Hong Kong – IPO – Updated Listing Decision LD43-3 And Guidance Letter GL77-14 – Contractual Arrangements.

12 October, 2015

 

Listing Decision LD43-3, which was originally issued in 2005, was updated on 27 August 2015.  The decision found that the listing applicant, Company A, which was a party to a number of contract-based structures ("Contractual Arrangements" or "Structured Contracts"), was suitable for listing despite legal questions associated with those Contractual Arrangements.  In this updated decision, the following guidance was added under the section headed "Subsequent Development":

 

• while the existing guidance within the Listing Decision provides that Structured Contracts should include a power of attorney by which the shareholders of the PRC operating companies (the "OPCOs") grant to the issuer’s directors and their successors the power to exercise all the rights of OPCOs' shareholders, the guidance has been extended to expressly state that OPCOs' shareholders should ensure that the power of attorney does not give rise to any potential conflicts of interest. Where any of OPCO's shareholders are officers or directors of the issuer, the power of attorney should be granted in favour of other unrelated officers or directors of the issuer;
• in terms of disclosure of Structured Contracts in the listing document, the guiding principles have added that the disclosure (other than risk factors) should be consolidated into one standalone section; and
• while the Listing Decision is in part based on the conclusion that the Structured Contracts comply with PRC laws, following publication of the consultation draft of the new PRC Foreign Investment Law by the Ministry of Commerce in January 2015, concerns over the legality and validity of Structured Contracts to hold interests in PRC businesses which are subject to foreign ownership restrictions may be heightened. Applicants are encouraged to contact the Hong Kong Stock Exchange for guidance if it uses such structures to hold its PRC business interests.

Guidance Letter GL77-14 has also been updated to reflect this Listing Decision.  A marked-up copy of the Guidance Letter can be found here.