Hong Kong: Securities Law - Application For Resumption Of Trading On HK Stock Exchange

Last Updated: 11 February 2009

Sanyuan Group Ltd ("Sanyuan") which was a listed company on the Hong Kong Stock Exchange ("HKSE") and together with its subsidiaries (the "Group") were previously engaged in transportation, property investment and pharmaceutical/health care businesses.

The transportation business of the Group was discontinued in 2002 and the Group's property investment properties were sold between 2001 and 2003 to repay bank borrowings. Since 2004, the Group has been primarily engaged in biotechnology through its subsidiary, GenePro Medical Biotechnology Ltd ("GenePro"). In 2005, the Group entered into a joint venture with Jin Shun Branch Company ("Jin Shun") to engage in trading of pharmaceutical products.

Sanyuan had been suspended from trading on the HKSE since May 2004. The HKSE informed Sanyuan that trading in its shares would not be allowed to resume unless Sanyuan complies with Rule 13.24 of the Listing Rules. Rule 13.24 provides that "an issuer shall carry out, directly or indirectly, a sufficient level of operations or have tangible assets of sufficient value and/or intangible assets for which a sufficient potential value can be demonstrated to the HKSE to warrant the continued listing of the issuer's securities."

In order to forestall de-listing, Sanyuan presented a resumption proposal (the 'Proposal") to the HKSE in late 2005. The Listing Committee of the HKSE ("LC") decided that the Proposal did not satisfy the requirements of Rule 13.24. Its decision was upheld by the Listing Review Committee ("LRC") and the Listing Appeals Committee ("LAC"). Sanyuan applied to the Court of First Instance for judicial review of the LAC's decision.


The LC refused to re-list Sanyuan in December 2005 on the following reasons. Sanyuan's Proposal essentially comprised of the continuation of the business operation of GenePro, the commencement of business operation of the joint venture company and a proposed rights issue to raise HK$15 million.

The LC decided that the GenePro business was still at a preliminary stage and would not be considered a sustainable business for the purpose of Rule 13.24 due to its low level of operation and operating loss. The joint venture company had only commenced operation in November 2005 and was run by Jin Shun's previous management. Sanyuan had used the track record of Jin Shun as an indication of how the joint venture company would perform in the future. The LC was of the view that Jin Shun's track record might not be indicative of the joint venture company's scale of operations and there was no confirmed order or sufficient track record to support the sustainability of the business run by the joint venture company.

The LRC and LAC were also not satisfied that Sanyuan had complied with Rule 13.24 of the Listing Rules and upheld the decision of LC.

Court's Decision

At the judicial review, the Court held that it should be extremely slow to substitute its views for those of the experienced members of the relevant committees. If the Court is to overturn the decision of any particular committee, it must be evident to the Court that such committee failed to comply with some legal norm or came to a decision which is wholly unreasonable. The Court cannot review the substantive merits of an administrative decision by a committee. It must confine itself to examining the legality of the decision or of the process by which the decision was reached.

The relevant Listing committees were subject to an overriding need for fairness and transparency in the application of Rule 13.24. The Court decided that the LC, LRC and LAC simply rejected Sanyuan's financial figures as "insufficient" without any attempt to articulate any objective reference by which their conclusions were reached. An applicant must at least be entitled to know what standard of operation or what sort of asset base he is expected to have in order to qualify for re-listing. If his resumption proposal is rejected, an applicant cannot simply be told that his turnover, profit or assets are considered insufficient. That is tantamount to giving no reasons. The applicant should be informed in what sense his financial numbers have been deemed to be insufficient and is entitled to know what level of operation or asset base he has fallen below.

Accordingly, Sanyuan was entitled to have the LAC's decision quashed for procedural unfairness and inadequacy of reasons and the Court remitted the matter to the LAC for reconsideration in accordance with the law.

The Court further held that a tribunal dwells on an irrelevant matter at some length during a hearing does not mean that the tribunal's eventual decision is automatically invalid, particularly where the matter plays little or no part in the tribunal's substantive reasoning and eventual determination. It would be wrong in such situation to say that the final decision was irregular on the ground of irrelevant consideration.


According to the decision of this case, the fact that the HKSE is a self-regulating body and the HKSE's committees are made up of experts in the market cannot overcome the need for transparency and fairness in its application of the Listing Rules. The HKSE should identify objective standards and give reasons for its decisions.

Experienced lawyers in our Corporate Finance and Securities Department regularly advise listed companies on regulatory compliance, capital and private fund raising and transactional matters.  If you have any question on the above eNews or any part of the Listing Rules, please do not hesitate to contact us.

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.