On 23 July 2013, The Stock Exchange of Hong Kong Limited ("Stock Exchange") published amendments to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited ("Listing Rules") and a series of guidance materials to complement the new rules for IPO sponsors issued by the Securities and Futures Commission ("SFC"). The new requirements will apply to listing applications submitted on or after 1 October 2013.
Our earlier article in the January 2013 issue of Governance & Securities Law Focus sets out a summary of the SFC's new sponsor rules under the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission ("Code of Conduct"). The enhanced sponsor responsibilities under the Code of Conduct, together with the Listing Rules amendments, are expected to have significant impact on the ways IPOs are conducted in Hong Kong. Some of the key amendments to the Listing Rules are set out below:
Sponsor must be Appointed at least 2 Months before Listing Application
A sponsor must notify the Stock Exchange of its appointment and a listing application must not be submitted less than two months from the date the sponsor is formally appointed. Where there is more than one sponsor, the two-month period will commence on the date the last sponsor is formally appointed.
8-week Moratorium on Returned Listing Applications
A new applicant must submit a draft listing document ("Application Proof") in both English and Chinese to the Stock Exchange together with the listing application. A sponsor is required to complete all reasonable due diligence on the applicant before submitting a listing application and the Application Proof must be substantially complete except for information that by its nature can only be finalized and incorporated at a later date. If the Stock Exchange returns a listing application on the basis that the Application Proof is not substantially complete, the applicant can only submit a new listing application after eight weeks.
Requirement to Publish Application Proofs on HKEx's Website to Commence on 1 April 2014
The Stock Exchange has introduced a six-month suspension period for public filing of Application Proofs. With effect from 1 April 2014:
- Application Proofs submitted to the Stock Exchange will be published on the HKEx's website; and
- if a listing application is returned, the applicant's name, the sponsor's name and the return date will be published on the HKEx's website.
Initial 3-day check
From 1 October 2013 to 30 September 2014 ("Transitional Period"), the Stock Exchange will carry out an initial 3-day check on each Application Proof before deciding whether to accept the listing application for detailed vetting. An Application Proof will only be published on the HKEx's website after completion of the 3-day check and any application which fails to satisfy the 3-day check will be returned.
During the first six months of the Transitional Period, the SFC and the Stock Exchange will review the effectiveness of having a 3-day check before publication of Application Proofs to see if the arrangement should continue for the remainder of or after the Transitional Period.
Exemption from Publication of the Application Proof
To address market concerns that public filing of Application Proofs may discourage listing applications from companies listed overseas, an applicant that has been listed on a "recognised overseas exchange" for not less than five years and has a market capitalization of not less than US$400 million is exempt from the public filing requirement. A "recognised overseas exchange", for this purpose, means the main market of one of the 15 overseas exchanges recognised by the Stock Exchange, including the New York Stock Exchange (NYSE Euronext (US)), the London Stock Exchange (premium segment, LSE), the Australian Securities Exchange (ASX), the Tokyo Stock Exchange (TSE) and the Singapore Exchange (SGX).
The Stock Exchange may also waive or modify, on a case-by-case basis, the publication requirement in the case of a spin-off from an overseas listed parent.
Streamlined Regulatory Commenting Process
The Stock Exchange will adopt a streamlined regulatory commenting process focusing on major issues such as eligibility, suitability, sustainability, compliance with law and regulations, and any material disclosure deficiencies.
The Stock Exchange has also issued new/updated guidance letters on disclosure requirements for listing documents and documentary requirements for each stage of an IPO transaction. Document submission has been accelerated and a number of documents previously required to be submitted in stages, e.g., final or advanced drafts of the profit forecast and cash flow forecast memoranda, are required to be submitted together with the listing application starting from 1 October 2013.
The Listing Rules amendments and the guidance materials issued by the Stock Exchange are available at:
Our January 2013 issue of Governance & Securities Law Focus is available at:
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.