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Cite as HKEx-LD20-2 (December 2000)

Name of Party Company A — a listed company
Subject Whether Chapter 15 applies to unlisted warrants
Listing Rules Chapter 15
Decision Chapter 15 applies to unlisted warrants

Summary of Facts

Company A proposed to enter into a transaction involving the issue of warrants for which it did not propose to apply for a listing on the Exchange.

The terms of the warrants did not comply with the requirements of Rule 15.02 of the Listing Rules which provides, among other things, that: (i) the securities to be issued on exercise of the warrants must not, when aggregated with all other equity securities which remain to be issued on exercise of any other subscription rights, if all such rights were immediately exercised, whether or not such exercise is permissible, exceed 20% of the issued equity capital of the issuer at the time such warrants are issued; and (ii) such warrants must expire not less than one and not more than five years from the date of issue or grant.

Company A submitted that Chapter 15 did not apply to unlisted warrants.


Rule 15.01 provides that Chapter 15 "applies to both options, warrants and similar rights to subscribe or purchase equity securities of an issuer which are issued or granted on their own by that issuer or any of its subsidiaries ("warrants") and to warrants which are attached to other securities but does not apply to any options which are granted under an employee or executive share scheme which complies with Chapter 17."

The rationale behind the placing of restrictions on warrants is to reduce the degree of uncertainty to which a listed issuer's share capital may be subject as a result of their potential dilution effect. In this regard, unlisted warrants could potentially create the same kind of uncertainty as listed warrants. Hence, no distinction is drawn in Chapter 15 between listed and unlisted warrants and, indeed, no such distinction should be drawn.


Company A decided to restructure the transaction so that the warrants would comply with the requirements of Chapter 15.