The Hong Kong Stock Exchange is consulting the market on proposals to expand the paperless listing regime. The proposed changes would remove unnecessary submissions and mandate the electronic submission of most documents. The Stock Exchange is also proposing to codify certain obligations that are currently included in separately submitted undertakings and confirmations, which would eliminate the need for these to be separately filed. In addition, listed companies will be required to disseminate their corporate communications, such as announcements and circulars, electronically where this is permitted by the laws of the place of incorporation.
These proposals are aimed at simplifying the administrative requirements of the Stock Exchange, which should improve efficiency and reduce costs for listed companies.
In this bulletin we summarise the key proposals. The Consultation Paper is open for public comment until 28 February 2023.
Streamlining the document submission process
Currently, various submissions are required to confirm to the Stock Exchange compliance with Listing Rule obligations. Given many of these reiterate the obligations set out in the Listing Rules or Guidance Letters, the Stock Exchange is proposing to dispense with the need for separate submissions and will rely on the overarching requirement to comply with the Listing Rules. The Listing Rules will also be updated to codify into the Listing Rules certain obligations currently set out in the separate undertakings, confirmations and declarations. For instance, directors of listed companies will no longer need to make separate declarations and undertakings in the Form B/H/I and the requirements will be set out in the Listing Rules. Other documents which are currently filed, such as underlying authorisations, will no longer need to be.
In 2021, the Stock Exchange enhanced its disciplinary powers and sanctions, expanding the spectrum of disciplinary sanctions available to it, as well as widening the net of responsible parties against whom disciplinary actions can be brought. It has also taken robust enforcement action against non-compliance in recent years. These developments signal the willingness of the regulators to pursue enforcement actions and should serve as a strong deterrent against non-compliance.
Mandatory electronic submission
The Stock Exchange is proposing that the majority of documents that need to be submitted to it should be submitted electronically. To facilitate this, the proposed rule changes would remove the requirement for various documents to be signed or certified. As all documents submitted to the Stock Exchange or to be published are required to be accurate and complete, the Stock Exchange considers that the signature and certification requirements are not essential.
The Stock Exchange is looking to establish a new online platform to be the designated channel for two-way communication between it and listed companies, listing applicants and their professional advisers. Certain submission documents will be converted into e-forms to standardise the process and improve efficiencies. The new platform will also permit electronic signatures.
The Stock Exchange is also working with the Companies Registry to assess the feasibility of the prospectus authorisation and registration process being digitised to avoid the current requirements for physical delivery of hard copy documentation.
Electronic dissemination of corporate communications
The Stock Exchange is proposing to make it mandatory for listed issuers to disseminate corporate communications to shareholders electronically, provided this is permitted under the laws of its jurisdiction of incorporation. Issuers would need to disclose on their websites the manner in which corporate communications will be sent or made available and how to request hard copies (which must remain an option where requested by shareholders).
Any corporate communication seeking instructions from shareholders will need to be sent electronically to shareholders individually (for example by email with a weblink). This, again, is subject to it being permitted by the relevant local laws.
Hong Kong-incorporated companies will not immediately be able to take advantage of the proposed electronic dissemination regime if it is introduced as the Companies Ordinance does not permit shareholders’ consent to receiving electronic communications to be implied. However, the Stock Exchange has indicated that it will work with relevant parties to consider this.
Other changes
The Stock Exchange is also proposing simplifying the appendices to the Listing Rules to move certain aspects to the Stock Exchange’s website. Some material on the website will still be treated as part of the rules, such as the provisions on fees. Other aspects will become administrative requirements, such as the “Headline Categories”. Some appendices are also proposed to be deleted, such as those containing the declarations and undertakings that will be dispensed with if the proposed consultation changes come into force. The remaining appendices will be rearranged so they are organised in a thematic way.
The Stock Exchange is also proposing to remove the need for the Listing Committee to be physically present at meetings to constitute a quorum.
Consultation timing
The consultation paper is open for public comments until 28 February 2023. If you require any assistance in relation to the proposed expanded paperless regime or responding to the consultation paper, please contact one of our team.
For further information, please contact:
Matt Emsley, Partner, Herbert Smith Freehills
matt.emsley@hsf.com
