Hong Kong: Coach Creates A Path For Other U.S. Companies To List In Hong Kong

Fried Frank advised leading accessories brand Coach in connection with its December 1st listing of Hong Kong depositary receipts (HDRs) representing Coach common stock on the Hong Kong Stock Exchange. The listing makes Coach the first company incorporated in the United States to list in Hong Kong. In connection with the listing, Coach also obtained a no-action letter from the SEC Staff on November 28th which granted relief from certain of the requirements of Regulation S under the Securities Act of 1933 (the 1933 Act).1 Approval of the listing by the Hong Kong regulators, as well as the SEC Staff's decision, serve as important precedents for other U.S. companies considering following in Coach's footsteps.

Background of the Coach Listing

In recent years, a number of international brands have sought listings in Hong Kong to tap into the investor base in Asia and to gain increased visibility among the growing middle class in China who use their products. Examples include L'Occitane, Prada and Samsonite, all of which sought primary listings in Hong Kong as part of their initial public offerings. Certain other international companies have also completed secondary listings in Hong Kong including Brazilian mining company Vale which completed a secondary listing without a capital raise to increase its profile in China. Others currently rumored to be in the queue for Hong Kong listings include Graff Diamonds and Louis Vuitton Moet Hennessy.

Seeking to increase its presence in Asia, Coach completed a secondary listing of HDRs by way of introduction on the Hong Kong Stock Exchange. A listing by way of introduction does not involve raising capital and is similar to a sponsored Level II American depositary receipt program in the United States. HDRs are similar to American depositary receipts and global depositary receipts in that they represent underlying common or ordinary shares deposited with a depositary. The listing also permits a Hong Kong dollar denominated security to be accessible to Asian investors during Hong Kong trading hours. Coach's primary listing continues to be the New York Stock Exchange.

Why Depositary Receipts?

Hong Kong introduced its depositary receipt framework in July 2008. Since that time, the Hong Kong Stock Exchange has been actively courting overseas companies to come to Hong Kong via a depositary receipt listing. Coach's listing is the third such listing since the implementation of the framework and the first by a company incorporated in the United States.

Pursuing a depositary receipt structure in Hong Kong, as compared to a common stock structure, may be driven by a number of factors similar to those considered when pursuing depositary receipt programs elsewhere. These factors include, among other things:

  • the ability to re-size the security's price to appeal to investors in the secondary listing jurisdiction;
  • prohibitions on maintaining an overseas share register;
  • ease of administration in terms of time and cost when moving securities between two jurisdictions; and
  • allowing payment of dividends in local currency.

The Hong Kong Stock Exchange also recently encouraged overseas companies to use HDRs, particularly in light of the current nature of its clearing system.2

Acceptance of Overseas Incorporated Companies in Hong Kong

The listing criteria in Hong Kong provide that companies incorporated in Hong Kong, China, Bermuda and the Cayman Islands may list on the Hong Kong Stock Exchange. The Hong Kong Stock Exchange, along with the Hong Kong Securities and Futures Commission, also consider applicants incorporated in other jurisdictions so long as the applicants can show that their home jurisdictions have at least equivalent standards of shareholder protection as compared to those in Hong Kong. For purposes of this analysis, the Hong Kong regulators published a roadmap in March 2007, known as the Joint Policy Statement, which sets out various shareholder protection matters under the Hong Kong Companies Ordinance against which an applicant is required to compare equivalency of its home jurisdiction's protections. Where the frameworks deviate on particular points, the Hong Kong regulators have permitted workarounds. A number of jurisdictions have been approved under this process including Australia, Brazil, the British Virgin Islands, certain provinces of Canada, California, Cyprus, France, Germany, Guernsey, Isle of Man, Italy, Japan, Jersey, Luxembourg, Singapore, and the United Kingdom.

Recently, the Hong Kong Stock Exchange stated that they and the Hong Kong Securities and Futures Commission were re-examining the Joint Policy Statement and whether the Hong Kong Companies Ordinance was the appropriate regulatory benchmark for the shareholder protection equivalency analysis.3 Further, based on the experience of Coach's listing, it appears that the Hong Kong regulators may be moving toward a case-by-case analysis for certain applicants.

Reconciling Regulatory Regimes

A secondary listing in Hong Kong (as compared to a primary listing) permits the applicant to obtain a number of waivers from compliance with the Hong Kong listing rules, takeovers code and securitiesrelated ordinances. These waivers focus on, among other things, a balancing of investor expectations with the burden of an applicant of having to comply with two regulatory frameworks where the trading is predominantly in the home market and the primary listing involves a regulatory framework with acceptable investor protections. Coach, as a U.S. domestic reporting issuer, is the first company subject to the full U.S. regulatory regime (unlike a foreign private issuer) that has completed such waiver process. The waivers obtained by Coach include:

  • the ability to use periodic reports filed in the United States to fulfill similar reporting requirements in Hong Kong;
  • waivers from Hong Kong's shareholder approval and disclosure requirements for related party transactions (known as "connected transactions") and certain share issuances and acquisitions and disposals (known as "notifiable transactions") provided that the regulatory framework in the United States is followed;
  • the ability to use Section 16 filings and Section 13 filings under the Securities Exchange Act of 1934 to fulfill similar security ownership filing requirements in Hong Kong; and
  • an exemption from the Hong Kong takeovers code, which provides for a regulatory regime quite different from the United States, and, in Coach's case, may be the first such exemption granted to a company incorporated in the United States.

Liquidity Arrangements

In the context of a listing where there is no capital raise, the Hong Kong Stock Exchange expects adequate measures to be in place to ensure that there is sufficient liquidity in the securities. These liquidity arrangements are precautionary measures designed to help facilitate a liquid and orderly market for the securities for a limited initial period following the listing. For example, as in Coach's listing, there may be a designated dealer who borrows shares from the open market to create an inventory of HDRs thereby acting as a conduit to allow some of the liquidity in the primary trading market to migrate to the secondary trading market. These measures may supplement any voluntary movement by existing securities holders from one market to the other.

U.S. Securities Laws Considerations

In order to avoid any concerns regarding compliance with the registration requirements of the 1933 Act, Coach and the depositary sought no action relief from the SEC Staff such that they could take advantage of the Regulation S safe harbor. Among other things, the Regulation S safe harbor permits U.S. companies to make offerings of equity securities abroad to foreign investors without registration under the 1933 Act.

As Coach is a U.S. domestic issuer, the requirements of Category 3 of the Regulation S safe harbor may be applicable to the issuance and secondary trading of the HDRs. The Category 3 requirements of the Regulation S safe harbor provide, in part, that the HDRs cannot be sold into the United States or to a U.S. person or for the account or benefit of a U.S. person prior to the expiration of a six month distribution compliance period and purchasers of HDRs may not engage in hedging transactions except in compliance with the 1933 Act.

As a result of the manner in which securities are traded and settled on the Hong Kong Stock Exchange, strict compliance with the following Category 3 requirements of Regulation S would not be feasible in connection with the issuance and secondary trading of the HDRs on the Hong Kong Stock Exchange:

  • purchaser certification, purchaser agreement regarding resale, legending and stop-transfer requirements (Rule 903(b)(3)(iii)(B) of Regulation S);
  • distributor notification requirements (Rule 903(b)(3)(iv) of Regulation S); and
  • dealer notification requirements (Rule 904(b)(1)(ii) of Regulation S).

These requirements would not be possible as book-entry trading was expected to be the primary means for trading in the HDRs.

The no-action relief provided by the SEC Staff permits Coach and the depositary to satisfy the abovementioned requirements of Category 3 of the Regulation S safe harbor by implementing alternative restrictions and procedures, including:

  • disclosure in Coach's Hong Kong listing document (which is similar to a U.S. style prospectus) of deemed representations regarding a purchaser's non-U.S. status and agreements regarding restrictions on resale and hedging;
  • the Hong Kong Stock Exchange's agreement to advise all exchange participants that:
    • no exchange participant may execute a transaction in the HDRs if such exchange participant has knowledge that the buyer is a U.S. person or is acting for the account or benefit of a U.S. person;
    • to the extent an exchange participant is purchasing HDRs on behalf of its customer that is not an exchange participant, the exchange participant making such purchase must make reasonable efforts to ascertain that its customer is not a U.S. person and is not acting for the account or benefit of a U.S. person; and
    • exchange participants must implement measures designed to assure reasonable compliance with the foregoing requirements;
  • inclusion of a restrictive legend on any certificated HDRs;
  • identification of the HDRs in the CUSIP database as subject to the restrictions of Regulation S;
  • Coach's agreement to include a statement that the HDRs have not been registered under the 1933 Act and are subject to the restrictions of Regulation S in any information provided by Coach to publishers of publicly-available databases (e.g., BLOOMBERG) about the terms of any issuance of the HDRs;
  • the Hong Kong Stock Exchange's agreement to:
    • add an "RS" identifier to Coach's full name on its website (i.e., Coach, Inc. -RS) and in the HDRs' short name (i.e., COACH-DRS-RS);
    • assign Coach a numeric stock code within a newly established range reserved for U.S. companies that have restricted HDRs; and
    • publish explanations of the above-mentioned "RS" identifier and the numeric stock code;
  • the Hong Kong Stock Exchange's agreement to advise all exchange participants that trade confirmations should include the HDRs' short name, including the "RS" identifier, and the numeric stock code;
  • covenants by the depositary and Coach in the deposit agreement that no Hong Kong depositary shares (evidenced by the HDRs) in physical certificated form, for so long as they contain the Regulation S legend thereon, may be transferred by, or on behalf of, the depositary without a favorable opinion of counsel or other assurance in the depositary's discretion that the transfer complies with the 1933 Act; and
  • Coach's agreement to provide notification of the Regulation S status of its securities in shareholder communications, such as annual reports, periodic interim reports, dividend notices and its notices of shareholder meetings.

With this no-action letter, the Hong Kong Stock Exchange now has procedures in place that other U.S. listed, domestic companies may find useful. Further, while the no-action letter is limited to transactions involving no capital raise, the SEC Staff has provided prior relief involving non-reporting U.S. companies doing capital raising exercises on foreign exchanges.4 Accordingly, the ability of U.S. companies to do capital raises via an HDR program may be feasible.


As noted above, Coach's listing has created a path for others to follow. As with any transaction, there are a number of other issues to consider or that may arise in the context of a particular applicant. Our team is available to discuss these listings with your company or organization in more detail and assist with any structuring issues.


1. See Coach, Inc. and J.P. Morgan Chase Bank N.A. no-action letter (November 28, 2011) at http://www.sec.gov/divisions/corpfin/cf-noaction/2011/coach112811.htm .

2 "HKEx: Our Listings Need to be Simplified", International Financial Law Review, December 2, 2011.

3 "HKEx and SFC to Revise Company Listings Joint Policy Statement", International Financial Law Review, December 2, 2011.

4. See OM Stockholm Exchange no-action letter (October 11, 2000); Australian Stock Exchange Limited no-action letter (January 7, 2000); and The European Association of Securities Dealers Automated Quotation N.V./S.A. no-action letter (July 27, 1999).

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.