Listing Rules and Guidance: Contents


 
 

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Up to Oct 14 2018Oct 15 2018 onwards

14.04
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For the purposes of this Chapter:—

(1) any reference to a "transaction" by a listed issuer:
(a) includes the acquisition or disposal of assets, including deemed disposals as referred to in rule 14.29;
(b) includes any transaction involving a listed issuer writing, accepting, transferring, exercising or terminating (in the manner described in rule 14.73) an option (as defined in rule 14.72) to acquire or dispose of assets or to subscribe for securities;
(c) includes entering into or terminating finance leases where the financial effects of such leases have an impact on the balance sheet and/or profit and loss account of the listed issuer;
(d) includes entering into or terminating operating leases which, by virtue of their size, nature or number, have a significant impact on the operations of the listed issuer. The Exchange will normally consider an operating lease or a transaction involving multiple operating leases to have a "significant impact" if such lease(s), by virtue of its/their total monetary value or the number of leases involved, represent(s) a 200% or more increase in the scale of the listed issuer's existing operations conducted through lease arrangements of such kind;
(e) includes granting an indemnity or a guarantee or providing financial assistance by a listed issuer, other than by a listed issuer which:
(i) is a banking company (as defined in rule 14A.06(3)) and provides the financial assistance (as defined in rule 14A.06(17)) in its ordinary and usual course of business (as referred to in rule 14.04(8));
(ii) grants an indemnity or a guarantee, or provides financial assistance to its subsidiaries; or
(iii) is a securities house and provides the financial assistance (as defined in rule 14A.06(17)) in its ordinary and usual course of business (as referred to in rule 14.04(8)) and upon normal commercial terms, either:
(A) by way of securities margin financing (which means providing a financial accommodation in order to facilitate:
(aa) the acquisition of securities listed on any stock market, whether a recognized stock market (as defined in Schedule 1 to the Securities and Futures Ordinance) or any other stock market outside Hong Kong; and
(bb) (where applicable) the continued holding of those securities,

whether or not those or other securities are pledged as security for the accommodation); or
(B) for the purpose of a proposed acquisition of securities in accordance with the terms of a prospectus which is registered in Hong Kong and issued in respect of an initial public offering of equity securities to be listed in Hong Kong.

Note: Such a transaction may nevertheless in some cases constitute a connected transaction under Chapter 14A. In such cases, the listed issuer will have to comply with the provisions of Chapter 14A.
(f) includes entering into any arrangement or agreement involving the formation of a joint venture entity in any form, such as a partnership or a company, or any other form of joint arrangement, other than a joint venture where:
(i) the joint venture is engaging in a single purpose project/transaction which is of a revenue nature in the ordinary and usual course of business of the issuer (see rule 14.04(1)(g));
(ii) the joint venture arrangement is on an arm's length basis and on normal commercial terms; and
(iii) the joint venture agreement contains clause(s) to the effect that the joint venture may not, without its partners' unanimous consent:
(A) change the nature or scope of its business; or
(B) enter into any transactions which are not on an arm's length basis; and
(g) to the extent not expressly provided in rules 14.04(1)(a) to (f), excludes any transaction of a revenue nature in the ordinary and usual course of business (as referred to in rule 14.04(8)) of the listed issuer;

Notes:
1 To the extent not expressly provided in rules 14.04(1)(a) to (f), any transaction of a revenue nature in the ordinary and usual course of business of a listed issuer will be exempt from the requirements of this Chapter.
2 Any transaction involving the acquisition and disposal of properties will generally not be considered to be of a revenue nature unless such transactions are carried out as one of the principal activities and in the ordinary and usual course of business of the listed issuer.
3 Where a listed issuer, for the financial reporting purpose, has transferred an asset from the fixed asset account to the current asset account, a subsequent disposal of the asset by the listed issuer will not be exempt under rule 14.04(1)(g).
4 In considering whether or not a transaction is of a revenue nature, a listed issuer must take into account the following factors:
(a) whether previous transactions or recurring transactions that were of the same nature were treated as notifiable transactions;
(b) the historical accounting treatment of its previous transactions that were of the same nature;
(c) whether the accounting treatment is in accordance with generally acceptable accounting standards; and
(d) whether the transaction is a revenue or capital transaction for tax purposes.
These factors are included for guidance only and are not intended to be exhaustive. The Exchange may take into account other factors relevant to a particular transaction in assessing whether or not it is of a revenue nature. In cases of doubt, the listed issuer must consult the Exchange at an early stage.
(2) "accounts" means:—
(a) in respect of a listed issuer, and for the purpose of determining its total assets, profits or revenue figures pursuant to rule 14.07, the listed issuer's latest published audited accounts or, where consolidated accounts have been prepared, the listed issuer's latest published audited consolidated accounts; and
(b) in the case of any other company, legal person, partnership, trust or business unit, its latest audited accounts or, where consolidated accounts have been prepared, its latest audited consolidated accounts or, where no audited accounts have been prepared, such other accounts as may be permitted by the Exchange in its discretion;
(3) an "aircraft company" means a company or other entity whose non-cash assets consist solely or mainly of aircraft or interests in aircraft or interests in companies or entities whose non-cash assets consist solely or mainly of aircraft and whose income is mainly derived from those aircraft;
(4) "assets" means both tangible and intangible assets and includes businesses, companies and securities, whether listed or not (unless otherwise stated);
(5) "de minimis ratio" means the ratio determined in accordance with rules 14A.76, 14A.87(2) and 14A.87(3) (as the case may be);
(6) a "listed issuer" means a company or other legal person whose securities are already listed on the Main Board , including a company whose shares are represented by listed depositary receipts, and unless the context otherwise requires, includes its subsidiaries;
(7) a "notifiable transaction" means a transaction classified as a share transaction, discloseable transaction, major transaction, very substantial disposal, very substantial acquisition or reverse takeover under rule 14.06;
(8) "ordinary and usual course of business" of an entity means the existing principal activities of the entity or an activity wholly necessary for the principal activities of the entity. In the context of financial assistance provided in the ordinary and usual course of business, this means financial assistance provided by a banking company only or by a securities house pursuant to rule 14.04(1)(e)(iii) only and, in the context of financial assistance not provided in the ordinary and usual course of business, it means financial assistance not provided by a banking company or by a securities house under rule 14.04(1)(e)(iii);
(9) "percentage ratios" means the percentage ratios set out in rule 14.07, and "assets ratio", "profits ratio", "revenue ratio", "consideration ratio" and "equity capital ratio" shall bear the respective meanings set out in rule 14.07;
(10) a "property company" means a company or other entity whose non-cash assets consist solely or mainly of properties or interests in properties or interests in companies or entities whose non-cash assets consist solely or mainly of properties and whose income is mainly derived from those properties;
(10A) [Repealed 1 February 2011]
(10B) "Qualified Issuer" means an issuer actively engaged in property development as a principal business activity. For determining whether property development is a principal activity of an issuer, consideration will be given to the following factors:
(a) clear disclosure of property development activity as a current and continuing principal business activity in the Directors' Report of its latest published annual financial statements;
(b) property development activity is reported as a separate and continuing segment (if not the only segment) in its latest published financial statements; and
(c) its format for reporting segmental information and its latest published annual financial statements have fully complied with the requirements of relevant accounting standards adopted for the preparation of its annual financial statements on reporting of segment revenue and segment expense.
(10C) "Qualified Property Acquisition" means an acquisition of land or property development project in Hong Kong from Government or Government-controlled entities through a public auction or tender; or an acquisition of governmental land in the Mainland from a PRC Governmental Body (as defined in rule 19A.04) through a tender (招標), auction (拍賣), or listing-for-sale (掛牌) governed by the PRC law (as defined in rule 19A.04);

Note: The Exchange may relax this requirement to accept land acquired in other jurisdictions from governmental bodies through public auctions or tenders. Factors which the Exchange will consider include:
(i) whether the government land is acquired through a competitive bidding process regulated by legislation and/or requirements in the relevant jurisdiction;
(ii) whether the bidding process is fairly structured and established, and bidders have no discretion to change pre-established terms;
(iii) whether acquiring government land through a bidding process is a common practice in that jurisdiction; and
(iv) the problems faced by the issuer in complying with the notifiable transaction Rules for the land acquisition.
(10D) "Qualified Aircraft Leasing Activity" means:
(a) an acquisition of aircraft;
(b) a finance lease in respect of the leasing of aircraft to an aircraft operator (i.e. an entity which carries on a business of operating aircraft as an owner or charterer for providing services for the carriage by air of passengers, cargo or mail), including financing arrangements in a sale and leaseback transaction;
(c) an operating lease in respect of leasing of aircraft to an aircraft operator; or
(d) a disposal of aircraft.
For the purpose of this rule and rule 14.04(10E), "aircraft leasing with an aircraft operator" include leases of aircraft to the aircraft operator directly or indirectly through an intermediate lessor related to the aircraft operator.
(10E) "Qualified Aircraft Lessor" means a listed issuer actively engaged in aircraft leasing with aircraft operators (as defined in rule 14.04(10D)) as a principal business in its ordinary and usual course of business. In making this determination, consideration will also be given to the following factors:
(a) there is clear disclosure of aircraft leasing as a current and continuing principal business activity in the issuer's latest published annual report and financial statements (or in the case of a newly listed issuer, its listing document);
(b) aircraft leasing is reported as a separate and continuing segment (if not the only segment) in the issuer's latest published financial statements. The format for reporting segmental information and its latest published annual financial statements have fully complied with the relevant accounting standards adopted for the preparation of its annual financial statements; and
(c) the lessor's directors and senior management, taken together, have sufficient experience relevant to the aircraft leasing industry. Individuals relied on must have a minimum of five years' relevant industry experience.
(11) a "securities house" means a corporation which is licensed or registered under the Securities and Futures Ordinance for Type 1 (dealing in securities) or Type 8 (securities margin financing) regulated activity;
(11A) a "shipping company" means a company or other entity whose non-cash assets consist solely or mainly of vessels or interests in vessels or interests in companies or entities whose non-cash assets consist solely or mainly of vessels and whose income is mainly derived from those vessels; and
(12) "total assets" means:—
(a) in respect of a listed issuer, the total fixed assets, including intangible assets, plus the total current and non-current assets, as shown in its accounts or latest published interim report (whichever is more recent), subject to any adjustments or modifications arising by virtue of the provisions of rules 14.16, 14.18 and 14.19; and
(b) in the case of any other company, legal person, partnership, trust or business unit, the total fixed assets, including intangible assets, plus the total current and non-current assets, as shown in its accounts, subject to any adjustments or modifications arising from any significant changes to its assets subsequent to the date of the balance sheet in the accounts.

Note: Listed issuers must demonstrate to the satisfaction of the Exchange that any such adjustments or modifications to the accounts of the relevant company, legal person, partnership, trust or business unit are necessary and appropriate in order to reflect its latest financial position.