SPACs and Enhanced shareholder protection
Following market consultations, the Hong Kong Stock Exchange (HKEx) has recently published two sets of significant amendments to its Listing Rules (together with related guidance notes, the Amendments). The Amendments create a new listing regime for special purpose acquisition companies (SPACs) and enhance shareholder core protection standards for HKEx listed companies. The Amendments take effect on 1 January 2022.
Shareholder Core Protection Standards
The Amendments introduce a common set of core shareholder
protection standards (the Core Standards) that
will apply to all companies with shares listed on the HKEx,
regardless of jurisdiction of incorporation. This approach will
supersede the current regime, which broadly requires overseas
issuers to afford protections to shareholders that are at least
equivalent to those available in Hong Kong. The Core Standards
cover a broad range of matters, including notice and conduct of
shareholder general meetings and voting requirements and the
appointment and removal of directors. The Core Standards are
intended to be applied in a unified manner across all listed
companies, and so derogation from any of the Core Standards will
not ordinarily be available. Prospective issuers incorporated
outside of Hong Kong and the PRC are required to demonstrate how
their domestic corporate law regime, together with their
constitutional documents, satisfy the Core Standards. Companies
that currently have shares listed on the HKEx will be required to
confirm compliance with the Core Standards not later than their
second annual general meeting after 1 January 2022.
With approximately 75% of companies with shares listed on the HKEx
incorporated offshore with more than 50% incorporated in the Cayman
Islands), Walkers' dedicated equity capital markets team in
Hong Kong is working very closely with prospective issuers, listed
clients and onshore advisers on the amendments required to meet the
Core Standards from a Cayman, BVI or Bermuda law perspective.
HKEx-listed SPACs
The Amendments introduce Chapter 18B to the Listing Rules, which creates a new listing regime for SPACs. Whilst some of the more restrictive proposals set out in the earlier consultation document have not been taken forward, the HKEx's SPAC listing regime will nevertheless differ from the US and European approaches in a number of key areas in relation both to the SPAC's IPO and subsequent business combination. These include:
- limiting IPO and pre-business combination trading to professional investors (and requiring a minimum of 75 professional investors, of which at least 20 must be institutional);
- stringent eligibility requirements for the SPAC's promoters / sponsors;
- mandatory PIPE investment for the business combination; and
- requiring a fresh listing application for the post-business combination combined entity.
It remains to be seen how the HKEx's SPAC listing regime
will be received by market participants in light of significant
competition from the US and European markets and from the Singapore
Stock Exchange (SGX). Our teams across Hong Kong
and Singapore have advised on a significant number of SPAC IPO and
de-SPAC business combination transactions across the region, and
are actively working with clients exploring both HKEx and SGX SPAC
listings, with a number of these expected to come to market early
in the new year.
Walkers is proud to be able to field one of the largest and most
experienced dedicated offshore capital markets teams in the region,
with team members based both in Hong Kong and Singapore. Contact
details for the core team members are set out below and we would be
delighted to discuss any aspect of the Amendments, or in relation
to regional equity capital markets transactions more generally, as
helpful.
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.