Listing Rules and Guidance: Contents


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Update No. 34

Note to subscribers for the amendments to the rules governing the listing of securities on the Growth Enterprise Market (the "GEM Listing Rules")

Update No. 34

May 2010

Dear Sirs,

Various amendments to the GEM Listing Rules

We enclose reprinted pages of the GEM Listing Rules and the filing instructions. The reprinted pages incorporate:

•  amendments to implement the proposals in the consultation conclusions on "Proposed Changes to Connected Transaction Rules", "Proposed Changes to Requirements for Circulars and Listing Documents of Listed Issuers", and "New Listing Rules for Mineral Companies" published in May this year; and
•  minor amendments.

We have amended the GEM Listing Rules to:

Connected transactions

•  exempt transactions with connected persons at the subsidiary level where the size of the subsidiary is insignificant to the issuer;
•  exempt revenue transactions with associates of a substantial shareholder who is a passive investor;
•  revise the percentage thresholds for the de minimis exemptions:
•  from 0.1% to 1% for fully exempt transactions which involve persons connected only at the subsidiary level; and
•  from 2.5% to 5% for exemption from shareholder approval requirements;
•  extend the de minimis exemptions to issues of securities by an issuer's subsidiary (ie deemed disposals);
•  exempt provision of financial assistance by an issuer to a connected person in which the issuer is a shareholder provided it is on normal commercial terms, pro-rata, and on a several basis;
•  exempt a disposal by an issuer of its interest in a subsidiary to a third party where the subsidiary has a substantial shareholder that is a controller only because of his/its relationship with the subsidiary under Rule 20.13(1)(b);
•  extend the exemption for an issuer acquiring consumer goods or services from connected persons for the purpose of or in connection with the issuer's business if there is an open market and transparency in pricing the goods or services concerned;
•  restrict the circumstances in which a non wholly-owned subsidiary is a connected person by:
•  excluding a non wholly-owned subsidiary which is connected simply because it is (i) a substantial shareholder of another subsidiary or (ii) an associate of a person connected only at the subsidiary level; and
•  introducing an exemption for intra-group transactions between a "connected subsidiary" (as defined in Rule 20.11(5)) and its subsidiaries or between its subsidiaries;
•  remove the following persons from the definition of connected person:
•   management shareholders;
•   promoters of PRC issuers; and
•   "PRC Governmental Body" for non PRC issuers;
•  remove the following persons from the definition of associate:
•  the holding company of an investee company (ie a company over which a connected person and/or any party closely related to this connected person, individually or together, has control); or a fellow subsidiary of this holding company; and
•  a company controlled by the investee company (not being a subsidiary of the investee company), and its subsidiary, holding company or fellow subsidiary;
•  extend the definition of "associate" to a company in which a connected person's relative has a majority control; and
•  clarify that the annual review requirements apply to continuing connected transactions subject to reporting and disclosure requirements under the connected transaction Rules.

Circulars and listing documents

•  for very substantial disposal circulars, introduce options to allow (i) the issuer to disclose its disposal target's financial information, and (ii) the issuer's auditors or reporting accountants to conduct a review of the financial information. These options are alternatives to the current requirement for an accountant's report on the issuer group (including separate note disclosure on the disposal target);
•  relax the reporting period deadline in an acquisition circular. Under the new Rule, the reporting period will include at least three consecutive financial years and end not more than six months before the circular date;
•  allow issuers to incorporate previously published financial information in their circulars or listing documents by reference;
•  for listing documents of listed PRC and overseas issuers, remove disclosure and inspection requirements regarding provisions in their constitutional documents and regulatory provisions in the relevant jurisdictions;
•  for a notifiable transaction involving an acquisition and a disposal, allow each of the acquisition and disposal to comply with the circular content requirements applicable to its respective transaction classification, rather than the higher classification;
•  require the working capital sufficiency statement in transaction circulars to take into account the effect of the transaction;
•  remove the requirement to disclose combined financial information of the enlarged group;
•  allow PRC issuers to despatch circulars after issuing notice of general meeting and before the deadline for giving such notice under the PRC Company Law;
•  require information in board minutes for connected transactions to be disclosed in circulars instead of in submissions to the Exchange;
•  remove the 21-day deadline for despatching circulars (other than information circulars), and require disclosure of the expected date of despatch and any delay;
•  change the timing for despatching information circulars from calendar days to business days; and
•  align the directors' responsibility statement with the general disclosure principles under Rule 17.56.

Mineral Companies

•  allow companies with at least a meaningful portfolio of Contingent or Indicated Resources to list;
•  require new applicant Mineral Companies to demonstrate that they have rights to participate actively in the exploration for and/or extraction of natural resources;
•  require new applicant Mineral Companies to demonstrate that they have available working capital for 125% of the group's present requirements, that is for the next twelve months;
•  require new applicant Mineral Companies to include independent technical reports ("a Competent Person's Report") on reserves and resources in their listing documents;
•  require new applicant Mineral Companies that have not commenced production, to disclose plans to proceed to production with indicative dates and costs;
•  require Mineral Companies acquiring or disposing of mineral or petroleum assets as part of a major (or above) transaction to present a Competent Person's Report in the relevant shareholder circular. Major (or above) acquisitions must also be accompanied by Valuation Reports prepared by Competent Evaluators;
•  require listed issuers that acquire mineral or petroleum assets as part of a major (or above) transaction to provide a Competent Person's Report and a Valuation Report in the relevant shareholder circular;
•  require Mineral Companies, and listed issuers that publicly disclose statements on reserves and resources, to update such statements once a year in their annual reports;
•  require Mineral Companies to include in their interim (half-yearly) and annual reports details of their exploration, development and mining production activities and a summary of expenditure incurred on these activities during the period under review;
•  require that Competent Persons' Reports be prepared under a recognized Reporting Standard. Other standards may be used but reconciliation to a Reporting Standard must be provided; and
•  require that Valuation Reports be prepared under CIMVAL, the VALMIN Code or the SAMVAL Code.


•  change the subscription periods for right issues and open offers from calendar days to business days, which relate to the proposals to accelerate rights issues and open offers implemented in February 2010; and
•  update the reference to property valuation standards to "The Hong Kong Institute of Surveyors Valuation Standards on Properties" and the "International Valuation Standards".

Coming into effect

The amendments will come into effect on 3 June 2010.

Please click HERE to see the amendments to the connected transaction Rules.

Please click HERE to see the amendments to the requirements for issuers' circulars and listing documents.

Please click HERE to see the amendments to the requirements for mineral companies.

Please click HERE to see other amendments to the GEM Listing Rules.

Yours faithfully,

For and on behalf of
The Stock Exchange of Hong Kong Limited

Mark Dickens
Head of Listing