In line with its drive to improve its environmental credentials and to modernize its systems and procedures, the Hong Kong Stock Exchange Limited (the "SEHK") issued a consultation paper in the last month of 2022 proposing to adopt a completely paperless listing regime. This comes on the heels of an SEHK consultation in December 2020 that introduced the paperless listing and subscription regime and online display of documents (the "2020 Amendment").
Although the 2020 Amendment mandated the electronic publication of listing documents for new issuers and digitizing the subscription for shares in new listings (i.e. by digitizing the investor-facing dimension of a listing), the process by which a company applied to the SEHK for listing still involves the manual submission of a considerable amount of physical documents.
We anticipate the recommendations to be adopted in substantially the same form, but the proposal is still subject to consultation with key stakeholders. A brief overview of the key points is briefly stated in the following paragraphs.
Proposals in the Consultation Paper
Proposal 1: Fewer documents required for a SEHK listing application that must be submitted thorough electronic channels
To do so, the SEHK proposes:
- removing submission documents that are unnecessary or
redundant, such as those that simply reiterate the obligations
already set out in the Rules governing the Listing of Securities on
the SEHK (the "Listing Rules") or other guidance
materials that overlap with other submission materials or
- information provided under the current Form M104 (regarding, for instance, the listing applicant's top 5 customers and suppliers and its pre-listing reorganization) are duplications of information otherwise included in the listing document; or
- confirmations currently required to be given by legal advisers and the sponsor regarding the compliance of the listing documents with the Companies (Winding Up and Miscellaneous Provisions) Ordinance, which is already covered by the Listing Rules;
- codifying obligations contained in various undertakings (such
as the directors' undertakings), listing agreements and various
other confirmations and declarations into the Listing Rules and,
accordingly, retiring such submission documents that will have
become redundant as a result. Given that the SEHK has the power to
take disciplinary actions against not only a listed issuer, but
also its directors, substantial shareholders and professional
advisers (and the Securities and Futures Commission also has power
to regulate licensed persons such as sponsors and compliance
advisers), the SEHK sees it as more effective and efficient to
codify these obligations into the Listing Rules rather than require
the submission of various cumbersome documents;
- consolidating certain requirements into existing forms. For
instance, the SEHK proposes including in the Form A1 new
undertakings by both listing applicants and sponsors regarding
Listing Rules compliance, due diligence and accuracy of
information. This will work in tandem with the proposed reduction
of submission documents and the codification of corresponding
obligations as Listing Rules, by way of overarching undertakings
within the Form A1;
- removing signature and certification requirements if they only:
- evidence the sponsors' approval of the contents; or
- certify that the submissions are true copies of their originals, since the duty of listed issuers and sponsors to satisfy themselves of the accuracy of information submitted is already covered under the Listing Rules (and in any event, the knowing or reckless submission of false or misleading information to the SEHK is a criminal offence under the Securities and Futures Ordinance); and
- mandating electronic submission for all submission documents unless otherwise required by the Listing Rules or the SEHK. To this end, the SEHK also proposes launching a designated online platform for communications between the Listing Division and listing applicants / listed issuers.
Proposal 2: Mandating listed issuers to send electronic corporate communications to the holders of securities after listing
The SEHK proposes mandating that listed issuers electronically disseminate corporate communications and enabling listed issuers to choose their own consent mechanism for disseminating corporate communications electronically, in each case where the chosen mechanism is permissible under the laws and regulations applicable to them and their constitutional documents. Indeed, the great majority of listed issuers in Hong Kong are incorporated in the Cayman Islands, Bermuda, and the People's Republic of China, where company laws generally allow or do not prohibit the digital transmission of corporate communications.
The foregoing proposals significantly streamline the administrative and logistical work involved in a listing. By cutting down on submission documents, codifying obligations into the Listing Rules and mandating their submission by electronic means, the SEHK has streamlined the listing application process significantly without compromising on the standards and obligations required of listing applicants and their advisers. In so doing, the environmental costs of a listing are significantly minimized. Although it seems small in the grand scheme of things, the proposals are a significant and necessary step in the right direction.
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