Most Read Contributor in Hong Kong, September 2016
Keywords: Hong Kong Stock Exchange, new
companies ordinance, CO, listing rules
Do Hong Kong incorporated listed companies need to draft their
annual general mandates to issue and repurchase shares differently
in view of the New Companies Ordinance (New CO)?
Yes, for shareholder resolutions to be passed on or after 3
March 2014, the 20 percent and 10 percent listing rule limits for
the issue of additional, or repurchase, of shares (as the case may
be) should refer to "the number of shares in issue (subject to
adjustment in the case of subdivision and consolidation of
shares)" rather than to "issued share capital"
(which is the existing term used in the Listing Rules).
This is so because in a par value regime in which Hong Kong
company law operates prior to 3 March 2014, "issued share
capital" means the "aggregate nominal value of shares in
issue", and the latter wording is typically used in general
mandate resolutions. "Aggregate nominal value of shares in
issue" is closely related to the number of shares in issue
because it simply means the par value of the shares times the
number of shares in issue. However, in a no par regime (such as the
one adopted under the New CO), "issued share capital" (or
simply "share capital") refers to everything received by
the company on issue of shares, and this has little to do with the
number of shares in issue. Care should therefore be taken in
preparing resolutions giving the mandates which are proposed to be
passed on or after the commencement date of the New CO (i.e., 3
Are the provisions of the listing rules consistent with the New
No, suggestions have been made to the Hong Kong Stock Exchange
for amendments to be made, or FAQs to be issued, in respect of the
relevant parts of the Listing Rules to provide guidance to Hong
Kong incorporated issuers whose general mandates need to be
prepared in a manner consistent with a no par value regime which
would take effect on 3 March 2014.
Does the New CO impact on mandates already given prior to 3
No, the transitional arrangements under the New CO would take
care of that, but resolutions passed on or after 3 March 2014 would
For listed companies with share option schemes, do they
need to have a general mandate to issue shares in place every year
in order to be able to grant options under the
Yes, as a matter of Hong Kong company law, the shareholder
approval given when the scheme is adopted would only cover options
granted before the next annual general meeting (AGM) and will
expire on conclusion of the AGM.
Does the change to a no par system under the New CO apply to
listed companies incorporated outside Hong Kong in jurisdictions
that continue to operate in a par value environment, such as in
Bermuda and the Cayman Islands?
No, the change affects Hong Kong incorporated issuers only.
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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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Investment funds with high net worth individuals as investors will need to have a client agreement with their high net worth investors.
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