Entire Section

  • GUIDANCE / PRACTICE NOTES

    • GN1 [Repealed]

    • GN2 [Repealed]

    • GN3 [Repealed]

    • GN4 [Repealed]

    • GN5 [Repealed]

    • GN6 [Repealed]

    • Suggested Risk Assessment for Mineral Companies

      The Stock Exchange of Hong Kong Limited

      Guidance Note 7

      to the Rules Governing the Listing of Securities (the "Exchange Listing Rules")

      Issued under rule 1.06 of the Exchange Listing Rules

      SUGGESTED RISK ASSESSMENT FOR MINERAL COMPANIES

      Risk Assessment

      Although other jurisdictions do not have a specific risk factor requirement, a listing of significant risk factors provides investors with a summary of significant risks to the company and its properties. A risk factor section is often included in reports filed in jurisdictions without a specific requirement for their inclusion. This can be particularly important for investors looking to invest in the mineral resource sector.

      In their technical reports, most consulting firms include risk analysis tables that address common areas of risk along with an assessment of the degree of risk for the particular project. These assessments are necessarily subjective and qualitative. Risk has been classified from minor to major, which can be further clarified as:

      •   Major Risk: the factor poses an immediate danger of a failure, which if uncorrected, will have a material effect (>15% to 20%) on the project cash flow and performance and could potentially lead to project failure.
      •   Moderate Risk: the factor, if uncorrected, could have a significant effect (10% to 15% or 20%) on the project cash flow and performance unless mitigated by some corrective action.
      •   Minor Risk: the factor, if uncorrected, will have little or no effect (<10%) on project cash flow and performance.

      The likelihood of a risk must also be considered. Likelihood within a 7-year time frame can be considered as:

      •   Likely: will probably occur
      •   Possible: may occur
      •   Unlikely: unlikely to occur

      The degree or consequence of a risk and its likelihood are combined into an overall risk assessment as presented in Table 1.1.

      Table 1.1

      Overall Risk Assessment

      Likelihood of Risk
      (within 7 years)
      Consequence of Risk
      Minor Moderate Major
      Likely Medium High High
      Possible Low Medium High
      Unlikely Low Low Medium

      Table 1.2 presents an example of a risk assessment for a coal project and shows how the likelihood and consequences of a risk are combined into an overall rating. Note that the detailed items considered are project specific.

      Table 1.2

      Project Risk Assessment Table Before Mitigation

      Hazard/Risk Issue Consequence
      Likelihood Rating Risk
      Geological
      Lack of Significant Resource Unlikely Minor Low
      Loss of Significant Reserve Possible Major High
      Significant Unexpected Faulting Likely Major High
      Significant Subsidence Possible Moderate Medium
      Poor Geological Roof Likely Moderate Medium
      Unexpected Groundwater Ingress Possible Moderate Medium
      Unexpected Seam Gas Outburst Unlikely Moderate Low
      Mining
      Significant Production Shortfalls Possible Major High
      Production Pumping System Adequacy Unlikely Major Medium
      Adverse Pre-Mining Stress Possible Moderate Medium
      Excessive Gas Possible Moderate Medium
      Spontaneous Combustion Unlikely Major Medium
      Significant Geological Structures Likely Moderate High
      Poor Development Roof/Rib Conditions Possible Minor Low
      Poor Development Floor Conditions Unlikely Moderate Low
      Poor Production Roof Unlikely Major Medium
      Excess Surface Subsidence Possible Major High
      Outbursts Unlikely Major Medium
      Windblasts Unlikely Moderate Low
      Processing/Handling
      Lower Yields Possible Minor Low
      Lower Plant Production Levels Possible Moderate Medium
      Higher Plant Production Costs Possible Moderate Medium
      Plant Reliability Possible Moderate Medium
      Handling System Unlikely Moderate Low
      Environmental
      Water Discharge Non-Compliance Possible Minor Low
      Significant Unpredicted Subsidence Possible Moderate Medium
      Regulatory Consent/Variation Delays Possible Minor Low
      Capital and Operating Costs
      Project Timing Delays Possible Moderate Medium
      Mine Management — Plan Unlikely Minor Low
      Capital Cost Increases — Start-Up Possible Moderate Medium
      Capital Costs — Ongoing Unlikely Minor Low
      Operating Costs Underestimated Possible Moderate Medium
      Project Implementation
      Critical Path Delays Possible Moderate Medium

      There are five high risk areas identified in Table 1.2. While this approach is necessarily subjective and a number of issues are related, the areas with high risk rating may be summarized as follows:

      •  loss of significant reserve,

      •  significant production shortfalls,

      •  significant unexpected faulting,

      •  significant geological structures, and

      •  excess surface subsidence.

      The areas of high risk, ranked by their importance, should be an important part of technical and valuation reports. Although general areas such as geology, reserve estimation, production, processing, financial issues, social and environmental issues, etc. are common major topics in risk assessments, the specific risks appropriate to each property and each company will differ from property to property and company to company. For a particular property or company, the number and order of risk factors will vary from year to year. In periods of low commodity prices, a risk factor relating to commodity prices will be far more important than during periods when commodity prices are high. Availability of needed equipment (drill rigs, trucks, shovels, etc.) also varies from year to year. The issuer is responsible for ensuring that appropriate risk factor disclosures are made.

    • Procedures Regarding the Delivery of Information and Documents

      The Stock Exchange of Hong Kong Limited

      Practice Note 1

      to the Rules Governing the Listing of Securities (the "Exchange Listing Rules")

      Issued pursuant to rule 1.06 of the Exchange Listing Rules

      PROCEDURES REGARDING THE DELIVERY OF INFORMATION AND DOCUMENTS

      1. Definitions

      Terms used in this Practice Note which are defined or interpreted in the Exchange Listing Rules shall have the same meaning as in the Exchange Listing Rules.
      2. Applications for Listing and listing matters

      All applications for listing must be sent to the Listing Division and marked for the attention of the Head of the Listing Division and all correspondence in respect of listing matters should be sent to the Listing Division.
      3. Requests for a Review

      Every request for a review under Chapters 2A and 2B of the Exchange Listing Rules must be sent to the Listing Division and marked for the attention of the Secretary of the Listing Committee.
      4. Contact Information

      References in Chapters 3, 13 and 19A of the Exchange Listing Rules, and where applicable, the listing agreements, and in the formal declaration relating to any other business activities and undertaking in the forms set out in Forms B, H and I in Appendix 5 to the Exchange Listing Rules to providing and/or informing the Exchange of the relevant contact information mean delivery of that information to the Listing Division.
      5. Continuing Obligations and Notifiable Transactions

      References in Chapters 13, 14 and 14A of the Exchange Listing Rules and where applicable, the listing agreements, to informing the Exchange mean delivery of the relevant information to the Listing Division.
      6. If the information is of an urgent nature, such as the announcement of the declaration of a dividend, the issuer should communicate the information to the Head of the Listing Division or his delegates by email, facsimile, letter delivered by hand or such other means of written communication as can achieve the effect of an immediate communication. Where telephone communication is used, written confirmation must follow immediately.
      7. All information communicated should be precise and definite.
      8. Where the Exchange Listing Rules and where applicable, the listing agreements require documents to be sent, submitted or forwarded to the Exchange they must be delivered to the Listing Division.
      9. This Practice Note takes effect from 13th March 2000.

      Hong Kong, 15 February 2002

      Revised on 31 March 2004

      Revised on 1 April 2015

    • PN2 [Repealed]

    • The Trading Record of the Management of a New Applicant

      The Stock Exchange of Hong Kong Limited
       
      Practice Note 3
       
      to the Rules Governing the Listing of Securities (the "Exchange Listing Rules")
       
      Issued pursuant to rule 1.06 of the Exchange Listing Rules
       
      THE TRADING RECORD OF THE MANAGEMENT OF A NEW APPLICANT
       
      1.    Definitions

      Terms used in this Practice Note which are defined or interpreted in the Exchange Listing Rules shall have the same meaning as in the Exchange Listing Rules.
       
      2.    Introduction

      Rule 8.05 sets out the basic conditions which have to be met as a pre-requisite to the listing of equity securities. One of those conditions is that a new applicant must have an adequate trading record under substantially the same management. This Practice Note is intended to give guidance on certain aspects of this condition and is not intended to be a general commentary on rule 8.05 in its entirety.

      In all cases the trading record period of a new applicant must enable the Exchange and investors to make an informed assessment of the management's ability to manage the applicant's business and the likely performance of that business in the future. In order to make this assessment the applicant must be able to demonstrate that its main business or businesses, as at the time of listing, have normally been managed by substantially the same persons throughout the period of the qualifying trading record and that such persons are the management of the new applicant.
       
      3.    Early Consultation

      The Exchange encourages potential new applicants which have made acquisitions during the qualifying trading record period, or which intend to make an acquisition prior to obtaining a listing, or where there has been a material change in the management or ownership of the applicant during that trading record period, to contact the Listing Division of the Exchange for confidential advice, before submitting a listing application.

      The Exchange hopes that this Practice Note will prevent companies from incurring unnecessary expenditure when it is clear that they will not be able to meet the requirements set out in rule 8.05.

      You are reminded that specific guidance on the interpretation of the Exchange Listing Rules cannot be given without full information.
       
      4.    Consideration of an Application by the Exchange

      While a company is free to acquire or dispose of assets at any time, in some cases, it may be difficult for a new applicant to demonstrate that it meets the requirements of rule 8.05 where it has acquired a new business or businesses during the period of the qualifying trading record or where the companies comprising the group to be listed have been recently organised into a group.

      In order to determine an applicant's suitability to listing in these circumstances, the Exchange will take into account the following factors:—
       
        (a) whether the new business forms a material part of the new applicant's business at the time of listing. The acquisition of a new business which forms a material part of the new applicant's business at the time of listing may result in the Exchange rejecting the application;
       
        (b) whether the new business is forecast to make a material contribution to the new applicant's profit forecast. A material contribution to forecast profits of a newly acquired business may result in the Exchange rejecting the application;
       
        (c)    whether the new business is in a similar line to that of the new applicant's previous business activities and is part of the logical growth trend of the business;
       
        (d) whether the new applicant has retained the management of the new business and whether it can be demonstrated to the Exchange that continuity and synergy of the management necessary is provided;
       
        (e) the period of time which has elapsed since the completion of the acquisition. Management's ability to manage the enlarged business may not be able to be determined until a sufficient period of time has elapsed after completion of the acquisition; and
       
        (f) whether the new group has been formed solely for the purpose of satisfying the listing requirements or to enhance the apparent attractiveness of that group as a new applicant for listing.

      The issue of materiality and compliance generally with rule 8.05 will be determined by the Exchange, in its sole discretion, having regard to all the relevant circumstances.

      The Exchange emphasises that it retains an absolute discretion to accept or reject an application for listing and that compliance with the relevant conditions may not of itself ensure an applicant's suitability for listing.
       
      5.    Accountants' Report Evidencing the Trading Record

      Rule 8.05 states that a new applicant must normally have an adequate trading record of not less than three years. To assess whether the trading record is acceptable, the Exchange will review the underlying audited accounts of the group companies and expects that the accountants' report on the results of a new applicant (or the consolidated results of a new applicant and its subsidiaries) which evidences the trading record, should not normally contain any modified opinion in respect of the latest two financial periods which relate to a matter of significance to investors.
       
      6.    This amended Practice Note takes effect from 16th October, 1995.
       
        Note:   The applicant is taken to be a holding company together with all its subsidiaries and associated companies. The applicant must demonstrate that the management of the new applicant, as head of the group, has exercised overall and effective control of the main businesses operated through its subsidiaries throughout the qualifying trading record period.
       
      Hong Kong, 16th October, 1995

    • Issue of New Warrants to Existing Warrantholders

      The Stock Exchange of Hong Kong Limited
       
      Practice Note 4
       
      to the Rules Governing the Listing of Securities (the "Exchange Listing Rules")
       
      Issued pursuant to rule 1.06 of the Exchange Listing Rules
       
      ISSUE OF NEW WARRANTS TO EXISTING WARRANTHOLDERS
       
      1.    Definitions

      Terms used in this Practice Note which are defined or interpreted in the Exchange Listing Rules shall have the same meaning as in the Exchange Listing Rules.

      For the purpose of this Practice Note the intrinsic value of a warrant is defined as the average closing price of the underlying security for the preceding three months prior to the date of the application, less the exercise price.
       
      2.    General

      The Exchange has been concerned that proposals to issue new warrants to existing warrantholders (rather than to shareholders in proportion to their shareholdings) may be unfair to shareholders and to those warrantholders who have disposed of their existing warrants.
       
      3.    The Existing Requirements

      Rule 15.02(2) stipulates that warrants must not expire less than one and not more than five years from the date of issue or grant and must not be convertible into further rights to subscribe securities which expire less than one or more than five years after the date of the issue or grant of the original warrants.
       
      4.    The Exchange's New Requirements

      Where an issuer proposes to issue new warrants to existing warrantholders or to alter the exercise period or the exercise price of existing warrants, the Exchange will not approve the issue of the new warrants or the proposed alteration in the terms of existing warrants, unless the following requirements additional to rule 15.02(2) are met:—
       
        a)    the existing warrants must have a positive intrinsic value. The Exchange will not consider any such proposal where the existing warrants do not have a positive intrinsic value;
       
        b)    the number of new warrants offered to the holders of the existing warrants must not normally be larger than the number of existing warrants held by them;
       
        c)    the warrant proposal must be subject to the approval of shareholders and warrantholders in accordance with the provisions of the issuer's constitutive documents and terms of the relevant warrant instrument respectively, and must be approved at such meetings by special resolution. The Exchange reserves the right to require that any connected person of the issuer who holds more than 10% of the outstanding existing warrants shall abstain from voting on the matter;
       
        d)    the relevant circulars to shareholders and warrantholders must both contain details of any dealings by the issuer, and, where relevant, the manager of the issue of new warrants, or any of their respective close associates and any dealings by any core connected persons of the issuer (so far as is known to the issuer or any director of the issuer after making reasonable enquiries) in the existing warrants and the underlying securities to which the warrants relate, during the period commencing three months prior to the announcement of the warrant proposal and ending on the date of the relevant circular. If such disclosure reveals that any such persons have been actually dealing in either the warrants or the underlying securities the Exchange reserves the right not to approve the issue of the new warrants or the proposed alteration in the terms of the existing warrants;
       
        e)    the relevant circular to shareholders must contain an opinion by an independent financial adviser acceptable to the Exchange as to whether the proposed issue of new warrants or alteration in the terms of the existing warrants is fair and reasonable so far as the shareholders of the issuer are concerned;
       
        f)    the application for the listing of the new warrants must be accompanied by a legal opinion, from a lawyer of the relevant jurisdiction, confirming that the warrant proposal complies with the relevant provisions of the issuer's constitutive documents and the terms of the existing warrant instrument;
       
        g)    the warrant proposal may not be announced unless the issuer can fulfil all of the above conditions, subject only to obtaining the approval of shareholders, warrantholders, and the Listing Committee. Such announcement should be made in accordance with rule 2.07C as soon as possible after the Listing Division have confirmed to the issuer that they are satisfied that the relevant requirements have been met; and
       
        h)    any such proposal must be approved by shareholders and warrantholders more than six months prior to the expiry of the existing warrants.
       
        Listed issuers are reminded that they will also have to comply with the usual listing requirements, including but not limited to rules 8.08 and 8.09.
       
      5.    This Practice Note takes effect from 14 August 1991.
       
      Hong Kong, 14 August 1991

      Revised on 25 June 2007

    • Disclosure of Interests Information

      The Stock Exchange of Hong Kong Limited

      Practice Note 5

      to the Rules Governing the Listing of Securities (the "Exchange Listing Rules")

      Issued pursuant to rule 1.06 of the Exchange Listing Rules

      DISCLOSURE OF INTERESTS INFORMATION

      1. Definitions

      Terms used in this Practice Note which are defined or interpreted in the Exchange Listing Rules shall have the same meaning as in the Exchange Listing Rules.
      2. The requirements of the Exchange Listing Rules

      Paragraphs 45 of Part A, 38 of Part B and 49 of Part C of Appendix 1 and paragraph 13 of Appendix 16 of the Exchange Listing Rules require issuers to disclose, in certain listing documents and annual and interim reports, details of substantial shareholders' and certain other persons' interests and short positions in the shares and underlying shares of the issuer and directors' and chief executives' interests and short positions in the shares, underlying shares and debentures of the issuer and any associated corporation, as recorded (or, in the case of a new listing, to be recorded) in the registers required to be kept under sections 336 and 352 of the Securities and Futures Ordinance ("SFO"), subject to certain stated exceptions or waivers that may be given by the Exchange. Certain circulars to shareholders may also be required to contain such information.
      3. Presentation of interests and short positions required to be disclosed under Part XV of the SFO
      3.1 In order to provide shareholders and investors with more meaningful information, the Exchange requires that any statement showing the "interests" (both long and short positions) of substantial shareholders and certain other persons, directors and chief executives, whose interests are recorded in the registers required to be kept under sections 336 and 352 of the SFO must set out the details of their interests in accordance with this Practice Note. Statements disclosing interests and short positions in shares, underlying shares and debentures have to separately refer to three categories of persons, namely, directors and chief executives, substantial shareholders, and other persons who are required to disclose their interests pursuant to Part XV of the SFO.
      3.2 Statements disclosing interests and short positions in shares, underlying shares and debentures should describe the capacity in which such interests and short positions are held and the nature of such interests and short positions as disclosed in the prescribed forms required to be used by substantial shareholders and certain other persons, and directors and chief executives, when giving notice pursuant to sections 324 and 347 of Part XV of the SFO. Where interests or short positions are attributable on account of holdings through corporations that are not wholly-owned by the person making disclosure, the percentage interests held by such person in such corporations should be disclosed.
      3.3 For directors and chief executives, the statements should show details of the following matters as recorded in the register required to be kept under section 352 of the SFO:
      (1) aggregate long position in shares and (in respect of positions held pursuant to equity derivatives) underlying shares and in debentures of the issuer and its associated corporation(s) showing separately for each entity:
      (a) interests in shares (other than pursuant to equity derivatives such as share options, warrants to subscribe or convertible bonds);
      (b) interests in debentures; and
      (c) interests under equity derivatives showing separately for listed and unlisted equity derivatives, interests in underlying shares of the entity pursuant to:
      (i) physically settled equity derivatives;
      (ii) cash settled equity derivatives;
      (iii) other equity derivatives.
      Notes:
      (1) In the case of issuers and associated corporations, the statements should include the percentage which the aggregate long position in shares represents to the issued voting shares of the issuer or associated corporation.
      (2) A long position arises where a person is a party to an equity derivative, by virtue of which the person:
      (i) has a right to take the underlying shares;
      (ii) is under an obligation to take the underlying shares;
      (iii) has a right to receive money if the price of the underlying shares increases; or
      (iv) has a right to avoid or reduce a loss if the price of the underlying shares increases.
      (3) For (c)(i) above, in respect of options granted to directors or chief executives pursuant to share option schemes under Chapter 17 of the Exchange Listing Rules, the statements should show such details as are required to be disclosed under rule 17.07(1) of the Exchange Listing Rules.
      (2) aggregate short position in shares and (in respect of positions held pursuant to equity derivatives) underlying shares and in debentures of the issuer and its associated corporation(s) showing separately for each entity:
      (a) short positions in respect of shares arising under a stock borrowing and lending agreement; and
      (b) short positions under equity derivatives showing separately for listed and unlisted equity derivatives, interests in underlying shares of the entity pursuant to:
      (i) physically settled equity derivatives;
      (ii) cash settled equity derivatives; and
      (iii) other equity derivatives.
      Notes:
      (1) In the case of issuers or associated corporations, the statements should include the percentage which the aggregate short position in shares represents to the issued voting shares of the issuer or associated corporation.
      (2) A short position arises:
      (i) where the person is the borrower of shares under a securities borrowing and lending agreement, or has an obligation to deliver the underlying shares to another person who has lent shares;
      (ii) where the person is the holder, writer or issuer of any equity derivatives, by virtue of which the person —
      (a) has a right to require another person to take the underlying shares of the equity derivatives;
      (b) is under an obligation to deliver the underlying shares of the equity derivatives to another person;
      (c) has a right to receive from another person money if the price of the underlying shares declines; or
      (d) has a right to avoid a loss if the price of the underlying shares declines.
      3.4 For substantial shareholders, the statements should show details of the following matters as recorded in the register required to be kept under section 336 of the SFO:
      (1) aggregate long position in the shares and (in respect of positions held pursuant to equity derivatives) underlying shares of the issuer showing separately:
      (a) interests in shares (other than pursuant to equity derivatives such as share options, warrants to subscribe or convertible bonds); and
      (b) interests under equity derivatives showing separately for listed and unlisted equity derivatives, interests in underlying shares of the entity pursuant to:
      (i) physically settled equity derivatives; and
      (ii) cash settled equity derivatives.
      Notes:
      (1) The term "substantial shareholder" has the same meaning as defined in Chapter 1 of the Exchange Listing Rules.
      (2) The statements should include the percentage which the aggregate long position in shares represents to the issued voting shares of the issuer.
      (3) A long position arises where a person is a party to an equity derivative, by virtue of which the person:
      (i) has a right to take the underlying shares;
      (ii) is under an obligation to take the underlying shares;
      (iii) has a right to receive money if the price of the underlying shares increases; or
      (iv) has a right to avoid or reduce a loss if the price of the underlying shares increases.
      (4) For (b)(i) above, in respect of options granted to substantial shareholders pursuant to share option schemes under Chapter 17 of the Exchange Listing Rules, the statements should show such details as are required to be disclosed under rule 17.07(1) of the Exchange Listing Rules.
      (2) aggregate short position in shares and (in respect of positions held pursuant to equity derivatives) underlying shares of the issuer showing separately:
      (a) short positions in respect of shares arising under a stock borrowing and lending agreement; and
      (b) short positions under equity derivatives showing separately for listed and unlisted equity derivatives, interests in underlying shares of the entity pursuant to:
      (i) physically settled equity derivatives; and
      (ii) cash settled equity derivatives.
      Notes:
      (1) The statements should include the percentage which the aggregate short position in shares represents to the issued voting shares of the issuer.
      (2) A short position arises:
      (i) where the person is the borrower of shares under a securities borrowing and lending agreement, or has an obligation to deliver the underlying shares to another person who has lent shares;
      (ii) where the person is the holder, writer or issuer of any equity derivatives, by virtue of which the person —
      (a) has a right to require another person to take the underlying shares of the equity derivatives;
      (b) is under an obligation to deliver the underlying shares of the equity derivatives to another person;
      (c) has a right to receive from another person money if the price of the underlying shares declines; or
      (d) has a right to avoid a loss if the price of the underlying shares declines.
      3.5 For other persons whose interests are recorded (or, in the case of a new listing, are required to be recorded) in the register required to be kept under section 336 of the SFO, the statements should show details of the following matters as recorded in such register:
      (1) aggregate long position in the shares and (in respect of positions held pursuant to equity derivatives) underlying shares of the issuer showing separately:
      (a) interests in shares (other than pursuant to equity derivatives such as share options, warrants to subscribe or convertible bonds); and
      (b) interests under equity derivatives showing separately for listed and unlisted equity derivatives, interests in underlying shares of the entity pursuant to:
      (i) physically settled equity derivatives; and
      (ii) cash settled equity derivatives.
      Notes:
      (1) The statements should include the percentage which the aggregate long position in shares represents to the issued voting shares of the issuer.
      (2) A long position arises where a person is a party to an equity derivative, by virtue of which the person:
      (i) has a right to take the underlying shares;
      (ii) is under an obligation to take the underlying shares;
      (iii) has a right to receive money if the price of the underlying shares increases; or
      (iv) has a right to avoid or reduce a loss if the price of the underlying shares increases.
      (2) aggregate short position in shares and (in respect of positions held pursuant to equity derivatives) underlying shares of the issuer showing separately:
      (a) short positions in respect of shares arising under a stock borrowing and lending agreement; and
      (b) short positions under equity derivatives showing separately for listed and unlisted equity derivatives, interests in underlying shares of the entity pursuant to:
      (i) physically settled equity derivatives; and
      (ii) cash settled equity derivatives.
      Notes:
      (1) The statements should include the percentage which the aggregate short position in shares represents to the issued voting shares of the issuer.
      (2) A short position arises:
      (i) where the person is the borrower of shares under a securities borrowing and lending agreement, or has an obligation to deliver the underlying shares to another person who has lent shares;
      (ii) where the person is the holder, writer or issuer of any equity derivatives, by virtue of which the person —
      (a) has a right to require another person to take the underlying shares of the equity derivatives;
      (b) is under an obligation to deliver the underlying shares of the equity derivatives to another person;
      (c) has a right to receive from another person money if the price of the underlying shares declines; or
      (d) has a right to avoid a loss if the price of the underlying shares declines.
      4. Duplication

      Every statement showing the interests of directors, chief executives or other persons in a listing document or annual or interim report or circular to shareholders must clearly indicate the extent to which there is duplication between the interests of each director, chief executive or such other person.
      5. Guidance

      Issuers who are in any doubt as to the appropriate category in which an interest should be shown are encouraged to consult the Exchange for further guidance.
      6. Effective Date
      6.1 This Practice Note takes effect from 1 April 2003 and, subject to paragraph 6.2 below, replaces Practice Note 5 issued on 22 August 1991.
      6.2 In respect of disclosure of interests made referable to a date or a period ending before 1 April 2003, such interests may be disclosed in accordance with Practice Note 5 issued on 22 August 1991.

      Hong Kong, 1 April 2003

    • Certainty of Offer Periods

      The Stock Exchange of Hong Kong Limited

      Practice Note 6

      to the Rules Governing the Listing of Securities (the "Exchange Listing Rules")

      Issued pursuant to rule 1.06 of the Exchange Listing Rules

      CERTAINTY OF OFFER PERIODS

      1. Definitions

      Terms used in this Practice Note which are defined or interpreted in the Exchange Listing Rules shall have the same meaning as provided in the Exchange Listing Rules.
      2. Introduction

      The Exchange is concerned to ensure that all statements contained in a listing document are strictly adhered to by the issuer and such statements must not be misleading or inaccurate in any way. In this regard, the Exchange places particular importance on the details relating to an offer period set out in listing documents issued in support of an offer of securities. The Exchange considers the details of an offer period to be a material term of the listing document which must be able to be relied upon by all investors and which should remain the same for all investors. Furthermore, in order to ensure that all investors are treated fairly and equally, and so that there is no confusion or uncertainty surrounding the offer period, the offer period set out in the listing document should not normally be revised or extended.
      3. Requirements for Offer Periods

      Where details of the offer period are required to be included in a listing document in respect of an issue of equity or debt securities pursuant to the following paragraphs of Appendix 1: paragraphs 15(2)(f) of Part A, 18(1) of Part B or 17(2) of Part C, as the case may be, the following shall apply to such details:—
      (1) any right to revise or extend the offer period or period during which the subscription list is open, as stipulated in the listing document, or any right to reopen the subscription list must:—
      (a) be limited to possible delays caused by a tropical cyclone warning signal or such similar extraneous factors affecting whether the stated closing date is a banking day or not, as are acceptable to the Exchange; and
      (b) be set out in the details included in the listing document; and
      (2) subject to any such qualifications acceptable to the Exchange, the closing date of the offer period and the period during which the subscription list is open, as stated in the listing document, may not be revised or extended and may not be subject to any unilateral right on the part of the issuer, the underwriter or any other person to revise or extend such date or period or to reopen the subscription list.
      4. This Practice Note takes effect from 27 January 1992.

      Hong Kong, 27 January 1992

    • PN7 [Repealed]

    • Introduction of CCASS and Emergency Share Registration Arrangements During a Typhoon and/or a Black Rainstorm Warning

      The Stock Exchange of Hong Kong Limited
       
      Practice Note 8
       
      to the Rules Governing the Listing of Securities (the "Exchange Listing Rules")
       
      Issued pursuant to rule 1.06 of the Exchange Listing Rules
       
      INTRODUCTION OF CCASS AND EMERGENCY SHARE REGISTRATION ARRANGEMENTS DURING A TYPHOON AND/OR A BLACK RAINSTORM WARNING
       
      1.    Definitions

      Terms used in this Practice Note which are defined or interpreted in the Exchange Listing Rules shall have the same meaning as in the Exchange Listing Rules.

      In this Practice Note, the following terms, save where the context otherwise requires, have the following meanings:
       
      "CCASS" means the Central Clearing and Settlement System established and operated by HKSCC;
      "HKSCC" means the Hong Kong Securities Clearing Company Limited including, where the context so requires, its agents, nominees, representatives, officers and employees;
      "Participant" means a person admitted for the time being by HKSCC as a participant of CCASS.
       
      2.    Introduction

      With the implementation of CCASS the Exchange wishes to maintain the status quo as much as possible with respect to the distribution of shareholder communications by listed issuers. In addition, the Exchange wishes to ensure that investors in securities which have been designated by the HKSCC as eligible for deposit and settlement in CCASS are informed where they may obtain information regarding the effects of CCASS on dealings in those securities on the Exchange. This is to minimise disruptions to the market and to make the transition to CCASS for listed issuers and other market participants as smooth as possible. With the implementation of CCASS, it is also necessary to formalise the emergency share registration arrangements which will apply when a typhoon, “extreme conditions” caused by a super typhoon and/or a black rainstorm warning affects an ex-date or book-close date. The Exchange Listing Rules and where applicable, the listing agreements specified that where a listed issuer changed its book close date due to exceptional circumstances, such as a typhoon, it needed to notify the Exchange in writing and publish a notice in the newspapers as soon as practicable. With the implementation of the arrangements set out below, a listed issuer will only be required to notify the Exchange and make a further announcement in accordance with rule 2.07C where a change is made to the dividend payment date and/or the book closure period is extended.
       
        Note:    According to the “Code of Practice in Times of Typhoons and Rainstorms”, the Hong Kong Government may issue an announcement on “extreme conditions” in the event of, for example, serious disruption of public transport services, extensive flooding, major landslides or large-scale power outage after super typhoons. When “extreme conditions” are in force (i.e. the two-hour period after cancellation of typhoon warning signal no. 8), the Hong Kong Government will review the situation and further advise the public by the end of the two-hour period whether “extreme conditions” will be extended or cancelled.
       
      3.    The Exchange's New Requirements
       
        (1) As from the date when a security issued by a listed issuer has been designated by the HKSCC as eligible for deposit and settlement in CCASS:
       
          a) an issuer incorporated or otherwise established in Hong Kong, outside Hong Kong or the PRC (other than authorised Collective Investment Schemes) shall forward to each Participant regardless of whether the Participant is a member of the issuer, one copy of each of the corporate communications of the issuer that relate to the relevant eligible security, at the same time as they are despatched to the holders of those securities with registered addresses in Hong Kong. Wherever practicable an issuer should provide a Participant with such reasonable number of additional copies of these documents as the Participant requests in advance and undertakes to forward to its bona fide clients who have a beneficial interest in those eligible securities; and
       
          b) an issuer shall include in every listing document issued by it which relates to those eligible securities a statement to the effect that dealings in those securities may be settled through CCASS and that investors should seek the advice of their stockbroker or other professional adviser for details of those settlement arrangements and how such arrangements will affect their rights and interests.
       
          Note:   HKSCC will provide listed issuers with up to date lists of Participants.
       
        (2) Emergency Share Registration Arrangements During a Typhoon or “Extreme Conditions” Caused by a Super Typhoon
       
          Note: For the purposes of this paragraph 3(2) and the Table set out in Appendix A to this Practice Note only:—
       
          (i) references to "normal business hours" in respect of a Share Registrar means at least 9 am to 4 pm; and
       
          (ii) references to "trading day" shall have the same meaning as in the Rules of the Exchange.
       
          With the implementation of CCASS the Exchange has switched to a T+2 settlement system under which securities will trade ex-entitlement (an "ex-date") for two trading days prior to the advertised date on which a listed issuer's transfer books or register of members is to be closed (the "book-close date") preceding a record date; the two trading days prior to the book-close date being referred to in this Practice Note as the first and second ex-date, respectively. A typhoon or “extreme conditions” occurring on either of the two ex-dates may affect the ability of the purchaser to effect registration in time. Accordingly, in the event of a typhoon or “extreme conditions” the following arrangements will apply:
       
          (a) Where the No. 8 signal or above is hoisted or remains hoisted, or “extreme conditions” are announced or remain in force, between 9 am and 12 noon on either the first or second ex-date and is not lowered or cancelled at or before 12 noon on the relevant ex-date:—
       
            i)      the last time for accepting shares for registration shall be deferred to the next business day during normal business hours for each ex-date affected; and
       
            ii) the book-close date shall be automatically postponed by the number of ex-dates affected;
       
          (b) Where the No. 8 signal or above is hoisted or remains hoisted, or "extreme conditions" are announced or remain in force, between 12 noon and 3 pm on either the first or second ex-date:—
       
            i) the last time for accepting shares for registration shall be deferred to the next business day during normal business hours for each ex-date affected; and
       
            ii) the book-close date shall be automatically postponed by the number of ex-dates affected;
       
          (c) Where the No. 8 signal or above is hoisted between 3 pm and 4 pm on the first ex-date, no changes will be made to the timetable for accepting shares for registration in respect of the reduced business hours on such ex-date;
       
          (d) Where the No. 8 signal or above is hoisted, or “extreme conditions” are announced, between 3 pm and 4 pm on the second ex-date but lowered or cancelled at or before 9 am on the next business day:—
       
            i) the last time for accepting shares for registration shall be deferred to 12 noon on the next business day; and
       
            ii) if the original book-close date is not a business day, the book-close date shall be automatically postponed to the next business day;
       
          (e) Where the No. 8 signal or above is hoisted, or “extreme conditions” are announced, between 3 pm and 4 pm on the second ex-date but lowered or cancelled after 9 am but at or before 12 noon on the next business day:—
       
            i) the last time for accepting shares for registration shall be deferred to 5 pm on the next business day; and
       
            ii) if the original book-close date is not a business day, the book-close date shall be automatically postponed to the next business day;
       
          (f) Where the No. 8 signal or above is hoisted, or “extreme conditions” are announced, between 3 pm and 4 pm on the second ex-date but not lowered or cancelled until after 12 noon on the next business day:—
       
            i) the last time for accepting shares for registration shall be deferred to 12 noon on the following business day; and
       
            ii) the book-close date shall be automatically postponed to such date;
       
          (g) Where the No. 8 signal is lowered or “extreme conditions” are cancelled at or before 12 noon on the first ex-date, no changes will be made in respect of the time for accepting shares for registration or the book-close date in respect of the reduced business hours on such ex-date. On the other hand, where the No. 8 signal is lowered or “extreme conditions” are cancelled at or before 12 noon on the second ex-date, the time for accepting shares for registration shall be deferred to at least 5 pm on the same day but no change will automatically be made to the book-close date;
       
          (h) In each of the above cases, listed issuers may alter the stated book-closure period in accordance with any delays made to the book-close date so that the book-closure period remains the same;
       
          (i) Listed issuers shall not be required to notify the Exchange or make any announcements with respect to changes made to the ex-dates or the book-close date in accordance with this Practice Note. All investors and practitioners should be aware of these emergency share registration arrangements as any subsequent announcement given of date changes after a typhoon is not likely to assist them. On the other hand, if the deferments referred to above affect the dividend payment date or the end of the book-closure period, a listed issuer must notify the Exchange in writing and publish in accordance with rule 2.07C an announcement of the new dividend payment date and any extension in the book-closure period as soon as practicable;
       
          (j) Where any of the events referred to in sub-paragraphs (a) - (g) above occur on any deferred ex-dates or on a postponed book-close date, the same arrangements will apply mutatis mutandis;
       
          (k) Listed issuers are required to ensure that where a book-close date is automatically altered by virtue of these arrangements any reference to such date in a resolution, listing document, announcement or circular to shareholders will include such altered date.
       
          For clarity, the proposed arrangements have been set out in tabular form and are attached hereto as Appendix A.
       
        (3) Emergency Share Registration Arrangements During a Black Rainstorm Warning
       
          Note: For the purposes of this paragraph 3(3) and the Table set out in Appendix B to this Practice Note only:—
       
          (i) references to "normal business hours" in respect of a Share Registrar means at least 9 am to 4 pm; and
       
          (ii) references to "trading day" shall have the same meaning as in the Rules of the Exchange.
       
          With the implementation of CCASS the Exchange has switched to a T+2 settlement system under which securities will trade ex-entitlement (an "ex-date") for two trading days prior to the advertised date on which a listed issuer's transfer books or register of members is to be closed (the "book-close date") preceding a record date; the two trading days prior to the book-close date being referred to in this Practice Note as the first and second ex-date respectively. A black rainstorm warning occurring on either of the two ex-dates may affect the ability of the purchaser to effect registration in time. Accordingly, in the event of a black rainstorm warning the following arrangements will apply:—
       
          (a) Where a black rainstorm warning is issued before 9 am and remains in effect at 12 noon:—
       
            i) the last time for accepting shares for registration shall be deferred to the next business day during normal business hours for each ex-date affected; and
       
            ii) the book-close date shall be automatically postponed by the number of ex-dates affected;
       
          (b) Where a black rainstorm warning issued before 9 am is cancelled at or before 12 noon on either the first or second ex-date, the time for accepting shares for registration shall be deferred to 5 pm on the same day but no change will automatically be made to the book-close date;
       
          (c) Where a black rainstorm warning is issued at or after 9 am, no changes will be made in respect of the time for accepting shares for registration or the book-close date as the share registrar will open to the public as normal;
       
          (d) In any of the above cases (if applicable), listed issuers may alter the stated book-closure period in accordance with any delays made to the book-close date so that the book-closure period remains the same;
       
          (e) Listed issuers shall not be required to notify the Exchange or make any announcements with respect to changes made to the ex-dates or the book-close date in accordance with this Practice Note. All investors and practitioners should be aware of these emergency share registration arrangements as any subsequent announcement given of date changes after a black rainstorm warning is not likely to assist them. On the other hand, if the deferments referred to above affect the dividend payment date or the end of the book-closure period, a listed issuer must notify the Exchange in writing and publish in accordance with rule 2.07C an announcement of the new dividend payment date and any extension in the book-closure period as soon as practicable.
       
          (f) Where any of the events referred to in sub-paragraphs (a)-(c) above occur on any deferred ex-dates or on a postponed book-close date, the same arrangements will apply mutatis mutandis.
       
          (g) Listed issuers are required to ensure that where a book-close date is automatically altered by virtue of these arrangements any reference to such date in a resolution, listing document, announcement or circular to shareholders will include such altered date.
       
          For clarity, the proposed arrangements have been set out in tabular form and are attached hereto as Appendix B.
       
      4.    This Practice Note takes effect from 17th May, 1994.
       
      Hong Kong, 17th May, 1994

      Revised on 8th August, 2000

      Revised on 31st March, 2004

      Revised on 25th June, 2007

      Revised on 1st September, 2008

      Revised on 1st January, 2013

      Revised on 1 October, 2020
       
      APPENDIX A TO PRACTICE NOTE 8
      EMERGENCY SHARE REGISTRATION ARRANGEMENTS FOR T + 2
      SETTLEMENT SYSTEM

       
      Event Ex-entitlement
      Day
      (Ex-Date)
      Issue/cancellation of a typhoon warning signal or “extreme conditions” Registrar Book-Close Date Closure Period For
      Transfer Books or
      Register of Members
      Announcements Required
      Time Status Time for Accepting Shares for Registration
      1 First 9 am - 12 noon No. 8 Signal or above is hoisted or remains hoisted and is not lowered at or before 12 noon; or

      “Extreme conditions” are announced or remain in force and are not cancelled at or before 12 noon
      For each ex-date affected defer to the next business day (normal business hours) Automatically postponed by number of ex-dates affected The book-closure period may be extended in accordance with the delay to the book-closure date so that the book-closure period remains the same No announcement required unless:-
      i) the payment date is also deferred, in which case an announcement of the new payment date must be made by the listed issuer; or
      ii) the book-closure period is extended,
      in both cases the listed issuer must notify the Exchange in writing and publish in accordance with rule 2.07C an announcement of such change as soon as practicable
      2 Second
      3 First 12 noon - 3 pm No. 8 Signal or above is hoisted or remains hoisted during this period; or

      “Extreme conditions” are announced or remain in force during this period
      4 Second
      5 First 3 pm- 4 pm No. 8 Signal or above is hoisted No deferment on first ex-date No change No change No announcement required
      6 Second 3 pm- 4 pm No. 8 Signal or above is hoisted but lowered at or before 9 am on the next business day; or

      “Extreme conditions” are announced but cancelled at or before 9 am on the next business day
      Defer to 12 noon on the next business day If the original book-close date is a business day - no change. Otherwise postponed to the next business day The book-closure period may be extended in accordance with the delay to the book-close date so that the book-closure period remains the same No announcement required unless:-
      i) the payment date is also deferred, in which case an announcement of the new payment date must be made by the listed issuer; or
      ii) the book-closure period is extended,
      in which case the listed issuer must notify the exchange in writing and publish an announcement of such change in accordance with rule 2.07C as soon as practicable
      7 Second 3 pm- 4 pm No. 8 Signal or above is hoisted but lowered after 9 am but at or before 12 noon on the next business day; or

      “Extreme conditions” are announced but cancelled after 9 am but at or before 12 noon on the next business day
      Defer to 5 pm on the next business day If the original book-close date is a business day - no change. Otherwise postponed to the next business day
      8 Second 3 pm- 4 pm No. 8 Signal or above is hoisted but not lowered until after 12 noon on the next business day; or

      “Extreme conditions” are announced but not cancelled until after 12 noon on the next business day
      Defer to 12 noon on the business day following the next business day ("B day") Automatically postponed to B day
      9 First At or before 12 noon No. 8 Signal is lowered or “extreme conditions” are cancelled No deferment No Change No Change No announcement required
      10 Second At or before 12 noon No. 8 Signal is lowered or “extreme conditions” are cancelled Extension to 5 pm on the same day


        N.B.: Where any of the above events happen on deferred ex-dates or on a postponed book-close date the relevant arrangements set out above will apply mutatis mutandis.
       
      APPENDIX B TO PRACTICE NOTE 8
      EMERGENCY SHARE REGISTRATION ARRANGEMENTS DURING A BLACK RAINSTORM WARNING

       

      Event Ex-entitlement
      Day
      (Ex-Date)
      Issue/Cancellation of a Black Rainstorm Warning Registrar Book-Close Date Closure Period for
      Transfer Books or
      Register of Members
      Announcements Required
      Time Status Time for Accepting Shares for Registration
      1 First Before 9 am A Black Rainstorm Warning is issued and remains in effect at 12 noon For each ex-date affected defer to the next business day (normal business hours) Automatically postponed by number of ex-dates affected The book-closure period may be extended in accordance with the delay to the book-close date so that the book-closure period remains the same No announcements required unless:-
      i) the payment date is also deferred, in which case an announcement of the new payment date must be made by the listed issuer; or
      ii) the book-closure period is extended,
      in both cases the listed issuer must notify the Exchange in writing and publish in accordance with rule 2.07C an announcement of such change as soon as practicable
      2 Second
      3 First Before 9 am A Black Rainstorm Warning is issued before 9 am but cancelled at or prior to 12 noon Extension to 5 pm on the same day No change No change No announcement required
      4 Second
      5 First At or after 9 am A Black Rainstorm Warning issued at or after 9 am No change No change No change No announcement required
      6 Second


        N.B.: Where any of the above events happen on deferred ex-dates or on a postponed book-close date the relevant arrangements set out above will apply mutatis mutandis.

    • Arrangements for Applicants During Bad Weather Signals

      The Stock Exchange of Hong Kong Limited
       
      Practice Note 8A
       
      to the Rules Governing the Listing of Securities (the “Exchange Listing Rules”)
       
      Issued pursuant to rule 1.06 of the Exchange Listing Rules
       
      ARRANGEMENTS FOR APPLICANTS DURING BAD WEATHER SIGNALS
       
      1.    This Practice Note sets out the arrangements in relation to dealings with the Exchange regarding a listing document that constitutes a prospectus under the Companies (Winding Up and Miscellaneous Provisions) Ordinance and related announcements when a No. 8 typhoon warning signal or above, “extreme conditions” caused by a super typhoon and/ or a black rainstorm warning signal (collectively, “Bad Weather Signals”) is issued during the period from the registration of a prospectus to the commencement of dealing of shares.
       
      Note:    According to the “Code of Practice in Times of Typhoons and Rainstorms”, the Hong Kong Government may issue an announcement on “extreme conditions” in the event of, for example, serious disruption of public transport services, extensive flooding, major landslides or large-scale power outage after super typhoons. When “extreme conditions” are in force (i.e. the two-hour period after cancellation of typhoon warning signal no. 8), the Hong Kong Government will review the situation and further advise the public by the end of the two-hour period whether “extreme conditions” will be extended or cancelled.
       
      2.    Applicants should ensure their prospectuses set out the arrangements in the event of bad weather which may disrupt their listing timetable in order to have greater clarity on the arrangements and to avoid market confusion.
       
      Issue of certificate for registration of prospectus
       
      3.    On the day of the publication of a prospectus (“P Day”), an electronic copy of the prospectus and application forms will be published on the Exchange’s website in accordance with rule 2.07C and hardcopies will be available for distribution to the public.
       
      4.    An applicant must submit documents under rule 9.11(33) to the Exchange by 11 a.m. on the date of the registration of a prospectus, which is the business day before the P Day (“P-1 Day”) in order to obtain a certificate from the Exchange for prospectus registration with the Companies Registry under the Companies (Winding Up and Miscellaneous Provisions) Ordinance. It is the responsibility of the applicant to deliver the prospectus and any ancillary documents to the Companies Registry for registration. The applicant should receive a written confirmation from the Companies Registry of the registration on P-1 Day.
       
      5.    If a Bad Weather Signal is issued on P-1 Day, the arrangements with the Exchange are as follows:
       
      Time when a Bad Weather Signal is issued    Status of the Bad Weather Signal Arrangements
      Before 9 a.m. Cancelled at or prior to 12:00 noon The Exchange will review relevant documents and issue the registration certificate on P-1 Day.
      Before 9 a.m. Remains in force at and after 12:00 noon The Exchange will review relevant documents on the business day after the Bad Weather Signal is lowered or cancelled, and issue the registration certificate as soon as possible.
      At or after 9 a.m. Business as usual The Exchange will review relevant documents and issue the registration certificate on P-1 Day.
       
      6.    If a Bad Weather Signal causes a delay in the registration of a prospectus with the Companies Registry whereby:—
       
      (a)    the offer period becomes less than 3 days as required under the Companies (Winding Up and Miscellaneous Provisions) Ordinance, the applicant must revise its listing timetable to ensure compliance with the requirement and make an announcement of the revised timetable on the business day after the Bad Weather Signal is lowered or cancelled. The announcement is not required to be reviewed by the Exchange, and the applicant is not required to amend its prospectus or issue a supplemental prospectus for this purpose; and/ or
       
      (b)    the prospectus would be published later than the date of the prospectus, the applicant should prepare a letter to the Companies Registry stating that the reason for the delay in publishing, circulating or distributing prospectus for the purpose of registration with the Companies Registry. The applicant is not required to amend the date of the prospectus.
       
      Publication of a prospectus
       
      7.    If a Bad Weather Signal is in force at 9:00 a.m. on P Day, the applicant must take necessary actions to ensure the offer period is at least 3 days as required under the Companies (Winding Up and Miscellaneous Provisions) Ordinance. If as a result the applicant amends its listing timetable set out in the prospectus, an announcement in relation to the revised timetable must be made on the business day after the Bad Weather Signal is lowered or cancelled. The announcement is not required to be reviewed by the Exchange, and the applicant is not required to issue a supplemental prospectus.
       
      Opening or closing of the application lists in a public offer
       
      8.    If a Bad Weather Signal is in force at any time between 9:00 a.m. and 12:00 noon on the scheduled date of the opening of the application lists (“A Day”), the application lists will not be opened on A Day but instead be opened between 11:45 a.m. and 12:00 noon on the next business day when no Bad Weather Signal is in force between 9:00 a.m. and 12:00 noon (“A+1 Day”).
       
      9.    An applicant is not required to make an announcement on the change of opening of the application lists only if the arrangement in paragraph 8 above is included in the prospectus. Otherwise, the applicant is required to make an announcement on the change of the opening of the application lists as a result of the Bad Weather Signal on A+1 Day, and such announcement is not required to be reviewed by the Exchange.
       
      Vetting of an allocation announcement under rule 12.08
       
      10.    Depending on the applicant’s intended date of listing (“L Day”), an allocation announcement is normally approved by the Exchange by the close of business on the second business day before listing (“L-2 Day”). The allocation announcement must be published on the Exchange’s website no later than 8:30 a.m. on the business day before listing (“L-1 Day”).
       
      11.    If a Bad Weather Signal is issued on L-2 Day, the arrangements with the Exchange are as follows:
       
      Time when a Bad Weather Signal is issued Status of the Bad Weather Signal Arrangements
      Before 9 a.m. Cancelled at or prior to 12:00 noon The Exchange will review the allocation announcement on L-2 Day.
       
      Before 9 a.m. Remains in force at and after 12:00 noon The allocation announcement must be published before 8:30 a.m. on L-1 Day on the Exchange’s website and will be post-vetted by the Exchange on the same day. If the Exchange considers the published allocation announcement omits material information, or contains inaccurate information, the applicant will be required, on L-1 Day, to publish a supplemental allocation announcement and may be required to take other actions to ensure the omitted or inaccurate information in the published allocation announcement will not result in a disorderly market on the L Day. Otherwise, the applicant may be required to delay its listing timetable and make an announcement in relation to the revised timetable on L-1 Day.

      If the applicant is unable to publish the allocation announcement before 8:30 a.m. on L-1 Day on the Exchange’s website, or if the Exchange cannot post-vet the allocation announcement because a Bad Weather Signal is issued before 9 a.m. and remains in force at and after 12:00 noon on L-1 Day, it must revise its listing timetable and make an announcement in relation to the revised timetable on L-1 Day.
      At or after 9 a.m. Business as usual The Exchange will review the allocation announcement on L-2 Day.
       
      Issue of a listing approval letter
       
      12.    The Exchange normally issues the listing approval letter by close of business on L-1 Day.
       
      13.    If a Bad Weather Signal is issued on L-1 Day, the arrangements with the Exchange are as follows:
       
      Time when a Bad Weather Signal is issued    Status of the Bad Weather Signal Arrangements
      Before 9 a.m. Cancelled at or prior to 12:00 noon   The Exchange will issue the approval letter by close of business on L-1 Day.
       
      Before 9 a.m. Remains in force at and after 12:00 noon If a Bad Weather Signal was anticipated, the Exchange will issue the approval letter on L-2 Day. Otherwise, the Exchange will issue the approval letter before 9:15 a.m. on L Day if the Bad Weather Signal is no longer in force.
      At or after 9 a.m. Business as usual The Exchange will issue the approval letter by close of business on L-1 Day.
       
      Commencement of dealings in shares
       
      14.    Dealings of an applicant’s shares will only commence when trading on the Exchange resumes, even if trading is only for half-day. The applicant shall refer to the “Trading Hours & Severe Weather Arrangements” on the Exchange’s website for details of the trading arrangement.
       
      15.    Applicants are not required to make any announcement on the trading arrangements in the event of Bad Weather Signal as this is on the Exchange’s website.
       
      16.    This Practice Note takes effect from 1 October 2020.
       
      Hong Kong, 1 October 2020

    • PN9 [Repealed]

    • [Repealed]

    • Trading Halt, Suspension and Restoration of Dealings

      The Stock Exchange of Hong Kong Limited

      Practice Note 11

      to the Rules Governing the Listing of Securities (the "Exchange Listing Rules")

      Issued pursuant to rule 1.06 of the Exchange Listing Rules

      TRADING HALT, SUSPENSION AND RESTORATION OF DEALINGS

      1. Definitions

      Terms used in this Practice Note which are defined or interpreted in the Exchange Listing Rules shall have the same meaning as in the Exchange Listing Rules.
      2. Requests for trading halt or suspension

      Any request for trading halt or suspension of trading should be directed to the Listing Division of the Exchange. It will only be considered when it is received directly from the issuer's authorised representative or some other responsible officer, or from a recognised and authorised merchant bank, financial advisor or sponsor, or a member firm acting in either of those capacities. The Listing Division may request confirmation of the authority of the person requesting the trading halt or suspension. A formal letter supporting the request will be required, although because of time factors, this need not be delivered to the Listing Division when the initial request is made.

      Issuers should not delay in contacting the Listing Division where it is felt a trading halt or suspension might be appropriate. However, full reasons supporting a request will be required before the Listing Division, or if necessary the Listing Committee, will give the request consideration.
      3. Grounds for trading halt

      A request for a trading halt will normally only be acceded to where the situation falls within rules 13.10A and/or 14.37.

      The Exchange reserves the right to direct a trading halt without a request and will not hesitate to do so, if, in its judgement, this is in the best interest of the market and investors in general. Instances which are likely to give rise to the Exchange directing a trading halt without a request include, but are not limited to, those set out above and the following:
      •   unexplained unusual movements in the price or trading volume of the issuer's listed securities or where a false market for the trading of the issuer's securities has or may have developed where the issuer's authorised representative cannot immediately be contacted to confirm that the issuer is not aware of any matter or development that is or may be relevant to the unusual price movement or trading volume of its listed securities or the development of a false market, or where the issuer delays in issuing an announcement in the form required under rule 13.10 and where applicable, under the heading "Response to enquiries" in the relevant listing agreements;
      •   uneven dissemination or leakage of inside information in the market giving rise to an unusual movement in the price or trading volume of the issuer's listed securities.
      3A. Grounds for suspension

      A suspension request (other than a trading halt) will normally only be acceded to in the following circumstances:
      •   where an issuer is subject to an offer, but only where terms have been agreed in principle and require discussion with and agreement by one or more major shareholders. Suspensions will only normally be appropriate where no previous announcement has been made. In other cases, either the details of the offer should be announced, or if this is not yet possible, a 'warning' announcement indicating that the issuer is in discussions which could lead to an offer, should be issued, without recourse to a suspension;
      •   to maintain an orderly market;
      •   certain levels of notifiable transaction, such as substantial changes in the nature, control or structure of an issuer, where publication of full details is necessary to permit a realistic valuation to be made of the securities concerned, or the approval of shareholders is required;
      •   where an issuer is no longer suitable for listing, or becomes a 'cash' company;
      •   where an issuer is going into receivership or liquidation;
      •   where an issuer confirms that it will be unable to meet its obligation to disclose periodic financial information in accordance with the Exchange Listing Rules.
      4. Restoration of dealings

      In the interests of a fair and continuous market, the Exchange requires a trading halt or suspension period to be kept as short as is reasonably possible. This means that an issuer must publish an appropriate announcement as soon as possible after the trading halt or suspension arises. Under normal circumstances, the Exchange will restore dealings as soon as possible following publication of an appropriate announcement, or after specific requirements have been met. Failure by an issuer to make an announcement when required, may, if the Exchange feels it to be appropriate, result in the Exchange issuing its own announcement and a restoration of dealings without an announcement by the issuer.

      The Exchange re-emphasises the importance of proper security within an issuer, and the responsibility of the directors to ensure a proper and timely disclosure of all information necessary to investors to establish a fair and realistic valuation of securities traded in the market.
      5. Disclosure of information

      The Exchange is also concerned to ensure issuers' proper and timely disclosure of information. It condemns the practice of allowing information to leak before its announcement to 'test' the market, or to affect the price of the relevant security before details of a proposal are formally announced. It is particularly concerned where inside information is used to gain a personal advantage. It will not hesitate to direct a trading halt or suspend dealings where it considers that improper use is being made of inside information, whether by persons connected with the issuer or otherwise. It may require a detailed explanation from an issuer as to who may have had access to inside information, and why security had not been properly maintained. If it considers the result of its enquiries justifies, it may publish its findings. It places great importance on the responsibility of the directors of an issuer to ensure proper security with regard to inside information, and that information is disclosed in a proper, equitable manner, in the interests of the market as a whole, not to the benefit of a select group or individual.

      Where the Exchange believes that an issuer or its advisers have permitted inside information regarding the issue of new securities to leak before its announcement, it will not normally consider an application for the listing of those securities.
      6. The Statutory Rules

      In accordance with the Statutory Rules the Exchange will continue to notify the Commission of trading halts, suspensions and restorations of dealings, and this Practice Note is issued without prejudice to the statutory powers of the Commission in respect of suspensions.
      7. This Practice Note replaces Guidance Note 1 and takes effect from 16th October, 1995.

      Hong Kong, 16th October, 1995

      Revised on 31st March, 2004

      Revised on 25th June, 2007

      Revised on 1st January, 2009

      Revised on 1st January, 2013

    • Valuations of Property Situated in Developing Property Markets

      The Stock Exchange of Hong Kong Limited
       
      Practice Note 12
       
      to the Rules Governing the Listing of Securities (the "Exchange Listing Rules")
       
      Issued pursuant to rule 1.06 of the Exchange Listing Rules
       
      VALUATIONS OF PROPERTY SITUATED IN DEVELOPING PROPERTY MARKETS
       
      1.    Definitions

      Terms used in this Practice Note which are defined or interpreted in the Exchange Listing Rules shall have the same meaning as in the Exchange Listing Rules.
       
      2.    Introduction

      Chapter 5 of these Rules sets out valuation and other disclosure requirements for property interests for any listing document or circular to shareholders. Rule 5.05 provides that all valuation reports must contain all material details of the basis of valuation which must follow The Hong Kong Institute of Surveyors ("HKIS") Valuation Standards on Properties published from time to time by the HKIS or the International Valuation Standards published from time to time by the International Valuation Standards Council. Rule 5.06 sets out the information a valuation report should normally include. Rule 5.06(9) provides that these reports shall contain other information the Exchange may require. This Practice Note is intended to set out the information to be included in a valuation report under rule 5.06(9) for property situated in a developing property market.
       
      3.    Early consultation

      The Exchange encourages new applicants and listed issuers who have made or intend to make acquisitions of properties in any developing property market to contact the Listing Division of the Exchange for confidential advice as to whether, in the opinion of the Exchange, a valuation for such property is capable of being included, or will require to be included, in a listing document or any circular to shareholders and the information such document or valuation report should contain.
       
      4.    Professional qualifications of the Independent valuer
       
        4.1    For the purpose of valuing properties in developing property markets, a valuer would normally be regarded as having the appropriate professional qualifications and experience for valuing properties in developing property markets if he is subject to the discipline of The Royal Institution of Chartered Surveyors ("RICS") or the HKIS or professional body of similar standing to the RICS or HKIS and has a minimum of 2 years experience in valuing properties in the relevant location or has relevant experience.
       
        4.2    The professional qualifications of the valuer and his experience in valuing properties within the relevant location (and, where the valuation is made on behalf of a valuation company, his experience with the company) should be disclosed in the valuation report.
       
      5.    Establishment of title
       
        5.1    A valuation report for any property must state whether the relevant party has vested legal title to the relevant property. The relevant document should also contain a statement of such fact and any material conditions affecting title. Such statement should clearly distinguish which properties (for which valuation reports are included in the document) are vested in the relevant party and which are not. Such statement should also summarise the material information regarding title and other relevant matters contained in any legal opinion, in the case of properties located in the People's Republic of China ("PRC"), referred to in paragraphs 5.2(a), (b), and 5.3 below.
       
        5.2    In the case of a property located in the PRC:
       
          (a)    a long-term land use right certificate will be treated as the operative equivalent to the Hong Kong legal concept of vested title to the relevant property. The listing applicant or listed issuer should confirm, with the benefit of a PRC legal opinion from a firm authorised by an appropriate authority in the PRC to advise in relation to listed companies, whether a long-term land use right certificate has been obtained by the relevant party in respect of the relevant property. The Exchange may require production of the land use certificate and may require that it be made available for inspection; or
       
          (b)    in respect of a grant of land by a government land administration bureau in the PRC or with respect to a transfer of land use rights where the issue of a land use right certificate is pending, a properly approved land grant or land transfer contract in writing accompanied by a PRC legal opinion (as described in sub-paragraph (a) above) as to the validity of the approval may be acceptable as evidence of a transferee's pending title to the land to be granted or transferred. The Exchange may require production of the approved contract and may require that it be made available for inspection.
       
        5.3    In the case of a property located in the PRC, where the relevant property is held or being acquired for development and where the residual method is used as the primary basis for the valuation, the relevant party should obtain an acceptable PRC legal opinion (as described in paragraph 5.2(a) above) which describes all consents, permits and regulations which need to be obtained or satisfied in respect of the development, or proposed development upon which any valuation is based. Such opinion should confirm whether and to what extent consent has been obtained for the proposed development and all such information should be included in the valuation report and in the relevant document.
       
      6.    Joint venture interests
       
        6.1    In the case of property held by any joint venture entity or pursuant to some other form of joint arrangement, the legal opinions referred to in paragraphs 5.2 and 5.3 above should include a description of the significant terms of the joint venture arrangement including a description of the equity and profit sharing arrangements of the parties to the agreement. In addition, any opinion should state whether the relevant joint venture company has obtained all necessary licenses to operate in the location where the relevant property is situated. A summary of the content of such opinion should also be disclosed both in any valuation report and in the relevant document.
       
        6.2    Where a new applicant or listed issuer has or is proposing to acquire an interest in a joint venture vehicle situated in the PRC where the relevant property asset is beneficially owned or retained by one of the parties to the joint venture agreement and does not vest in the joint venture entity, and where the listing applicant or listed issuer has or is intending to acquire some right to occupy or to enjoy income or profit therefrom, then the PRC legal opinion described in paragraph 5.2(a) above should also confirm:
       
          (a)    the exact nature of the interest in the joint venture vehicle which the listing applicant has or the listed issuer is intending to acquire;
       
          (b)    whether the terms of any joint venture agreement provide for the transfer of the legal title to any property to the joint venture vehicle and the status of such transfer;
       
          (c)    whether the right the new applicant has or the listed issuer is intending to acquire is capable, as a matter of PRC law, of being granted by the party in whom legal title to the relevant property is vested;
       
          (d)    whether and to what extent the right acquired or to be acquired is enforceable in the PRC and whether it will be freely transferable by the listing applicant or the listed issuer to any other third party; and
       
          (e)    whether all relevant regulatory approvals have been obtained.
       
      7.    Disclosure of legal opinions to the valuer

      In all cases where a legal opinion is required, such opinion together with copies of any document referred to therein should be made available to the valuer carrying out any valuation in respect of relevant property prior to the completion of the valuation report and the valuer shall explain whether and if so how he has taken account of the content of such opinion in the valuation of the relevant property.
       
      8.    Contents of the Valuation Report
       
        8.1    Where the relevant property has been valued on an open market basis, but such valuation is not by reference to comparable market transactions, the valuer may be required to discuss and disclose the assumptions underlying the open market valuation method in the context of the developing property market in which the relevant property is situated. Valuers may be asked to justify the assumptions they have made in the valuation report particularly where local market conditions or legal circumstances may differ greatly from those in Hong Kong.
       
        8.2    The valuer in any valuation report must clearly state the nature of the interest which is being valued, taking account of the content of any legal opinion provided to him relating to the relevant property. In particular the valuation report should clearly state whether the valuation is of a vested legal right or of a right to acquire a vested legal right to the relevant property or, for example, only a right to occupy the relevant property for a fixed period or to enjoy rents or other income therefrom.
       
        8.3    Where the property the subject of the valuation report has been valued on an open market basis and by reference to the residual method, the valuation report should:
       
          (a)    state this fact;
       
          (b)    describe the valuation method used together with a brief description of that method in simple language;
       
          (c)    provide a statement showing:—
       
            (i)    gross development value of the various components in the proposed development with an explanation of any comparables used and the adjustments made to arrive at the figure for gross development value;
       
            (ii)    construction costs based on the report of a properly qualified quantity surveyor as referred to in paragraph 8.4 below;
       
            (iii)    all fees charged or to be charged;
       
            (iv)    interest charges;
       
            (v)    developer's profit; and
       
            (vi)    any other component or comparable figure used in the residual method; and
       
          (d)    describe the assumed development potential for the relevant property, including relevant plot ratios. Any approval or any indication from any competent authority which differs from the development potential or plot ratios assumed by the valuer should be set out in the valuation report. If no relevant approval has been obtained from a competent authority the valuer should state the source of and the basis of the assumptions used.
       
        8.4    Where the valuation figure is derived through use of the residual method, the new applicant and/or listed issuer should in addition instruct a professionally qualified quantity surveyor acceptable to the Exchange to verify the estimated costs of carrying out the development. The report of the quantity surveyor should be included together with the valuation report.
       
      9.    Income or profit method of valuation

      Where relevant property (or part thereof) has been valued through use of the profit or income method of valuation, the valuation report should in addition state the assumptions upon which this method is based and whether there is any comparable market evidence, for example, in the case of a hotel, of room rates and occupancy levels in the same or similar location to the relevant property.
       
      10.    Notifiable Transactions and Connected Transactions

      Where in any transaction which are subject to Chapters 14 and/or 14A of the Exchange Listing Rules, the relevant party is or intends to contribute capital or to contribute to or become liable for all or part of the cost of development of any property project or development, or to any company or venture involved in any development project, then the Exchange:
       
        (a)    may require further disclosure of how such capital contribution or development costs have been derived;
       
        (b)    may require an independent valuation report even if such report is not expressly required under Chapter 5 of these Rules; and
       
        (c)    may consider taking account of such capital or cost contributions when considering whether the transaction falls within any of the categories of notifiable transactions and connected transactions referred to in Chapters 14 and 14A of the Exchange Listing Rules.
       
      11.    Statement by directors

      Where valuations are required under Chapter 5 of these Rules or under paragraph 10(b) of this Practice Note and where the primary method for valuing a property is the residual method, the Exchange may require the directors of the relevant party to include a statement in a prominent position in the relevant document with respect to the valuation of any property held for investment, development, future development and sale. In that statement the directors or, for a connected transaction, the independent directors, must:—
       
        (a)    critically discuss and assess the assumptions made by the valuer as disclosed in the valuation report for the aforesaid categories of property and the material effect that any variation of those assumptions may have on the valuation figure;
       
        (b)    critically discuss the effect of any material conditions affecting the status of the legal title to any such property as disclosed in any legal opinion obtained in respect of such property;
       
        (c)    describe in the case of property in the process of being developed or held for future development, and where the valuation is based on the expected sale value of the completed development, the exact stage at which any proposed development has reached; and
       
        (d)    describe all known relevant local taxes which may be charged in respect of any proposed property development project and explain how such taxes could affect the calculation of developers profit contained in any calculation pursuant to the residual method, and the consequent effect on any valuation figure.
       
      12.    Accountancy Treatment

      In all cases where a valuation report is required the Exchange may also require the directors to describe the accounting treatment to be adopted in respect of any property assets situated in a developing property market.
       
      13.    Warning Statement

      Where the residual method is used, the valuation report should include a general warning statement in the form attached hereto.
       
      14.    Exchange Rates

      Where any figures or calculations rely on exchange rates, the rate used and relevant date should be stated. Where there has been a fluctuation in exchange rates between the date of the valuation and the date of the listing document or circular to shareholders, this fact together with the effect of the fluctuation on the valuation in the valuation report should be set out.
       
      15.    Connected Transactions

      In the case of connected transactions, where the valuer has relied upon information supplied by a connected person this should be clearly stated in the valuation report and the extent to which the valuer has independently verified this information should be set out prominently in the relevant document.
       
      16.    Date and Cost of Original Acquisitions

      Where the property the subject of the valuation has been acquired within five years of the date of valuation, the new applicant or the listed issuer should supply to the valuer for inclusion in his report the relevant date and cost of acquisition and the total costs expended on the property, which should be included alongside the current valuation figure.
       
      17.    Risk Factors

      Where property assets situated in developing property markets represent substantially the whole or a majority of the assets of the new applicant or listed issuer, the warning in paragraph 13 above should, if applicable, also appear in the "Risk Factors" section of the relevant document.
       
      18.    This Practice Note replaces Guidance Note 5 and takes effect from 16th October, 1995.
       
      Hong Kong, 16th October, 1995

      Revised on 31st March, 2004
       
      Warning Statement
       
      "The valuation arrived at has not been determined by reference to comparable market transactions which is the most reliable method for valuing property assets and the most common method used for valuing properties in Hong Kong. In contrast, because of the lack of comparable market transactions in the locality in which the subject property is situated this valuation has used the residual method which is generally acknowledged as being a less reliable valuation method. The residual method is essentially a means of valuing land by reference to its development potential by deducting costs and developer's profit from its estimated completed development value. It relies upon a series of assumptions made by the valuer which produce an arithmetical calculation of the expected current sale value as at [date] of a property being developed or held for development or redevelopment. Where the property is located in a relatively under-developed market such as [place] those assumptions are often based on imperfect market evidence. A range of values may be attributable to the property depending upon the assumptions made. While the valuer has exercised its professional judgment in arriving at the value, investors are urged to consider carefully the nature of such assumptions which are disclosed in the valuation report and should exercise caution in interpreting the valuation report."

    • PN13 [Repealed]

    • PN14 [Repealed]

    • Practice with Regard to Proposals Submitted by Issuers to Effect the Separate Listing on the Exchange or Elsewhere of Assets or Businesses Wholly or Partly Within their Existing Groups

      The Stock Exchange of Hong Kong Limited
       
      Practice Note 15
       
      to the Rules Governing the Listing of Securities (the "Exchange Listing Rules")
       
      Issued pursuant to rule 1.06 of the Exchange Listing Rules
       
      PRACTICE WITH REGARD TO PROPOSALS SUBMITTED BY ISSUERS TO EFFECT THE SEPARATE LISTING ON THE EXCHANGE OR ELSEWHERE OF ASSETS OR BUSINESSES WHOLLY OR PARTLY WITHIN THEIR EXISTING GROUPS
       
      1.    Definitions

      Terms used in the Practice Note which are defined or interpreted in the Exchange Listing Rules shall have the same meaning as in the Exchange Listing Rules.
       
      2.    Introduction

      This Practice Note is intended to set out the Exchange's policy with regard to proposals submitted by issuers to effect the separate listing on the Exchange or elsewhere of assets or businesses wholly or partly within their existing groups ("spin-offs"). This Practice Note sets out the principles which the Exchange applies when considering spin-off applications. Issuers are reminded that they are required to submit their spin-off proposals to the Exchange for its approval.
       
        Note:    This Practice Note is normally only applicable to an issuer and entity which is a subsidiary of the issuer at the time of submission of the spin-off proposal. However, the Exchange will treat an entity as if it were a subsidiary of an issuer for the purpose of this Practice Note if such entity is at the time of submission of the issuer's spin-off proposal, an associated company of the issuer and was, at any time during the latest completed financial year of the issuer (comprising at least 12 months) up to the date of submission of the spin-off proposal, a subsidiary of the issuer.

      In such circumstances, the entity will be required to comply with the requirements of this Practice Note and will be treated as if it has remained as a subsidiary of the issuer. The issuer is required to substantiate the changes in the beneficial ownership of the entity's issued shares in the period stated above.
       
      3.    Principles

      The principles, which apply equally whether the entity to be spun off is to be listed in Hong Kong or overseas, are as follows:
       
        (a) Newco to satisfy basic listing criteria

      Where the entity ("Newco") to be spun-off by the existing issuer ("Parent") is to be listed on the stock market operated by the Exchange other than GEM, it must satisfy all requirements of the Exchange Listing Rules falling on new listing applicants, including the basic listing criteria contained in Chapter 8 of the Exchange Listing Rules.
       
        (b) No spin-off within three years of Parent's original listing

      In recognition that the original listing of the Parent will have been approved on the basis of the Parent's portfolio of businesses at the time of listing, and that the expectation of investors at that time would have been that the Parent would continue to develop those businesses, the Listing Committee would not normally consider a spin-off application within three years of the date of listing of the Parent.
       
          Note:    For a listed issuer that has transferred from GEM to the Main Board under Chapter 9A, its original listing date on GEM shall be regarded for the purpose of (b) as the date of listing of the Parent.
       
        (c) The remaining business of the Parent

      The Listing Committee must be satisfied that, after the listing of Newco, the Parent would retain a sufficient level of operations and sufficient assets to support its separate listing status. In particular, it would not be acceptable to the Listing Committee that one business (Newco's) supported two listing statuses (the Parent's and Newco's). In other words, the Parent itself would be required to retain, in addition to its interest in Newco, sufficient assets and operations of its own, excluding its interest in Newco, to satisfy independently the requirements of Chapter 8 of the Exchange Listing Rules.

      Where the Parent, excluding its interest in Newco, cannot meet the minimum profit requirement of rule 8.05, the Exchange may grant a waiver to the Parent if the Parent is able to demonstrate that it, excluding its interest in Newco, fails to meet the minimum profit requirement of rule 8.05 due solely to a significant market downturn. The Parent must also demonstrate that the circumstances that led to its inability to meet the minimum profit requirement was temporary and is not likely to continue or recur in the future or that appropriate measures have been taken by the Parent to negate the impact on its profit of the market downturn (as the case may be). In addition, the Parent, excluding its interest in Newco, must have an aggregate profit attributable to shareholders of not less than HK$50 million in respect of any three out of the five financial years immediately preceding the spin-off application.
       
          Note:    For the purpose of meeting the minimum aggregate profit requirement referred to above, the Parent must satisfy the following criteria:
       
            (a)    the profit/loss in the three consecutive financial years immediately preceding the spin-off application must in aggregate amount to a net profit of not less than HK$50 million; failing which
       
            (b) the profit/loss in any three of the four consecutive financial years immediately preceding the spin-off application must in aggregate amount to a net profit of not less than HK$50 million; failing which
       
            (c) the profit/loss of any three of the five consecutive financial years immediately preceding the spin-off application must in aggregate amount to a net profit of not less than HK$50 million.
       
            The relevant profit/loss is the profit/loss attributable to shareholders of the Parent after excluding the Parent's interest in Newco, and should exclude any income or loss of the Parent generated by activities outside the ordinary and usual course of its business.

      In the case of (b) or (c) above, the Parent must demonstrate that the profit/loss of any financial year whose profit/loss is not taken into account in the calculation of the minimum net profit of HK$50 million was affected by the significant market downturn.
       
        (d) Principles applied in the consideration of spin-off applications

      In considering an application for listing by way of spin-off, the Listing Committee would apply the following principles:
       
          (i) there should be a clear delineation between the business(es) retained by the Parent and the business(es) of Newco;
       
          (ii) Newco should be able to function independently of the Parent. As well as independence as regards its business and operations, the Listing Committee would expect from Newco:
       
            independence of directorship and management. While common directors would not be a bar to qualification under this test, the Listing Committee would require to be satisfied that Newco would operate independently and in the interests of its shareholders as a general body, and not in the interests of the Parent only, where the former interests and the latter were actually or potentially in conflict;
       
            independence of administrative capability. The Listing Committee would expect that all essential administrative functions would be carried out by Newco without requiring the support of the Parent, although the Listing Committee is prepared to be flexible in the sharing of administrative, non-management functions, such as secretarial services; and
       
            the Listing Committee must be satisfied that ongoing and future connected transactions between the Parent and Newco would be properly transacted under Chapter 14A of the Exchange Listing Rules and/or waivers thereunder and, in particular, that the ongoing relationship would not, in the context of any waivers granted, be unduly artificial or difficult to monitor from the perspective of safeguarding the interests of the respective minority shareholders of the Parent and of Newco.
       
          (iii) there should be clear commercial benefits, both to the Parent and to Newco, in the spin-off which should be elaborated upon in the listing document; and
       
          (iv) there should be no adverse impact on the interests of shareholders of the Parent resulting from the spin-off.
       
        (e) Shareholder approval of the spin-off
       
          (1) At present, under the Exchange Listing Rules, as well as where the connected transaction provisions are applicable, shareholder approval will be required where, under rule 14.07, any of the percentage ratios of the transaction is 25% or more.
       
          (2) The Exchange is of the view that the approval of shareholders of the Parent must be sought for the proposal if it falls within (1) above, and that the controlling shareholder and its associates must abstain from voting if the controlling shareholder has a material interest in the proposal.
       
          (3) [Repealed 1 January 2009]
       
          (4) In cases where the spin-off proposal requires approval by shareholders of the Parent, whether or not the controlling shareholder is required to abstain from voting, the Parent must comply with the requirements set out in rules 13.39(6) and (7). The circular to shareholders must contain full details of the spin-off and its effect on the Parent. The independent financial adviser appointed under rule 13.39(6)(b) may not also be the sponsor or co-sponsor or an underwriter of Newco.
       
          (5) In any case where the controlling shareholder votes through the spin-off proposal in the face of significant minority opposition, the Exchange would expect to receive a report from the independent financial adviser as to the discussions at the relevant general meeting.
       
        (f) Assured entitlement to shares in Newco

      The Listing Committee expects the Parent to have due regard to the interests of its existing shareholders by providing them with an assured entitlement to shares in Newco, either by way of a distribution in specie of existing shares in Newco or by way of preferred application in any offering of existing or new shares in Newco. The percentage of shares in Newco allocated to the assured entitlement tranche would be determined by the directors of the Parent and by its advisers, and all shareholders of the Parent would be treated equally. There would be no bar to the controlling shareholder receiving his proportion of shares under such entitlement. Where Newco is proposed to be listed elsewhere than in Hong Kong, and where shares in Newco under the assured entitlement can only be made available to existing shareholders of the Parent by way of a public offering in Hong Kong, the Listing Committee would consider submissions as to why the assured entitlement requirement would not be for the benefit of the Parent or its shareholders. Further, the minority shareholders of the Parent may by resolution in general meeting resolve to waive the assured entitlement, even where Newco is to be listed in Hong Kong.
       
          Note: In case where Newco is made subject to this Practice Note by virtue of the Note to paragraph 2, the Parent should use its best endeavours to provide its shareholders an assured entitlement to the shares in Newco. Whether such assured entitlement is available will be taken into account by the Exchange when considering whether to approve the spin-off proposal.
       
        (g) Announcement of spin-off

      An issuer must announce its spin-off listing application by the time it lodges the Form A1 (or its equivalent in any overseas jurisdiction). Where an overseas jurisdiction requires a confidential filing, the matter should be discussed with the Listing Division before the filing. Until announcement of the application, strict confidentiality should be maintained and, if there is a leakage of information or a significant, unexplained movement in the price or turnover volume of the Parent's securities, an earlier announcement would be required.
       
        These are general principles intended to assist the market. The Listing Division should be consulted at an early stage of any spin-off proposal for clarification as to the application.
       
      4.    The Exchange emphasises that it retains an absolute discretion to accept or reject a proposal submitted by issuer to effect the separate listing of assets or businesses wholly or partly within its existing group. The principles in this Practice Note are not exhaustive and the Exchange may impose additional requirements or make a spin-off proposal subject to special conditions whenever it considers it appropriate.
       
      5.    Effective Date

      This Practice Note takes effect from 12th May, 1997.
       
      Revised on 6th September, 2000

      Revised on 16th July, 2001

      Revised on 31st March, 2004

      Revised on 25th June, 2007

      Revised on 1st January, 2009

      Revised on 1st January, 2013

    • PN16 [Repealed]

    • Sufficiency of Operations and Delisting Procedures

      The Stock Exchange of Hong Kong Limited

      Practice Note 17

      to the Rules Governing the Listing of Securities (the "Exchange Listing Rules")

      Issued pursuant to rule 1.06 of the Exchange Listing Rules

      SUFFICIENCY OF OPERATIONS AND DELISTING PROCEDURES

      (This practice note applies only to suspended listed issuer subject to this note immediately before the effective date of rule 6.01A(1))

      1. Definitions

      Terms used in this Practice Note which are defined or interpreted in the Exchange Listing Rules shall have the same meaning as in the Exchange Listing Rules.
      2. Introduction
      2.1 Rule 13.24 requires an issuer to carry out a sufficient level of operations or have tangible assets of sufficient value or intangible assets for which a sufficient potential value can be demonstrated to warrant the continued listing of the issuer's securities on the Exchange.
      2.2 Characteristics of issuers which are unable to comply with rule 13.24 include :
      •   financial difficulties to an extent which seriously impairs an issuer's ability to continue its business or which has led to the suspension of some or all of its operations; and/or
      •   issuers which have net liabilities as at their balance sheet date i.e. issuers whose liabilities exceed their assets.
      2.3 Issuers that are unable to comply with rule 13.24 may be suspended — either at the request of the issuer or at the direction of the Exchange. Resumption of trading in the securities of these issuers will only be permitted where they are able to demonstrate that they comply with rule 13.24. In many cases it will be necessary for there to be some restructuring of these issuers' operations prior to resumption.
      2.4 Paragraph 6.04 of the Exchange Listing Rules provides that "... the continuation of a suspension for a prolonged period without the issuer taking adequate action to obtain restoration of listing may lead to the Exchange cancelling the listing." Purpose of this Practice Note is to clarify the procedures it will adopt in allowing such issuers to present resumption proposals or, where no such proposals are received, the procedures that will be taken to cancel the listing of an issuer's securities.
      3. Delisting Procedures
      3.1 The Exchange will follow a four-stage procedure as set out below.
      •   During the initial period of six months following the suspension, the Exchange will monitor developments. The issuer must make periodic announcements of developments under rule 13.24A. At the end of this six month period, the Exchange will determine whether it is appropriate to extend this initial period or to proceed to the second stage.
      •   The second stage would involve the Exchange in writing to the issuer, drawing attention to its continued failure to meet rule 13.24 and requiring it to submit resumption proposals within the next six months. During this period, the Exchange will continue to monitor developments of the issuer and will require from its directors monthly progress reports. At the end of this period, the Exchange will consider the issuer's proposals and determine whether it is appropriate to proceed to the third stage.
      •   Where the Exchange determines to proceed to the third stage, it will announce that the issuer does not have sufficient assets or operations for listing, and impose a deadline (generally six months) for submitting resumption proposals. During the third stage, the issuer would again be required to provide monthly progress reports to the Exchange.
      •   At the end of the third stage, if no resumption proposals have been received, the listing will be cancelled. Both the Exchange and the issuer concerned would announce this.
      4. This Practice Note takes effect from 1st February, 1998

      Hong Kong 26th January, 1998

      Revised on 31st March, 2004

      Revised on 1st January, 2013

    • Initial Public Offer of Securities

      The Stock Exchange of Hong Kong Limited

      Practice Note 18

      to the Rules Governing the Listing of Securities (the "Exchange Listing Rules")

      Issued pursuant to rule 1.06 of the Exchange Listing Rules

      INITIAL PUBLIC OFFER OF SECURITIES

      1. Definitions

      Terms used in this Practice Notice which are defined or interpreted in the Exchange Listing Rules shall have the same meaning as in the Exchange Listing Rules.
      2. Introduction
      2.1 This practice note sets out certain procedures to be adopted in the allocation of shares in initial public offerings. The Exchange Listing Rules permit a new issue of shares to be offered by way of placing. This practice note also sets out certain procedures to be adopted where an initial public offering involves a placing tranche and public subscription tranche of securities.
      3. Allocation of Shares
      3.1 The total number of securities available for public subscription (taking account of any clawback feature in the case of issues which involve both placement and public subscription tranches) are to be divided equally into pools: pool A and pool B. The securities in pool A should be allocated on an equitable basis to applicants who have applied for securities in the value of HK$5 million or less. The securities in pool B should be allocated on an equitable basis to applicants who have applied for securities in the value of more than HK$5 million and up to the value of pool B. Where one of the pools is undersubscribed, the surplus securities should be transferred to satisfy demand in the other pool and be allocated accordingly. No applications should be accepted from investors applying for more than the total number of shares originally allocated to each pool. Multiple applications within either pool or between pools should be rejected.
      4. Offers Involving a Subscription Tranche
      4.1 Issuers are reminded that in accordance with paragraph 7.10 of the Exchange Listing Rules, the Exchange may not permit a new applicant to be listed by way of placing if there is likely to be significant public demand for the securities. A key factor the Exchange will consider in reaching such a determination is the size of the offering.
      4.2 Where an IPO includes both a placing tranche and a public subscription tranche the minimum allocation of shares to the subscription tranche shall be as follows:
      •   an initial allocation of 10% of the shares offered in the IPO;
      •   a clawback mechanism that increases the number of shares to 30% when the total demand for shares in the subscription tranche is 15 times but less than 50 times the initial allocation;
      •   a clawback mechanism that increases the number of shares to 40% when the total demand for shares in the subscription tranche is 50 times but less than 100 times the initial allocation; and
      •   a clawback mechanism that increases the number of shares to 50% when the total demand for shares in the subscription tranche is 100 times or more the initial allocation.
      Shares may be transferred from the subscription tranche to the placing tranche where there is insufficient demand in the subscription tranche to take up the initial allocation.
      4.3 Where the issuer has granted the underwriters an over-allotment option this may be divided between the public subscription tranche and placing tranche at the discretion of the underwriters. Underwriters should restrict the extent of any over-allocation of shares to the limit provided under the over-allotment option.
      4.4 Before trading in the shares commences, issuers should disclose the level of indications of interest for shares in the placing tranche. This may be provided in either a numerical form or by way of a qualitative description.
      4.5 Investors are free to select whether to apply in the placing tranche or the subscription tranche. Where the placement tranche and subscription tranche are completed simultaneously an investor may submit an application in one of the pools in the subscription tranche and indicate an interest for shares in the placing tranche. An investor may only receive shares in the placing tranche or the subscription tranche. Any investors which have not received shares in the placing tranche may receive shares from the subscription tranche.
      4.6 Issuers should reject multiple applications within either pool or between pools. Issuers, their directors, sponsors and underwriters are required to take reasonable steps to identify and reject applications in the subscription tranche from investors that received shares in the placing tranche, and to identify and reject indications of interest in the placing tranche from investors that received shares in the subscription tranche. Investors which have not received shares in the subscription tranche may receive shares in the placing tranche.
      5. Disclosure
      5.1 Sponsors should ensure that details of these procedures are included in prospectuses.
      6. Effective Date
      6.1 This practice note takes effect from 26th June, 1998

      Hong Kong 26th June, 1998

    • PN19 [Repealed]

    • Allocation of Securities Subscribed for by an Issuer's Employees in Conjunction with its Initial Share Offer ("Pink Form Allocation")

      The Stock Exchange of Hong Kong Limited
       
      Practice Note 20
       
      to the Rules Governing the Listing of Securities (the "Exchange Listing Rules")
       
      Issued pursuant to rule 1.06 of the Exchange Listing Rules
       
      ALLOCATION OF SECURITIES SUBSCRIBED FOR BY AN ISSUER'S EMPLOYEES IN CONJUNCTION WITH ITS INITIAL SHARE OFFER
      ("Pink Form Allocation")
       
      1.    Definitions

      Terms used in this Practice Note which are defined or interpreted in the Exchange Listing Rules shall have the same meaning as in the Exchange Listing Rules.

      In this Practice Note, the following term, save where the context requires otherwise, has the following meaning:

      "Pink Form" refers to the form used for subscription by employees in conjunction with an issuer's initial share offer.
       
      2.    General

      The Exchange is minded to ensure that securities allotted to an issuer's employees in connection with Pink Form applications are allotted on a fair basis. In this regard, the Exchange will apply the guidelines set out in new Practice Note 20 in assessing the fairness of the basis of Pink Form Allocation. Issuers are notified that the following guidelines are not exhaustive and that the Exchange reserves the right to consider other factors as appropriate in particular circumstances.
       
      3.    Pink Form Allocation Guidelines
       
        (a)    The Issuer shall demonstrate the fairness of the basis of allocation. The basis of allocation shall be fully disclosed in the Prospectus. The factors underlying any subjective basis of allocation adopted by the Issuer shall be set out in the Prospectus to the extent reasonably possible. The Issuer is advised to consult the Exchange in advance in respect of these matters.
       
        (b)    The Issuer shall issue written guidance to all employees on the allocation of shares under the Pink Form application detailing the basis of allocation.
       
        (c)    The Issuer shall not accept application from employees for shares in excess of the number available under the Pink Forms. All applications in excess of the shares available under the Pink Form shall be rejected. Such information shall also be included as one of the conditions on the Pink Form application.
       
        (d)    If a "scale down" ratio formula is used by the Issuer to determine the allotment of shares to employees, such ratio shall be applied in an equitable manner and shall not favour employees applying for a large number of shares.
       
        (e)    The Issuer shall include in the announcement of the results of allotment any exception(s) noted in the Pink Form Allocation.
       
      4.    Effective Date

      This practice note takes effect from 15 June, 2000
       
      Hong Kong, 1 June, 2000

    • Due Diligence by Sponsors in Respect of Initial Listing Applications

      The Stock Exchange of Hong Kong Limited

      Practice Note 21

      to the Rules Governing the Listing of Securities (the "Exchange Listing Rules")

      Issued pursuant to rule 1.06 of the Exchange Listing Rules

      DUE DILIGENCE BY SPONSORS IN RESPECT OF INITIAL LISTING APPLICATIONS

      1. This Practice Note should be read together with Chapter 3A of the Exchange Listing Rules and the SFC Sponsor Provisions. Chapter 3A, amongst other things, requires that sponsors conduct reasonable inquiries ("due diligence") to enable the sponsor to make a declaration set out in Appendix 19 under rule 3A.13. The SFC Sponsor Provisions provide a regulatory basis for defining the expected quality of work as a sponsor.
      1A. In undertaking due diligence inquiries a sponsor must have regard to this Practice Note and the SFC Sponsor Provisions. To the extent that any matters under this Practice Note and the SFC Sponsor Provisions overlaps, the more onerous provisions imposing a higher standard of conduct on sponsors will prevail.
      2. The sponsor should make such inquiries as may be necessary until the sponsor can reasonably satisfy itself on the disclosure in the listing document. In undertaking its role a sponsor should examine with professional scepticism the accuracy and completeness of statements and representations made, or other information given, to it by the new applicant or its directors. An attitude of professional scepticism means making a critical assessment with a questioning mind and being to information, including information from experts, that contradicts or brings into question the reliability of these statements, representations and information.
      3. This Practice Note sets out the Exchange's expectations of due diligence sponsors will typically perform. It is not in any way intended to set out the actual steps that may be appropriate in any particular case. Each new applicant is unique and so will be the due diligence steps necessary for the purpose of its listing application. The scope and extent of appropriate due diligence by a sponsor may be different from (and in some cases, considerably more extensive than) the more typical examples in this Practice Note. The sponsor must exercise its judgment as to what investigations or steps are appropriate for a particular new applicant and the extent of each step.
      4. The Exchange expects sponsors to document their due diligence planning and significant deviations from their plans. This includes demonstrating that they have turned their minds to the question of what inquiries are necessary and reasonably practicable in the context and circumstances of the case. The Exchange also expects sponsors to document the conclusions they reach on the new applicant's compliance with all the conditions in Chapter 8 of the Exchange Listing Rules taking into account the extent to which compliance with those rules has been waived by the Exchange.
      5. It may be appropriate for a sponsor to engage third party professionals to assist it to undertake tasks related to certain due diligence inquiries. For example, assistance in reviewing the circumstances of all current legal proceedings to which the new applicant is a party. In such cases, the Exchange expects the sponsor to satisfy itself that it is reasonable to rely on information or advice provided by the third party professional. That would include, for example:
      a) being satisfied as to the competence of the professional, the scope of work to be undertaken by the professional and the methodology proposed to be used by the professional; and
      b) being satisfied that the third party professional's report or opinion is consistent with the other information known to the sponsor about the new applicant, its business and its business plans.
      6. The Exchange reminds sponsors of their other obligations including but not limited to those under the Exchange Listing Rules, the SFC Corporate Finance Adviser Code of Conduct, the Code of Conduct and particularly the SFC Sponsor Provisions, the Sponsors Guidelines, the Takeovers Code, the Code on Share Buy-backs, the Securities and Futures Ordinance and all other relevant ordinances, codes, rules and guidelines applicable to sponsors. Nothing in this Practice Note detracts from or diminishes those obligations.

      Interpretation of this Practice Note

      7. Unless otherwise stated, all terms used in this Practice Note have the same meanings as in the Exchange Listing Rules.
      8. All references in this Practice Note to the new applicant's listing document include supporting or supplementary documents, for example, correspondence with the Exchange in relation to the new applicant's initial listing application and relied on by the Exchange in assessing that application.
      9. All references in this Practice Note to the new applicant include the new applicant's group of companies.
      10. Unless otherwise stated, all references in this Practice Note to directors include executive and non-executive directors.

      Due diligence

      11. Typical due diligence inquiries in relation to the collective and individual experience, qualifications, competence and integrity of the directors include:
      a) reviewing written records that demonstrate each director's past performance as a director of the new applicant including participation in board meetings and decision making relating to the management of the new applicant and its business;
      b) assessing individually and collectively the financial literacy, corporate governance experience and competence generally of the directors with a view to determining the extent to which the board of the new applicant as a whole has a depth and breadth of financial literacy and understanding of good corporate governance, having regard to any code on corporate governance practices that the Exchange publishes from time to time; and
      c) reviewing the financial and regulatory track record of each publicly listed company (this includes companies listed on other exchanges as well as on the Exchange) of which any of the new applicant's directors is or was an executive or non-executive director, for example, by reference to company disclosures, media articles and information about those companies on the website of the relevant stock exchange.
      12. Typical due diligence inquiries in relation to the new applicant's compliance with the qualifications for listing include:
      a) searching the company registry in the new applicant's place of incorporation to confirm that the new applicant is duly established in that place and that the new applicant is in compliance with its memorandum and articles of association or equivalent constitutive documents;
      b) reviewing material financial information, including:
      (i) financial statements of the new applicant;
      (ii) financial statements of all subsidiaries of the new applicant and other companies that are material to the group's financial statements; and
      (iii) the internal financial records, tax certificates and supporting documents to the tax certificates for the trading record period.
      Such review would in most cases include interviewing the new applicant's accounting staff and internal and external auditors and reporting accountants and, where relevant, obtaining comfort from the new applicant's external auditors or reporting accountants based upon agreed procedures; and
      c) assessing the accuracy and completeness of the information submitted by the new applicant to demonstrate that it satisfies the trading record requirement.
      13. Typical due diligence inquiries in respect of each new applicant and the preparation of its listing document and supporting information include:
      a) assessing the financial information to be published in the listing document including:
      (i) obtaining written confirmation from the new applicant and its directors that the financial information (other than that al reported upon by a reporting accountant) has been properly extracted from the relevant underlying accounting records; and
      (ii) being satisfied that the confirmation referred to at paragraph (i) has been given after due and careful inquiry by the new applicant and its directors;
      b) assessing the new applicant's performance and finances, business plan and any profit forecast or estimate, including an assessment of the reasonableness of budgets, projections and assumptions made when compared with past performance, including historical sales, revenue and investment returns, payment terms with suppliers, costs of financing, long-term liabilities and working capital requirements. This would normally include interviewing the new applicant's senior management and would often involve interviewing the new applicant's major suppliers and customers, creditors and bankers;
      c) assessing whether there has been any change since the date of the last audited balance sheet included in the listing document that would require disclosure to ensure the listing document is complete and not misleading;
      d) assessing whether it is reasonable to conclude that the proceeds of the issue will be used as proposed by the new applicant, taking into account the outcome of the sponsor's assessment of, in particular, the new applicant's existing cash and liquid reserves, projected liabilities, working capital requirements and expenditure controls;
      e) undertaking a physical inspection of material assets, whether owned or leased, including property, plant, equipment, inventory and biological assets (for example, livestock or crops) used or to be used in connection with the new applicant's business;

      Notes:
      1. By physical inspection the Exchange means the sponsor should visit the site of the asset in order to view the asset and to assess its extent, quality and quantity and the purpose for which it is used.
      2. Where, in the reasonable opinion of the sponsor, assessment of an asset, including as to its extent, quality, quantity and use, genuinely cannot be achieved without the use of an expert (for example, in undertaking the physical inspection the sponsor becomes suspicious that the asset does not exist as to the extent represented or exists but is not used for the purpose claimed) the sponsor should ensure that the new applicant instructs an appropriately qualified independent expert to conduct all or part of the inspection. In such cases the sponsor should ensure the expert is required to provide a written report in respect of the inspection.
      f) reaching an understanding of the new applicant's production methods;
      g) reaching an understanding of the manner in which the new applicant manages its business, including as relevant actual or proposed marketing plans, including distribution channels, pricing policies, after-sales service, maintenance and warranties;
      h) reviewing the business aspects of all contracts material to the new applicant's business;

      Note: By business aspects the Exchange means non-legal aspects.
      i) reviewing legal proceedings and other material disputes that are current or recently resolved (for example, resolved in the previous 12 months) and in which the new applicant is involved, and all proceedings or material disputes the new applicant knows to be contemplated and which may involve the new applicant or one of its subsidiaries;
      j) analysing the business aspects of economic, political or legal conditions that may materially affect the new applicant's business;
      k) considering the industry and target markets in which the new applicant's business has principally operated and is intended to principally operate, including geographical area, market segment and competition within that area and/or segment (including existing and potential principal competitors and their relative size, aggregate market share and profitability);
      l) assessing whether there is appropriate documentation in place to confirm that the material assets, whether owned or leased, including property, plant, equipment, inventory and biological assets used or to be used, in connection with the new applicant's business, are appropriately held by the new applicant (for example, reviewing the relevant certificates of title and rights of land use);
      m) assessing the existence, validity and business aspects of proprietary interests, intellectual property rights, licensing arrangements and other intangible rights of the new applicant;
      n) reaching an understanding of the technical feasibility of each new product, service or technology developed, being developed or proposed to be developed under the new applicant's business plan that may materially affect the new applicant's business; and
      o) assessing the stage of development of the new applicant's business and assessing the new applicant's business plan and any forecasts or estimates, including reaching an understanding of the commercial viability of its product(s), service(s) or technology, including an assessment of the risk of obsolescence as well as market controls, regulation and seasonal variation.
      14. Typical due diligence inquiries in relation to the expert sections of the listing document include:
      a) interviewing the expert, reviewing the terms of engagement (having particular regard to the scope of work, whether the scope of work is appropriate to the opinion required to be given and any limitations on the scope of work which might adversely impact on the degree of assurance given by the expert's report, opinion or statement) and reviewing publicly available information about the expert to assess:
      (i) the expert's qualifications, experience and resources; and
      (ii) whether the expert is competent to undertake the required work;
      b) reviewing the expert sections of the draft listing document to form an opinion as to whether the following are disclosed and commented on appropriately:
      (i) the factual information on which the expert relies;
      (ii) the assumptions on which the expert opinion is based; and
      (iii) the scope of work performed by the expert in arriving at his opinion;
      c) verifying factual information for the purpose of making that part of the declaration in rule 3A.13 and Appendix 19(c);
      d) where the sponsor is aware that the new applicant has made formal or informal representations to an expert in respect of an expert section or in respect of a report made in connection with the listing application, assessing whether the representations are consistent with the sponsor's knowledge of the new applicant, its business and its business plans;
      e) by reference to the sponsor's knowledge of the new applicant, its business and its business plans assessing whether the assumptions disclosed by the expert as those on which the expert's opinion is based, are fair, reasonable and complete;
      f) if the expert's opinion is qualified, assessing whether the qualification is adequately disclosed in the listing document; and
      g) where the standard of independence is not set by a relevant professional body, obtaining written confirmation from the expert that it is independent from the new applicant and its directors and controlling shareholder(s), and being satisfied that there is no cause to inquire further about the truth of this confirmation. This would include confirming that the expert does not have a direct or indirect material interest in the securities or assets of the new applicant, its core connected persons, or any close associate of the new applicant beyond that allowed by rule 3A.07.
      15. Typical due diligence inquiries in relation to the new applicant's accounting and management systems and in relation to the directors' appreciation of their and the new applicant's obligations include:
      a) assessing the new applicant's accounting and management systems that are relevant to:
      (i) the obligations of the new applicant and its directors under the Exchange Listing Rules and other legal and regulatory requirements, in particular the financial reporting, disclosure of notifiable and connected transaction and inside information requirements; and
      (ii) the directors' ability to make a proper assessment of the financial position and prospects of the new applicant and its subsidiaries, both immediately before and after listing.
      This assessment should cover the new applicant's compliance manuals, policies and procedures including corporate governance policies and any letters from the reporting accountants to the new applicant commenting on the new applicant's accounting and management systems or other internal controls; and
      b) interviewing all directors and senior managers with key responsibilities for ensuring compliance with the Exchange Listing Rules and other legal and regulatory requirements (including the staff responsible for the accounting and financial reporting function, company secretary and any compliance officers) to assess:
      (i) their individual and collective experience, qualifications and competence; and
      (ii) whether they appear to understand relevant obligations under the Exchange Listing Rules and other relevant legal and regulatory requirements and the new applicant's policies and procedures in respect of those obligations.
      16. To the extent that the sponsor finds that the new applicant's procedures or its directors and/or key senior managers are inadequate in any material respect on issues referred to at paragraph 15 above, the sponsor should typically discuss the inadequacies with the new applicant's board of directors and make recommendations to the board regarding appropriate remedial steps. It should also typically ensure that these steps be taken before listing. These steps might include training tailored to the needs of individual directors and senior managers.

    • Publication of Application Proofs and Post Hearing Information Packs (PHIPs)

      The Stock Exchange of Hong Kong Limited

      Practice Note 22

      to the Rules Governing the Listing of Securities (the "Exchange Listing Rules")

      Issued pursuant to rule 1.06 of the Exchange Listing Rules

      PUBLICATION OF APPLICATION PROOFS AND POST HEARING INFORMATION PACKS (PHIPs)

      Definitions and Interpretation

      1. For the purposes of this Practice Note:
       
      "institutional or other professional investors" means the actual or potential investors under the placing tranche of an offer
      "HKEx-ESS" means the Exchange's electronic submission system or by whatever name the system is called for submitting Application Proofs and PHIPs for publication on the Exchange's website
      "Returned Application" means any application returned by the Listing Division under rule 9.03(3) or the Commission (as the case may be) where all related review procedures on the decision to return the application have been completed or the time for invoking them has lapsed
      2. Unless the context otherwise requires:
      (a) the reference to a "new applicant" or "applicant" includes a new CIS applicant which is required to publish an Application Proof and a PHIP under rules 20.25 and 20.26 of the Exchange Listing Rules; and
      (b) the reference to a "sponsor" includes a "listing agent" or a person under whatever description appointed by a new CIS applicant which is required to discharge the functions equivalent to those of a sponsor for the purpose of a listing of interests in a CIS under Chapter 20 of the Exchange Listing Rules.

      Language

      3. Every Application Proof and PHIP for publication must be:
      (a) in English and Chinese; and
      (b) concise, easy to understand and in plain language.

      Content of Application Proofs and PHIPs

      4. For the purpose of publication on the Exchange's website, an Application Proof and a PHIP must be prepared on the following principles:
      (a) there must not be any information about the offering, price or means to subscribe for the equity securities or interests in a CIS of a new applicant until a final listing document is published;
      (b) there must not be any information regarding the proposed offering or other information that would constitute the Application Proof or PHIP a prospectus under section 2(1) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance or an advertisement under section 38B(1) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance or an invitation to the public in breach of section 103 of the Securities and Futures Ordinance as amended from time to time;
      (c) there must be appropriate disclaimer and warning statements to advise readers of the legal status of an Application Proof and a PHIP to the effect that:
      (i) it is not an offer to sell or an invitation to induce/solicit an offer to acquire, purchase or subscribe for securities;
      (ii) it is not in a final form and is subject to change;
      (iii) no investment decision should be based on the information contained in the Application Proof and PHIP;
      (iv) there is no guarantee that there will be an offering; any offer of securities will require a final listing document which is the only document investors should rely on to make investment decisions; and
      (v) there is no indication that the application to which the document relates has been approved for listing.
      5. A new applicant must redact an Application Proof and a PHIP only to the extent necessary for these documents not to constitute a prospectus under section 2(1) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance or an advertisement under section 38B(1) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance or an invitation to the public in breach of section 103 of the Securities and Futures Ordinance (unless consent is obtained for further redactions). A new applicant must also include adequate warning and disclaimer statements on the Exchange's website and in every Application Proof and PHIP published on the Exchange's website to advise viewers of the legal status of these documents.

      Legal Confirmation

      6. Every new applicant must ensure that the publication of any Application Proof and PHIP on the Exchange's website complies with paragraphs 4 and 5. Compliance with the Companies (Winding Up and Miscellaneous Provisions) Ordinance, the Securities and Futures Ordinance and other laws and regulations remains the primary responsibility of every new applicant.
      7. To ensure compliance, a new applicant must provide the Exchange with a confirmation from its legal adviser that the new applicant has complied with the Exchange's guidance on redactions in its Application Proof and PHIP and inclusion of appropriate warning and disclaimer statements for publication of these documents.
      8. Where a new applicant is concerned that the publication of any Application Proof and PHIP on the Exchange's website may violate securities laws in other overseas jurisdictions in which an offer of securities is intended to be marketed, it should include sufficient warning statements in the Application Proof and the PHIP to make clear that these documents are intended for access by Hong Kong residents only or that the readers need to confirm prior to reading these documents that there are no laws or regulations prohibiting the readers from gaining access (for viewing and downloading) to the Application Proof and/or PHIP.

      Prescribed Timing for Publishing Application Proofs

      9. A new applicant must submit its Application Proof through HKEx-ESS for publication on the Exchange's website:
      (a) in the case of a new applicant for listing equity securities, on the same day the new applicant files a listing application with the Exchange; or
      (b) in the case of a new CIS applicant required to publish its Application Proof under rule 20.25, on the same day the new CIS applicant files an authorisation application with the Commission.
      10. Where an applicant re-submits its listing application or authorisation application, no Application Proof is required to be submitted for publication on the Exchange's website if at the time of the submission of the application the following conditions are satisfied:
      (a) a PHIP or a final listing document has been published on the Exchange's website; and
      (b) the sponsor provides a written confirmation to the Exchange or the Commission (as the case may be) that the PHIP or the final listing document published on the Exchange's website does not need to be updated and remains valid.
      11. Where a new Application Proof is submitted for publication on the Exchange's website, no mark-up against the previous proof is required.

      Prescribed Timing for Publishing PHIPs

      12. A new applicant must at the earliest practicable time submit a PHIP through HKEx-ESS for publication on the Exchange's website upon the following taking place:
      (a) in the case of the new applicant for listing of equity securities, receipt of a post hearing letter from the Exchange together with a request to post a PHIP; and in the case of a new CIS applicant required to publish its PHIP under rule 20.26, receipt of an approval in principle letter from the Commission together with a request to post a PHIP; and
      (b) the directors of the new applicant concluding that the material comments of the Exchange or the Commission (as the case may be) have been addressed;
      provided that where the new applicant intends to offer equity securities or interests in a CIS to the public in Hong Kong, the publication of the PHIP on the Exchange's website must not be later than the first occurrence of:
      (i) the time at which the new applicant first distributes any red herring document to institutional or other professional investors;
      (ii) the time at which the book-building process commences irrespective of whether the process involves a meeting (whether held physically or by video conference or any other media) between the new applicant and institutional or other professional investors, or whether any red herring document has been distributed; and
      (iii) if a new applicant has also scheduled a listing of its securities on an overseas exchange at or around the time as its prospective listing in Hong Kong, simultaneously with any overseas publication of similar information.
      13. A new applicant does not need to publish its PHIP:
      (a) if it delays its listing plan by informing the Exchange or the Commission (as the case may be) accordingly; or
      (b) if the listing is by way of an introduction and the final listing document is to be issued immediately after the obligation to publish a PHIP arises.
      14. When a new applicant resumes its listing plan after a delay under paragraph 13(a), it must publish a PHIP as set out in paragraph 12.

      Publication of Subsequent PHIPs

      15. If at any time after the issue of a PHIP, a new applicant circulates to institutional or other professional investors an addendum to its red herring document that will be included in its final listing document or a replacement red herring document, the new applicant must, as soon as practicable, re-submit through HKEx-ESS for publication on the Exchange's website an addendum to the PHIP or a replacement PHIP, as the case may be. The re-submitted PHIP must be marked up against the previous proof and give the same level of detail that the new applicant has made available to institutional or other professional investors.
      16. For any other cases, whenever a revised PHIP is submitted to replace an existing PHIP after the latter's publication on the Exchange's website, the replacement PHIP must be marked up against the previous proof to show all changes made.
      17. Where a listing application lapsed after the publication of a PHIP and the new applicant re-submits a new Application Proof, any PHIP that immediately follows the re-submitted Application Proof is not required to be marked up against the previously published PHIP.

      Confidential Filings

      18. A new applicant which has been listed on a recognised overseas exchange for not less than 5 years and has a significantly large market capitalisation (as determined by the Exchange from time to time) or a new applicant applying for secondary listing under Chapter 19C at the time of filing its listing application is entitled to make a confidential filing of its Application Proof. The new applicant is not subject to the publication requirements for its Application Proof unless requested to comply with them by the Exchange or the Commission (as the case may be). All other requirements under the Exchange Listing Rules apply unless a waiver is granted.
      19. The Exchange or the Commission (as the case may be) may waive or modify the publication requirements for an Application Proof in a spin-off from an overseas listed parent upon application by a new applicant. A new applicant is encouraged to consult the Exchange or the Commission (as the case may be) if it envisages any difficulties in complying with the publication requirements at least 2 months before the filing of its Application Proof.

      No pre-vetting of Application Proofs or PHIPs

      20. Application Proofs, PHIPs and statements issued under rule 9.08(2)(c) do not require pre-vetting or clearance from the Exchange or the Commission (as the case may be) before their publication on the Exchange's website.

      Status Marks and Information on the Exchange's Website

      21. The Exchange will publish the following status marks and information on the Exchange's website to indicate the status of each listing application:
       
      Status Mark Status of Listing Application Information on the Exchange's Website
      "Active" Any valid listing or authorisation application and includes an application of which the review of a decision to return or reject the application is pending
      •   The contents of the latest submitted Application Proof, and any PHIPs and statements under rule 9.08(2)(c) submitted thereafter
      "Inactive" comprising
      •   "Lapsed"
      •   "Withdrawn"
      •   "Rejected"
      Any lapsed application

      Any withdrawn application

      Any rejected application
      •   The name of the new applicant
      •   A record of the date and description of the documents previously published
      Note:

      The contents of all previously published documents will no longer be accessible but there will be a record of these documents
      "Listed" Any application of which the applicant is subsequently listed on the Exchange
      •   The contents of the latest submitted Application Proof, and any PHIPs and statements under rule 9.08(2)(c) submitted thereafter
      Note:

      The contents of all previously published documents which have been categorised as "Inactive" will no longer be accessible, but there will be a record of these documents
      "Returned" Any Returned Application
      •   The name of the new applicant
      •   The name of the sponsor or listing agent
      •   The date of the Exchange's or the Commission's return decision
      Note:

      All other information previously categorised as "Active" will be removed
      22. The status marks are subject to change from time to time as the Exchange considers appropriate.