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Keywords: Listing decisions, Hong Kong Exchange
and Clearing Limited, HKEx, lister issuer
Quick Read
Hong Kong Exchanges and Clearing Limited (HKEx)
published its listing decision "HKEx-LD9-2011"
on 29 April 2011 to determine whether The Stock Exchange of Hong
Kong Limited (SEHK) should waive the requirement
on the exercise price of share options for a share option scheme of
a PRC listed issuer (Listco B) in relation to
issue of new A shares.
Background
Listco B, which shares were also listed on a Mainland exchange,
announced its proposals to (a) adopt a share option scheme
(Scheme) involving issue of new A shares; and (b)
grant share options under the Scheme
(Announcement).
Both the Scheme and the granting of the share options were
required to be approved by the relevant Mainland China regulatory
authorities and shareholders and it would be effective from the
date of the shareholders' approval.
To comply with the relevant Mainland China legal requirement,
Listco B should set the exercise price of the options based on the
higher of (PRC Price Fixing Mechanism):
The closing price of A Shares on the last trading day before
the Announcement; and
The average closing price of A shares during the last 30
trading days before the Announcement.
Issue
The PRC Price Fixing Mechanism was different from the
requirement under Note (1) to Rule 17.03(9) of the Rules Governing
the Listing of Securities on The Stock Exchange of Hong Kong
Limited (Note). As stipulated in the Note, the
exercise price of share options should be the higher of the share
price on the date of grant of the share options and the 5- business
day average of the share price before the date of grant
(Note Requirement). The date of grant is the date
on which the terms of the grant were fixed.
Listco B sought a waiver from the Note Requirement and the issue
to be considered by the SEHK was whether to waive such
requirement.
Decision
The SEHK decided to waive the Note Requirement based on the
following rationale:
The securities under the Scheme were A shares. The Scheme must
comply with the relevant Mainland China law and be approved by the
relevant Mainland China regulatory authorities.
The exercise price determined under the PRC Price Fixing
Mechanism reflected the market price of the A Shares at the time
the terms of the grant were fixed. This was consistent with the
principle of the Note.
The Scheme was subject to shareholders' approval.
Copies of the HKEx's listing decision 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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