Entire Section

  • Contents of circulars

    • General principles (19.63-19.65)

      • 19.63

        A circular of a major transaction, very substantial disposal, very substantial acquisition or extreme transaction and a listing document for a reverse takeover sent by a listed issuer to holders of its listed securities must:—

        (1) provide a clear, concise and adequate explanation of its subject matter having regard to the provisions of rule 17.56; and
        (2) if voting or shareholders' approval is required:
        (a) contain all information necessary to allow the holders of the securities to make a properly informed decision;
        (b) contain a heading emphasising the importance of the document and advising holders of securities, who are in any doubt as to what action to take, to consult appropriate independent advisers;
        (c) contain a recommendation from the directors as to the voting action that shareholders should take, indicating whether or not the proposed transaction described in the circular is, in the opinion of the directors, fair and reasonable and in the interests of the shareholders as a whole; and
        (d) contain a statement that any shareholder with a material interest in a proposed transaction and his close associates will abstain from voting on resolution(s) approving that transaction; and
        (3) a confirmation that, to the best of the directors' knowledge, information and belief having made all reasonable enquiry, the counterparty and the ultimate beneficial owner of the counterparty are third parties independent of the listed issuer and connected persons of the listed issuer.

      • 19.64 [Repealed]

        [Repealed 1 January 2009]

      • 19.65 [Repealed]

        [Repealed 1 January 2009]

    • Major transaction circulars (19.66-19.67)

      • 19.66

        A circular relating to a major transaction must contain the following:—
         
        (1) a prominent and legible disclaimer on the front cover or inside front cover of the circular in the form set out in rule 2.19;
         
        (2) a statement, at a prominent position in the document, and in bold type, about the characteristics of GEM, in the form set out in rule 2.20
         
        (3) the information regarding the listed issuer specified in the following paragraphs of Appendix 1, Part B
         
          1- name
         
          2- directors' responsibility
         
          5- expert statements
         
          29(2)- requirements if there is a profit forecast
         
          33- litigation statement
         
          35- details of secretary and other officers
         
          36- address of registered office and head office;
         
        (4) information regarding interests of directors and chief executive in the listed issuer required under paragraphs 34, 38 and 38A of Appendix 1, Part B;
         
        (5) information which is required to be included in the announcement under rule 19.60;
         
        (6) information concerning the effect of the transaction on the earnings and assets and liabilities of the listed issuer;
         
        (7) where a company either becomes a subsidiary or ceases to be a subsidiary of the listed issuer:—
         
          (a) the percentage of the company's issued shares (if any) held by the listed issuer after the acquisition or disposal; and
         
          (b) in the case of a disposal, a statement whether the remaining shares are to be sold or retained;
         
        (8) details of any existing or proposed service contracts of directors and proposed directors of the listed issuer, or an appropriate negative statement;
         
          Note: Details of contracts to expire or which may be terminated by the employer within a year without payment of any compensation (other than statutory compensation) need not be included.
         
        (9) information as to the competing interests (if any) of the Compliance Adviser and each of the directors, employees and close associates (as referred to in rule 6A.32) and each of the directors and any proposed director of the issuer (excluding its subsidiaries) and his/her respective close associates (as if each of them were treated as a controlling shareholder under rule 11.04);
         
        (10) any additional information requested by the Exchange;
         
        (11) the information regarding the listed issuer specified in the following paragraphs of Appendix 1, Part B:—
         
          28- indebtedness
         
          29(1)(b)- financial and trading prospects
         
          30- sufficiency of working capital, which must take into account the effect of the transaction
         
          40- directors' and experts' interests in group assets
         
          41- material contracts
         
          42(2)(c), (3) and (4)- documents on display;
         
        (12) where required by Chapter 8, information under that Chapter on the property interest being acquired or disposed of by the listed issuer;
         
        (13) where the circular contains a statement as to the sufficiency of working capital, the Exchange will require a letter from the listed issuer's financial advisers or auditors confirming that:—
         
          (a) the statement has been made by the directors after due and careful enquiry; and
         
          (b)    the persons or institutions providing finance have confirmed in writing that such facilities exist; and
         
        (14)    where applicable, the information required under rule 2.28.
         

      • 19.67

        In addition to the requirements set out in rule 19.66, a circular issued in relation to an acquisition constituting a major transaction must contain:—

        (1) the information required under paragraphs 9 and 10 of Appendix 1, Part B, if the acquisition involves securities for which listing will be sought;
        (2) the information required under paragraph 22(1) of Appendix 1, Part B, if new shares are to be issued as consideration;
        (3) where the consideration for a transaction includes the listed issuer's shares or securities that are convertible into the listed issuer's shares, a statement whether the transaction will result in a change of control of the listed issuer;
        (4) the information regarding the listed issuer required under paragraphs 31 (financial information) and 32 (no material adverse change) of Appendix 1, Part B;
        (5) the information required under paragraph 34 of Appendix 1, Part B, in relation to each new director and member of senior management joining the listed issuer in connection with the transaction;

        Note: The fact that any director or proposed director is a director or employee of a company which has an interest or short position in the shares or underlying shares of the listed issuer which would fall to be disclosed to the listed issuer under the provisions in Divisions 2 and 3 of Part XV of the Securities and Futures Ordinance need not be stated.
        (6)
        (a) on an acquisition of any business, company or companies:
        (i) an accountants' report on the business, company or companies being acquired in accordance with Chapter 7 provided that, where any company in question has not or will not become a subsidiary of the listed issuer, the Exchange may be prepared to relax this requirement. The accounts on which the report is based must relate to a financial period ended 6 months or less before the circular is issued. The financial information on the business, company or companies being acquired as contained in the accountants' report must be prepared using accounting policies which should be materially consistent with those of the listed issuer; and

        Note: Where the accountants can only give a modified opinion in the accountants' report in respect of the acquisition of the business, company or companies, for example because the records of stock or work-in-progress are inadequate, the Exchange will not accept a written shareholders' approval for the transaction, but will require a general meeting to be held to consider the transaction (See rule 19.86). In these circumstances, listed issuers are urged to contact the Exchange as soon as possible.
        (ii) a pro forma statement of the assets and liabilities of the listed issuer's group combined with the assets and liabilities of the business, company or companies being acquired on the same accounting basis. The pro forma financial information must comply with Chapter 7; and
        (b) on an acquisition of any revenue-generating assets (other than a business or company) with an identifiable income stream or assets valuation:
        (i) a profit and loss statement and valuation (where available) for the 3 preceding financial years (or less, where the asset has been held by the vendor for a shorter period) on the identifiable net income stream and valuation in relation to such assets which must be reviewed by the auditors or reporting accountants to ensure that such information has been properly compiled and derived from the underlying books and records. The financial information on which the profit and loss statement is based must relate to a financial period ended 6 months or less before the circular is issued. The financial information on the assets being acquired as contained in the circular must be prepared using accounting policies which should be materially consistent with those of the listed issuer; and
        (ii) a pro forma statement of the assets and liabilities of the listed issuer's group combined with the assets being acquired on the same accounting basis. The pro forma financial information must comply with Chapter 7; and
        (7) a discussion and analysis of results of the business, company or companies being acquired covering all those matters set out in rule 18.41 for the period reported on in the accountants' report.

    • Inability to access information to compile circulars for major transactions or very substantial acquisitions (19.67A)

      • 19.67A

        (1)    Where a listed issuer has acquired and/or agreed to acquire equity capital in a company and the transaction constitutes a major transaction or a very substantial acquisition, and the listed issuer does not have access or only has limited access to the non-public information on the target company that would be required for the purpose of complying with the disclosure requirements in respect of the target company and the enlarged group under rules 19.66 and 19.67 (for a major transaction) or rule 19.69 (for a very substantial acquisition), then the listed issuer may defer complying with certain of the disclosure requirements in the manner set out in paragraphs (2) and (3) below, provided that the following conditions are demonstrated:
         
          (a)    the unavailability of non-public information is caused by the lack of co-operation of the board of directors in the target company (such as in the case of a hostile takeover) and/or legal or regulatory restrictions in providing non-public information to the listed issuer;
         
          (b)    the target company is listed on a regulated, regularly operating, open stock exchange recognised by the Exchange (including the Main Board or GEM); and
         
          (c)    the target company will become a subsidiary of the listed issuer.
         
        (2) Subject to the conditions in paragraphs (1)(a), (b) and (c) being satisfied, the listed issuer may defer complying with the disclosure requirements for certain non-public information relating to the target company and/or the enlarged group. In such circumstances, the listed issuer must despatch an initial circular in partial compliance with rules 19.66 and 19.67 or rule 19.69 within the time frames stipulated in rules 19.41 and 19.42 or rules 19.48 and 19.52. The initial circular shall include, as a minimum, the following:
         
          (a) material public information (and other available information of which the listed issuer is aware and is free to disclose) of the target company to enable shareholders to make an informed voting decision with respect to the proposed acquisition. This would include:
         
            (i)        published audited financial information of the target company for the preceding three years (and the latest published unaudited interim accounts) together with a qualitative explanation of the principal differences, if any, between the target company's accounting standards and those of the listed issuer's which may have a material impact on the financial statements of the target company; and
         
            (ii) other information of the target company and its group of companies in the public domain or made available by the target company and which the listed issuer is aware and free to disclose;
         
          (b) where information required for the enlarged group is not available, to include the following information regarding the issuer:
         
            (i) statement of indebtedness (see rule 19.66(11), paragraph 28 and Note 2 to Appendix 1, Part B);
         
            (ii) statement of sufficiency of working capital (see rule 19.66(11), paragraph 30 and Note 2 to Appendix 1, Part B);
         
            (iii) [Repealed 1 January 2012];
         
            (iv) discussion and analysis of results (this is applicable only to very substantial acquisitions, see rule 19.69(8));
         
            (v) statement as to the financial and trading prospects (see rule 19.66(11), paragraph 29(1)(b) and Note 2 to Appendix 1, Part B);
         
            (vi) particulars of any litigation or claims of material importance (see rule 19.66(3), paragraph 33 and Note 2 to Appendix 1, Part B);
         
            (vii) particulars of directors' or experts' interests in group assets (see rule 19.66(11), paragraph 40 and Note 2 to Appendix 1, Part B);
         
            (viii) material contracts and documents on display (see rule 19.66(11), paragraphs 41, 42 and Note 2 to Appendix 1, Part B); and
         
          (c) the reasons why access to books and records of the target company has not been granted to the listed issuer.
         
        (3) Where an initial circular has been despatched by a listed issuer under paragraph (2) above, the listed issuer must despatch a supplemental circular at a later date which contains: (i) all the prescribed information under rules 19.66 and 19.67 or rule 19.69 which has not been previously disclosed in the initial circular; and (ii) any material changes to the information previously disclosed in the initial circular. The supplemental circular must be despatched to shareholders within 45 days of the earlier of: the listed issuer being able to gain access to the target company's books and records for the purpose of complying with the disclosure requirements in respect of the target company and the enlarged group under rules 19.66 and 19.67 or rule 19.69; and the listed issuer being able to exercise control over the target company.

    • Very substantial disposal circulars (19.68)

      • 19.68

        A circular issued in relation to a very substantial disposal must contain:—

        (1) the information required under rules 19.66 and 19.70;
        (2)
        (a) on a disposal of a business, company or companies:
        (i) financial information of either:
        (A) the business, company or companies being disposed of; or
        (B) the listed issuer's group with the business, company or companies being disposed of shown separately as (a) disposal group(s) or (a) discontinuing operation(s),
        for the relevant period (as defined in the note to rule 7.05(1)(a)). The financial information must be prepared by the directors of the listed issuer using accounting policies of the listed issuer and must contain at least the income statement, balance sheet, cash flow statement and statement of changes in equity.

        The financial information must be reviewed by the listed issuer's auditors or reporting accountants according to the relevant standards published by the Hong Kong Institute of Certified Public Accountants or the International Auditing and Assurance Standards Board of the International Federation of Accountants or the China Auditing Standards Board of the China Ministry of Finance. The circular must contain a statement that the financial information has been reviewed by the issuer's auditors or reporting accountants and details of any modifications in the review report; and

        Notes:
        1. The listed issuer may include an accountants' report instead of a review by its auditors or reporting accountants. In that case, the accountants' report must comply with Chapter 7.
        2. The Exchange may be prepared to relax the requirements in this rule if the assets of the company or companies being disposed of are not consolidated in the issuer's accounts before the disposal.
        (ii) pro forma income statement, balance sheet and cash flow statement of the remaining group on the same accounting basis. The pro forma financial information must comply with Chapter 7;
        (b) on a disposal of any revenue-generating assets (other than a business or company) with an identifiable income stream or assets valuation:
        (i) a profit and loss statement and valuation (where available) for the 3 preceding financial years (or less, where the asset has been held by the listed issuer for a shorter period) on the identifiable net income stream and valuation in relation to such assets which must be reviewed by the auditors or reporting accountants to ensure that such information has been properly compiled and derived from the underlying books and records. The financial information on which the profit and loss statement is based must relate to a financial period ended 6 months or less before the circular is issued; and
        (ii) a pro forma profit and loss statement and net assets statement on the remaining group on the same accounting basis. The pro forma financial information must comply with Chapter 7;
        (3) the information required under rule 18.41 on the remaining group; and
        (4) the information regarding the listed issuer required under paragraph 32 (no material adverse change) of Appendix 1, Part B.

    • Very substantial acquisition circulars, extreme transaction circulars and reverse takeover listing documents (19.69)

      • 19.69

        A circular issued for a very substantial acquisition or an extreme transaction or a listing document issued for a reverse takeover must contain:— 

        (1) for a reverse takeover or an extreme transaction:
         
        (a) the information required under rule 19.66 (except for the information required under rules 19.66(3), 19.66(4), 19.66(11) and 19.66(12)) and rule 19.67(3);
         
        (b) the information required under Appendix 1, Part A, if it applies, except paragraphs 8 and 15(3) (in respect of the 12 months before the issue of the circular or listing document) and 20(1). For paragraph 36, the statement on sufficiency of working capital must take into account the effect of the transaction; and
         
        (c) [Repealed 1 January 2009]
         
        (d)
        (i) for a reverse takeover, information on the enlarged group's property interests under rules 8.01A and 8.01B; and
         
        (ii) for an extreme transaction, the information required under Chapter 8 on the property interests acquired and/or to be acquired by the issuer;
         
        (2) for a very substantial acquisition, the information required under rules 19.66 to 19.67 (except for the information required under rule 19.67(6)) and rule 2.28;
         
        (3) [Repealed 1 January 2012];
         
        (4)
        (a) on an acquisition of any business, company or companies:
         
        (i) an accountants' report on the business, company or companies being acquired in accordance with Chapter 7. The accounts on which the report is based must relate to a financial period ended 6 months or less before the listing document or circular is issued. The financial information on the business, company or companies being acquired as contained in the accountants' report must be prepared using accounting policies which should be materially consistent with those of the listed issuer; and
         
        (ii) pro forma income statement, balance sheet and cash flow statement of the enlarged group on the same accounting basis. The pro forma financial information must comply with Chapter 7;
         
        (b) on an acquisition of any revenue-generating assets (other than a business or a company) with an identifiable income stream or assets valuation:
         
        (i) a profit and loss statement and valuation (where available) for the 3 preceding financial years (or less, where, other than in the case of a reverse takeover, the asset has been held by the vendor for a shorter period) on the identifiable net income stream and valuation in relation to such assets which must be reviewed by the auditors or reporting accountants to ensure that such information has been properly compiled and derived from the underlying books and records. The financial information on which the profit and loss statement is based must relate to a financial period ended 6 months or less before the listing document or circular is issued. The financial information on the assets being acquired as contained in the listing document or circular must be prepared using accounting policies which should be materially consistent with those of the listed issuer; and
         
        (ii) a pro forma profit and loss statement and net assets statement on the enlarged group on the same accounting basis. The pro forma financial information must comply with Chapter 7;
         
        (5) where the transaction also involves a disposal by the listed issuer, the information required under rule 19.70(2);
         
        (6) general information on the trend of the business of the group since the date to which the accounts of the listed issuer were made up and a statement as to the financial and trading prospects of the group for at least the current financial year (together with any material information which may be relevant);
         
        (7) in the case of a listing document issued in relation to a reverse takeover, a statement of business objectives (in respect of the current financial year and the 2 financial years thereafter) (see rules 14.19 to 14.21); and
         
        (8) in respect of a circular issued in relation to a very substantial acquisition a separate discussion and analysis of the performance of each of the existing group and any business or company acquired or to be acquired for the relevant period referred to in rule 7.05(1)(a), in both cases covering all those matters set out in rule 18.41.

    • Additional requirements for circulars in respect of disposals (19.70)

      • 19.70

        In addition to the requirements set out in rule 19.66, a circular issued in relation to a disposal constituting a major transaction must contain:—

        (1) the intended application of the sale proceeds (including whether such proceeds will be used to invest in any assets) and, if the sale proceeds include securities, whether they are to be listed or not; and
        (2) the excess or deficit of the consideration over or under the net book value of the asset(s).

        Circulars for specific types of companies

    • Circulars for specific types of companies (19.71-19.71A)

      • 19.71

        Where a major transaction, very substantial acquisition, very substantial disposal, extreme transaction or reverse takeover involves acquiring or disposing of an interest in an infrastructure project or an infrastructure or project company, the listed issuer shall incorporate in the circular or listing document a business valuation report on the business or company being acquired or disposed of and/or traffic study report in respect of the infrastructure project or an infrastructure or project company. Such report(s) must clearly set out:

        (1) all fundamental underlying assumptions including discount rate or growth rate used; and
        (2) a sensitivity analysis based on the various discount rates and growth rates.

        Where any business valuation is based on a profit forecast, the accounting policies and calculations for the underlying forecasts must be examined and reported on by the auditors or reporting accountants. Any financial adviser mentioned in the circular or listing document must also report on the underlying forecasts.

        Note: On profit forecasts, see also rules 19.61 and 19.62.

      • 19.71A

        Where a discloseable transaction, major transaction or very substantial acquisition involves a Qualified Property Acquisition described in Note to rule 20.99, the Qualified Issuer shall comply with additional announcement and reporting requirements with details as described in chapter 20.