Hong Kong – Exchange Published Conclusions On Reforms To Enhance Listing Regime For Overseas Issuers.

14 November 2021
 

Further to our article, on 19 November 2021, the Stock Exchange of Hong Kong Limited (the “Exchange”) published its consultation conclusions on its proposals to enhance and streamline the listing regime for overseas issuers¹.
 

The revised listing regime for overseas issuers will result in:
 

• One common set of core shareholder protection standards will apply to all issuers, providing the same level of protection to all investors,

• Greater China Issuers² without a weighted voting rights (WVR) structure can secondary list: (a) without demonstrating they are an “innovative company”, and (b) with a lower minimum market capitalisation at listing than currently required³; and

• Grandfathered Greater China Issuers⁴ and Non-Greater China Issuers⁵ eligible for secondary listing with their existing WVR and/or variable interest entity structyres^{6 7} may opt for a dual primary listing.
   

The Exchange will also publish a Guidance Letter on Change of Listing Status, to provide guidance for secondary listed issuers, on the Exchange’s approach with regards to:
 

• The migration of the majority of trading in an issuer’s securities from an overseas exchange to Hong Kong;

• Voluntary conversion to a dual-primary listing on the Exchange; and

• De-listing from overseas exchanges of primary listing.
   

The amended Listing Rules and the new guidance materials will take effect from 1 January 2022 with transitional arrangements set out in the Consultation Conclusions. The webpage on “Listing of Overseas Companies” on the HKEX website will also be revamped to provide updated guidance on the revised regime.
 

Notes:
 

1. Issuers incorporated or otherwise established outside Hong Kong and the People’s Republic of China.

2. Overseas issuers with a centre of gravity in Greater China primary listed on a Qualifying Exchange⁸.

3. Currently, Greater China Issuers without a WVR structure applying for secondary listing on the Exchange must have a minimum market capitalisation at the time of listing of at least either: (a) $40 billion; or (b)$10 billion and revenue of at least $1 billion for their most recent audited financial year.

In addition, these applicants must demonstrate a track record of good regulatory compliance of at least two full financial years on a Qualifying Exchange⁸.
 

Under the new regime, these issuers would be required, instead, to have a minimum market capitalisation at the time of listing of at least:
 

(a) $3 billion if they can demonstrate a track record of good regulatory compliance of at least five full financial years on a Qualifying Exchange; or (b) $10 billion if they can demonstrate a track record of good regulatory compliance of at least two full financial years on a Qualifying Exchange.
 

4. Issuers with a centre of gravity in Greater China (a) primary listed on a Qualifying Exchange⁸ on or before 15 December 2017; or (b) controlled by corporate WVR beneficiaries (as defined in the Exchange’s Conclusions to its Consultation Paper on Corporate WVR Beneficiaries) as at 30 October 2020 and primary listed on a Qualifying Exchange after 15 December 2017 but on or before 30 October 2020.

5. Issuers with a centre of gravity outside of Greater China primary listed on a Qualifying Exchange⁸.

6. Retention of these structures is subject to relevant domestic laws and regulations. The Exchange’s requirements regarding these variable interest entity structures are set out in Guidance Letter HKEX-GL77-14: “Guidance on listed issuers using contractual arrangements for their businesses” and Listing Decision HKEX-LD43-3.

7. These issuers must have a track record of good regulatory compliance, of at least two full financial years on a Qualifying Exchange⁸, and meet the higher minimum market capitalisation requirements applicable to an applicant with WVR (ie at least $40 billion at the time of listing; or a market capitalisation of at least $10 billion at the time of listing and revenue of at least $1 billion for the most recent audited financial year). They must also comply with other applicable suitability requirements as set out in the Consultation Conclusions and guidance materials published by the Exchange from time to time.

8. The New York Stock Exchange, Nasdaq Stock Market or the Main Market of the London Stock Exchange plc (and belonging to the UK Financial Conduct Authority’s “Premium Listing” segment).
    

The Consultation Conclusions and copies of the respondents’ submissions are available to view on the HKEX website.