2 October, 2017
The Stock Exchange of Hong Kong (“SEHK”), wholly owned subsidiary of Hong Kong Exchanges and Clearing, has published a consultation paper on 22 September 2017 which proposed changes to the Main Board Listing Rules (“MB Rules”) and the Rules for the Growth Enterprise Market.
The current MB Rules set out two ways in which an issuer can be delisted:
(i) a three stage delisting procedures for those without sufficient operations or assets (guided by Practice Note 17); and
(ii) those the SEHK considers “no longer suitable for listing”. We believe the delisting procedures have presented challenges for insolvency practitioners involved in rescuing distressed listed issuers. On one hand, they are duty bound to rescue or restructure the business of the issuer to maximise returns to creditors and on the other hand, have to convince the SEHK the continued listing of the issuer is necessary to discharge their duties.
Key takeaways from the consultation paper
Separate delisting criteria after continued suspension for a prescribed period (to be determined) and remedial period to be specified on a discretionary basis;
New delisting process to be specified which will also include an express right for the SEHK to delist an issuer and incorporate rules dealing with issuers without sufficient operations and assets (Practice Note 17).It is also proposed that a note to be included to MB Rule 13.24 to set out the characteristics of issuers which are unable to comply with sufficiency of operations/assets requirements;
Backdoor listings and continued listing criteria will fall outside the scope of this consultation paper and will be dealt with under a separate consultation process, along with continuing listing criteria and capital raisings by listed issuers in due course.
We believe the proposed changes will potentially (i) significantly reduce the ability and time available for the insolvency practitioners to resurrect preexisting businesses; (ii) limit the ability for issuers (and their financial advisers) to seek review/appeal over decisions relating to resumption proposals; and (iii) empower the SEHK additional discretion to delist an issuer.
The consultation paper can be found here and the consultation period will end on 24 November 2017.
Eugene Yeung, Eversheds
EugeneYeung@eversheds.com
