Hong Kong Stock Exchange Consults On Listing Rule Changes To Codify Existing Practice.

Legal News & Analysis - Asia Pacific - Hong Kong - Regulatory & Compliance

15 August, 2019


The Hong Kong Stock Exchange has issued a consultation paper on proposals to codify into the Listing Rules certain aspects of current practice and guidance. In recent years the Stock Exchange has granted a number of waivers either of general effect or on a repeat basis, issuing guidance letters or listing decisions where appropriate.


The Stock Exchange is now proposing codifying these where it is not expected that the basis and conditions for such waivers is likely to change. Other minor Listing Rule changes and housekeeping amendments are also being proposed. In this bulletin we highlight the key proposals.


Proposals relating to ongoing Listing Rule compliance


The Stock Exchange is proposing codifying the following:


  • the general waiver to permit issuers to display their stock code prominently in the corporate or shareholder information section of financial reports rather than on the cover page. This is in response to requests from issuers who produce financial reports with glossy covers.

  • the conditions for a waiver from the experience and qualification requirements for company secretaries. The Stock Exchange is proposing adding a note to Rule 3.28 setting out the factors it will take into account in granting a waiver, including whether the issuer has its principal business activities outside Hong Kong, the reason the individual is considered suitable and whether the company secretary will be assisted by a suitably qualified person during the waiver period.

  • the general waiver granted to PRC incorporated issuers from the requirement to obtain shareholders’ approval for a bonus or capitalisation issues. This reflects the Stock Exchange’s listing decision setting out the interpretation of the Mandatory Provisions for Companies Listed Overseas to not require approval in such circumstances given there is no fundraising involved.

  • the general waiver granted to PRC incorporated issuers dually listed on the Stock Exchange and a PRC exchange to modify the calculation of the consideration ratio by permitting the market capitalisation of its A or B shares to be calculated by reference to the market price of those shares (and not the price of the H shares) to better reflect the market value of the PRC issuer.

  • the waiver for banks and insurance companies from the requirement to include a working capital statement in transaction circulars where alternative disclosures are made. This exemption will also be extended to listing documents by new applicants who are banks or insurance companies.

  • the waivers from the notifiable transaction disclosure requirements in respect of aircrafts purchased from manufacturers by listed airline operators. The Stock Exchange is proposing setting out the usual conditions for the waiver of the disclosure requirements as a note to Rule 14.58(4).

  • the waivers granted to companies which are dual listed on the Stock Exchange and a PRC exchange from the requirement to determine the exercise price of share options by reference to the Stock Exchange’s closing share prices as specified in Rule 17.03(9). The Stock Exchange is proposing a new Rule 19A.39C to permit the option exercise prices to be determined by reference to the market price on the PRC exchange where the scheme only involves shares listed on the PRC exchange. This is on condition that the scheme provides that the exercise price will be no less than the prevailing market price on the PRC exchange at the time of grant.

  • the guidance in GL16-09 requiring announcements to be clearly presented, with legible font size and paragraph spacing.

  • the guidance in GL31-12 on the administrative arrangements during typhoon and rainstorm warnings.


The Stock Exchange is also proposing:


  • to amend Rule 17.05 to clarify the restricted period for the grant of share options. The proposed amendment clarifies that the issuer may not grant options until the trading day after the inside information is disclosed. This change is to ensure that the market has adjusted to announcement of any inside information before any options can be granted.

Proposals relating to new listings


The Stock Exchange is proposing codifying the following:


  • the waiver of the requirement for a new applicant to include in its accountants’ report the financial results and financial position of any subsidiary or business acquired, agreed to be acquired or proposed to be acquired since the date to which the latest accounts have been made up to for each of the years covered during the track record period. Recognising that such businesses may not be material and the information may, therefore, be of limited value to investors, the Stock Exchange is proposing to codify by way of a note under Rule 4.04 the conditions under which it will grant waivers.

  • the waiver of the requirement for banking companies’ financial disclosures to comply with the Banking Disclosure Guidelines for overseas banking companies on condition that they are regulated by a body equivalent to the HKMA and alternative satisfactory disclosures are made.

  • the waiver from Rule 8.21(1) which provides that a new applicant will generally not be considered suitable for listing if it has changed its financial year end during the most recent financial year before listing. The Stock Exchange proposes to add an exemption to that rule for a new applicant which is an investment company which has changed its year end to be co-terminous with its subsidiaries where the change is not designed to circumvent the listing criteria and the change will not materially affect the presentation of the financial information or result in any omission of material information.

  • the general waiver exempting newly listed companies from the requirement to publish preliminary results announcements and annual reports due shortly after listing. The proposed rule changes will extend the exemption to cover a new applicant’s quarterly and half-year results announcements and interim reports, subject to the prescribed conditions being met. Practice Note 10, which currently covers interim reporting for new issuers, will be deleted with the exemptions being set out in the Chapter 13 requirements for disclosure of financial information.

  • in the context of a spin off, the waiver from the strict requirements of note 1 to Rule 17.03(3) to allow a listed issuer to determine the scheme limit for a share option scheme of its spin-off subsidiary by reference to that subsidiary’s shares in issue on the date of its listing. The existing requirement that approval is based on the shares in issue at the date of approval does not otherwise accommodate the share capital position resulting from the spin-off reorganisation.

  • the existing guidance in GL7-09 on documents required to be submitted on the refiling of a listing application more than six months after the original filing (to be included in notes to Rule 9.10A) or where the sponsor has changed (to be added as a new Rule 9.10B).

  • the existing guidance in listing decision LD15-3 on the calculation of the initial listing fee for a new applicant to be listed by introduction. This requires that the fee is based on either the actual market capitalisation of the listing applicant (where the shares are already listed) or the price/earning ratio used to estimate the monetary value of the newly listed shares.

  • the existing guidance in GL16-09 on the requirement to pre-vet documents and announcements in IPO cases, whereas announcements relating to stabilisation actions are post-vetted.

  • the existing guidance in GL58-13 and GL60-13 as to the confirmations to be given by the reporting accountants and experts at the time of filing the application proof. These will be added to the lists of documents to be filed with the Stock Exchange under Rule 9.11 and templates of the confirmations will be added to the Stock Exchange’s website.


The consultation is open until 27 September 2019.


herbert smith Freehills


For further information, please contact:


Matthew Emsley, Partner, Herbert Smith Freehills