Most Read Contributor in Hong Kong, September 2016
Originally published June 9, 2011
Keywords: HKEx, securities transactions, listed
issuers, Hong Kong, Listing of Securities
Hong Kong Exchanges and Clearing Limited (HKEx) published a new
Frequently Asked Questions Series 14 (FAQ) on 31 May 2011 mainly to
assist listed issuers to understand and comply with Appendix 10 of
the Rules Governing the Listing of Securities on The Stock Exchange
of Hong Kong Limited, namely the Model Code for Securities
Transactions by Directors of Listed Issuers (Model Code) and the
corresponding relevant provisions under the Rules Governing the
Listing of Securities on the Growth Enterprise Market of The Stock
Exchange of Hong Kong Limited.
Situations Explained in the FAQ
Under the Model Code, a listed issuer's director must not
deal in the listed issuer's securities when he is in possession
of unpublished price sensitive information relating to those
securities and during a black out period. Dealing includes an offer
to acquire the listed issuer's securities.
The different scenarios mentioned in the FAQ are summarised as
Mr. A (a director of Listco A) plans to make an offer for
Listco A's shares under the Code on Takeovers and Mergers (Takeovers Code).
In this connection, whether the following situations would be
regarded as a dealing in Listco A's shares under the Model
Code: (a) when the offer document is despatched; and (b) if during
the black out period, Mr. A announces his firm intention to make
the offer (with terms)?
Response: (a) In a takeover transaction, the despatch of
the offer document is a dealing by
Mr. A under the Model Code because he has made an offer to acquire
Listco A's shares under the offer document; and (b) as an offer
has not been made at the time of the announcement, it is not
considered as a dealing under the Model Code.
Prior to the commencement of the black out period, Mr. A
announced his firm intention to make an offer for Listco A's
shares (with terms) under the Takeovers Code. If the offer document
is to be despatched during the black out period and the offer terms
have not been amended, would the dealing restrictions under the
Model Code apply?
Response: Yes, the dealing restrictions under the Model
Code would apply.
If Mr. A requests and obtains irrevocable undertakings from
Listco A's shareholders to tender their shares under the offer
during the black out period, would the undertakings fall within the
ambit of dealings under the Model Code?
Response: The undertakings alone would not be regarded as
dealings by Mr. A under the Model Code.
Under the Model Code, do the dealing restrictions apply
to a takeover of a listed issuer by way of scheme of arrangement
pursuant to which the listed issuer's shares would be cancelled
or transferred in exchange for cash or securities?
Response: The dealing restrictions under the Model Code
are also applicable to schemes of arrangement as the effect is
similar to takeovers by way of general offer.
An entity makes an offer to acquire Listco A's
shares under the Takeovers Code. Mr. B is a director of both Listco A and the offeror. The
offer is not a dealing in which Mr. B would be regarded as interested under Part XV
of the Securities and Futures Ordinance. Would the offer be
considered as dealing by Mr. B in Listco A's shares under the
Model Code by virtue of his directorship in the offeror?
Response: No. Having said that, Mr. B should be aware
that under the Model Code he must not make any unauthorised
disclosure of confidential information of Listco A to any person
(even those to whom he owes a fiduciary duty).
Copies of the FAQ can be downloaded via the link below:
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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
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