing

The minimum spread of securities holders at the time of listing in the event of a bonus issue of a new class of securities involving options, warrants or similar rights to subscribe or purchase shares will no longer apply, provided that in the five years preceding the date of the announcement on the proposed bonus issue, there are no circumstances to indicate that the shares of the listed issuer may be concentrated in the hands of a few shareholders.

6. Review of HKEx's approach to pre-vetting public documents of listed issuers


  • A progressive phased approach is being introduced to reduce the requirements for pre-vetting activities for different types of listed issuers' announcements. The first phase will remove the requirements for pre-vetting of most announcements. Pre-vetting for announcements of transactions or arrangements that require shareholders' approval in relation to notifiable transactions and connected transactions will still be required.
  • Specific circumstances are set out in the amended Listing Rules when a listed issuer must consult HKEx before it enters into any proposed transactions in determining whether notifiable transactions or connected transactions are to be aggregated. A listed issuer must provide details of the transactions to HKEx to enable it to determine whether the transactions should be aggregated. HKEx will continue to retain the ability to require the aggregation of notifiable and connected transactions pursuant to existing Listing Rules where no prior consultation has been made by the listed issuer.

Listing documents and circulars

  • The pre-vetting requirement in respect of circulars for proposed amendments to a listed issuers' constitution and bye-laws will be removed. The listed issuer will only be required to submit the published version of the circular together with:
  • a letter addressed to the listed issuer from its legal advisers confirming that the proposed amendments comply with the requirements of the Listing Rules and the laws of the place where it is incorporated, and
  • a confirmation by the listed issuer itself that there is nothing unusual about the proposed amendments for a company listed in Hong Kong.
  • The pre-vetting requirement in respect of the explanatory statements relating to listed issuers purchasing their own shares on a stock exchange will be removed. A listed issuer will only be required to submit a published version of the circular along with:
  • a confirmation from the listed issuer that the specific information required is contained in the explanatory statement
  • a confirmation from the listed issuer that neither the explanatory statement nor the proposed share repurchase has any unusual features, and
  • an undertaking from the directors of the listed issuer to HKEx according to the relevant Listing Rule.
  • The current practice requiring the pre-vetting of circulars in relation to significant transactions or arrangements, including connected transactions and the cancellation or withdrawal of the listing of listed securities, will be codified.
  • The circular requirement for discloseable transactions will be removed. However, a listed issuer will be required to disclose the content of expert reports for a profit forecast in respect of a discloseable transaction (where a profit forecast is required to be provided) in the announcement or in a further announcement within 21 days after the publication of the initial announcement.
  • A listed issuer will need to include a standard HKEx disclaimer statement in any listing document, circular, announcement or notice issued by the listed issuer pursuant to the Listing Rules.

7. Disclosure of changes in issued share capital

Next Day Disclosure Return

A listed issuer will need to submit a Next Day Disclosure Return to HKEx in respect of changes in issued share capital. The Next Day Disclosure Return will be merged with the current Share Buyback Report. Some changes will require disclosure by 9.00 am the next business day, including changes as a result of or in connection with a placing, consideration issue, open offer, rights issue, bonus issue, scrip dividend, repurchase of shares or other securities, capital reorganisation and the exercise of an option by a director of the listed issuer or any of its subsidiaries. Some changes will be considered to be less sensitive and will require disclosure, subject to a 5% de minimis threshold and certain other criteria.

Monthly Return

A listed issuer will need to submit a monthly return by 9.00 am of the fifth business day following the end of each calendar month in relation to movements in the share capital and other securities of the listed issuer, including future obligations and commitments to issue shares. Such information will include, among other things, the number as at the close of such period of equity securities, debt securities and any other securitised instruments, as applicable, issued and which may be issued pursuant to options, warrants, convertible securities or any other agreements or arrangements.

Announcement relating to grant of share options

A listed issuer will need to make an announcement as soon as possible upon the grant of a share option under a share option scheme, setting out the following details:

  • date of grant
  • exercise price of options granted
  • number of options granted
  • market price of its securities on the date of grant
  • where any of the grantees is a director, chief executive or substantial shareholder of the listed issuer, or an associate of any of them, the names of such grantees and the number of options granted to each of them, and
  • validity period of the options.

8. Disclosure requirements for announcements regarding issues of securities for cash and allocation basis for excess shares in rights issue

The disclosure requirements for the issue of securities under general mandates will be extended to cover any issue of securities for cash. Additional information such as the basis of the allocation of excess shares for a rights issue or an open offer will be required to be disclosed in the announcement, circular or listing document.

9. Alignment of requirements for material dilution in major subsidiary and deemed disposal

The Listing Rules will be amended to align the requirements for material dilution in a major subsidiary and deemed disposal to such that the requirement for shareholders' consent will be based on a size test threshold of 25% (i.e. the threshold for a major transaction). A written certificate may be accepted in lieu of a physical shareholders' meeting.

10. Voting at general meetings

Voting by poll will be made mandatory on all resolutions at general meetings. The new code provision in Appendix 14 (Code on Corporate Governance Practices) to the Listing Rules will require a notice period of 20 clear business days to be given for annual general meetings and 10 clear business days to be given for all other general meetings.

11. Disclosure of information about and by directors

The level of disclosure in relation to information about and by directors and supervisors, during the term of the director's or supervisor's office with a listed issuer, will be increased.

Continuous and immediate disclosure by publishing an announcement in accordance with Main Board Rule 2.07C and a notification to HKEx will now be required for any change and any updated information requiring disclosure pursuant to Main Board Rule 13.51(2)(h) to (v) (subject to certain exceptions and modifications), including the full particulars of any adjudication of bankruptcy of an individual or liquidation of a company; unsatisfied judgments or court orders; deed of arrangement entered into; convictions of fraud, dishonesty or insider dealing related offences; or criminal proceedings material to the evaluation of the character or integrity of an individual being a director or supervisor.

Periodical disclosure in annual and interim reports will be required for any change and any updated information requiring disclosure pursuant to Main Board Rule 13.51(2)(a) - (e) & (g) (subject to certain exceptions and modifications), including the full name of the director or supervisor; positions held; previous experience in the past three years; length of service with the listed issuer; relationships with any directors, senior management or substantial or controlling shareholders of the listed issuer; and details regarding emoluments.

Directors and supervisors will be required to procure and/or assist the listed issuer in complying with the disclosure obligation.

Information about the directors' and supervisors' experience including (i) other directorships held in the last three years in public companies, the securities of which are listed on any securities market in Hong Kong or overseas; and (ii) other major appointments and professional qualifications, will be required to be disclosed.

The Listing Rules will be amended to clarify that disclosure under Main Board Rule 13.51B (relating to the continuous and immediate disclosure and periodic disclosure for any change and any updated information of directors and supervisors) will not be required where it is prohibited by law.

Disclosure of the particulars of the directors' and supervisors' offences under Listing Rule 13.51(m) will be expanded to include references to offences under the Commodity Exchanges (Prohibition) Ordinance and several other securities laws.

12. Codification of waiver to property companies

The Listing Rules will be amended to codify the conditional waiver (the "Exemption") that exempts listed issuers actively engaged in property development as a principal business ("Qualified Issuers") from the shareholders' approval requirement under the Listing Rules in certain scenarios involving acquisitions of land or property development projects in Hong Kong, from Government or Government-controlled entities through public auctions or tenders ("Qualified Property Projects").

The Exemption

  • The Exemption will be available to Qualified Issuers only. For the purpose of determining whether property development is a principal business of a listed issuer for it to be a Qualified Issuer, consideration will be given to the following factors:
  • clear disclosure of property development activity as a current and continuing principal business in the directors' report of the listed issuer's latest published annual financial statements
  • property development activity is being reported as a separate and continuing business segment (if not the only segment) in the listed issuer's latest published financial statements, and
  • the listed issuer's format for reporting segmental information is in business segments, and its latest published annual financial statements have fully complied with the requirements of Hong Kong Accounting Standard 14 or International Accounting Standard 14, as appropriate, which require, amongst others, the reporting of segment revenue and segment expense.
  • A Qualified Property Project that contains a capital element ("Qualified Property Acquisition"), which constitutes a major transaction or a very substantial acquisition, will be exempted from shareholders' approval provided that certain conditions are satisfied.
  • For the purpose of this issue, any person that is a connected person (as defined in Main Board Rule 14A.11) of the Qualified Issuer solely because such person is a substantial shareholder, with or without representation on the board in one or more non-wholly owned subsidiaries of the Qualified Issuer formed to participate in property projects, each of which is single purpose and project specific, is defined as a "Qualified Connected Person".
  • A Qualified Property Project undertaken with a Qualified Connected Person will be exempted from the shareholders' approval requirement where the Qualified Issuer has previously obtained an authority granted in advance by its shareholders in an annual general meeting to engage in Qualified Property Acquisitions ("General Property Acquisition Mandate"). A Qualified Property Project having the Exemption in such case will still be subject to certain notification, circularisation, reporting and announcement requirements.

13. Disclosure of information in takeovers

Codifying current practice of granting waivers

HKEx's practice of granting waivers will be codified to allow listed issuers to publish certain prescribed information on target companies being acquired by the listed issuer in cases of major transactions and very substantial acquisitions, in a supplemental circular at a later time when the information becomes available, provided that the following conditions are demonstrated to the satisfaction of HKEx:

  • the unavailability of non-public information is caused by the lack of cooperation of the board of directors in the target company (such as in the case of a hostile takeover) and/or legal or regulatory restrictions in providing non-public information to the listed issuer
  • the target company is listed on a regulated, regularly operating, open stock exchange recognised by HKEx, and
  • the target company will become a subsidiary of the listed issuer.

In such circumstances, the listed issuer must despatch an initial circular in partial compliance with Main Board Rules 14.66 and 14.67 or Main Board Rule 14.69 within the time frames stipulated in Main Board Rules 14.38A and 14.42 or Main Board Rules 14.48 and 14.52.

The supplemental circular must be despatched to shareholders within 45 days of the earlier of (i) the listed issuer being able to gain access to the target company's books and records for the purpose of complying with the disclosure requirements in respect of the target company and the enlarged group under Main Board Rules 14.66 and 14.67 or Main Board Rule 14.69; and (ii) the listed issuer being able to exercise control over the target company.

14. Review of director's and supervisor's declaration and undertaking

Director's and Supervisor's Undertaking Forms will be streamlined by:

  • removing questions concerning the director's and supervisor's biographical details
  • removing the statutory declaration requirement
  • amending the Listing Rules so that the listing documents in relation to the new listing applicants for the listing of equity and debt securities do not contain less information than required under Main Board Rule 13.51(2), and
  • amending the Listing Rules to codify HKEx's powers to gather information from directors.

A similar provision will be included in the Director's Undertakings (Part 2 of Form B and H of the Main Board Rules and Part 2 of Forms A and B of the GEM Rules).

In light of the changes made to the Director's Undertakings, directors appointed by a listed issuer before 1 January 2009 and who continue to hold office will be required to sign a new undertaking, and a transitional rule 3.20A will be introduced allowing for a period of approximately three months from the date of implementation (until 31 March 2009) for directors to sign and return the undertaking in the form set out in Part 2 of Form B or H of Appendix 5 (as the case may be).

Going forward, the declaration and undertaking in the form set out in Form B or H of Appendix 5 will need to be executed and submitted by the directors or supervisors of a listed issuer if specifically requested by HKEx.

15. Review of Model Code for Securities Transactions by Directors of Listed Issuers ("Model Code")

The Model Code will introduce three new exceptions to the definition of "dealing", including dealing where:

  • the beneficial interest or interests in the relevant security of the listed issuer do not change
  • a shareholder places out his existing shares in a "top-up" placing where the number of new shares subscribed by him pursuant to an irrevocable, binding obligation equals the number of existing shares placed out and the subscription price (after expenses) is the same as the price at which the existing shares were placed out, and
  • the beneficial ownership is transferred from another party by operation of law.

The "black out" period whereby a director must not deal in any securities of the listed issuer will be extended to cover the period commencing from the end of the financial period of the listed issuer to the date on which the listed issuer publishes the relevant results announcement.

The note to Rule A.1 of the Model Code will clarify that "price sensitive information" in the context of the Model Code means information described in Main Board Rule 13.09(1).

A listed issuer will be required to respond to a request for clearance to deal within five business days of the request. Furthermore, the clearance will be valid for no longer than five business days after the clearance is received.

Guides on HKEx's Practices and Procedures for Handling Listing-related Matters

HKEx has also published a number of guidance documents to assist the listed issuers in meeting their listing obligations. For more information, please see


The amendments to the Listing Rules in relation to the above 15 issues will be implemented by HKEx from 1 January 2009. The remaining three issues that were discussed in the January 2008 Combined Consultation Paper regarding public float, general mandates and self-constructed fixed assets remain under assessment, and separate conclusions will be published at a later date.

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