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  • 2003

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    Please visit Archive to view listing decisions which have been superseded or are no longer applicable.

    This section comprises decisions on cases handled by the Listing Committee and/or the Listing Division, to enhance transparency and market understanding of their interpretation of the Listing Rules. Each decision was based on its specific circumstances and is not a precedent for future cases.

    Since August 2007, we have adopted a thematic approach in preparing decision series for IPO cases. Grouping decisions on cases which discuss similar topics into a common series should help readers better understand the application of the Rules. To maintain the guidance value of the decisions, we will not report on every case. Instead, only decisions that discuss novel issues or are of general guidance value will be published.

    LD Series Number First Release Date (Last Update Date) (mm/yyyy) Listing Rules/ Topics Particulars
    LD37-3 10/2003
    (10/2019)
    Rules 6.04, 6.10, 13.24, Practice Note 17 Submission of resumption proposal immediately prior to expiry of 3rd stage of delisting procedures and viability of resumption proposal
    LD37-2 10/2003
    (09/2009)
    Rules 11.17, 11.18, 11.19 Whether non-inclusion of profit forecast IPO prospectus acceptable

    (Withdrawn in April 2019)
    LD37-1 10/2003
    (09/2009)
    Rules 8.08(2), 21.04 Chapter 21 listing applicant — minimum spread of shareholders on listing

    (Withdrawn in August 2015; Superseded by GL17-10)
    LD36-3 10/2003 General Principles For IPO Whether an offer size adjustment option is allowed for purposes other than stabilization
    LD36-2 10/2003
    (09/2009)
    GEM Rules 1.01, 13.16A
    Rules 1.01,
    Pre-IPO placing-whether shares subject to lock-up and counted as part of public float (GEM Board)

    (Withdrawn on 25/10/2012; Superseded by GL43-12)
    LD36-1 10/2003 8.24, 10.07(1) Pre-IPO placing-whether shares subject to lock-up and counted as part of public float (Main Board)

    (Withdrawn on 25/10/2012; Superseded by GL43-12)
    LD35-3 07/2003 General Principles On Sponsors Eligibility of Company A to act as sole sponsor

    (Withdrawn in September 2009)
    LD35-2 07/2003 Rule 11.17, Paragraph 34 (2) of Appendix 1A IPO prospectus — disclaimer by reporting accountants in relation to profit forecast

    (Withdrawn in April 2019)
    LD35-1 07/2003
    (04/2014)
    Rules 3.28 and 8.17
    Rule 8.05,
    PRC issuer — company secretary not possessing relevant professional qualifications

    (Withdrawn in October 2020; superseded by GL108-20)
    LD34-3 04/2003 Practice Note 3 No absolute control by Company A over its joint ventures — whether profits from joint ventures could be attributed to Company A to meet three-year trading record requirement

    (Withdrawn in December 2013; Superseded by LD106-1)
    LD34-2 04/2003 General Principles For IPO Whether exercise of over-allotment option would necessitate suspension

    (Withdrawn in September 2009)
    LD34-1 04/2003 Rule 9.03(3) No figure for third financial year of track record period

    (Withdrawn in September 2009)
    LD33-3 02/2003 Rules 6.01(2), 8.08(1) Announcement regarding general offer — appropriate warning statement to be included

    (Withdrawn in September 2009)
    LD33-2 02/2003 Rule 14.25(1) Whether standard 3-year waiver for on-going connected transaction would cover current financial year

    (Withdrawn in September 2009)
    LD33-1 02/2003
    (09/2010)
    Rule 9.11(35) (b),
    Paragraph 11 of Appendix 6
    IPO-shares being placed to investment funds — extent of information to bedisclosed

    • LD37-3

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      HKEx LISTING DECISION
      Cite as HKEx-LD37-3 (Amended in January 2005, October 2019 (Rule amendments)

      Summary
      Category Listing Decisions Series 37-3 (LD37-3)
      Name of Party Company A — a listed company
      Subject
      1.   Submission of resumption proposal immediately prior to expiry of 3rd stage of delisting procedures
      2.   Viability of resumption proposal
      Listing Rules Practice Note 17; Paragraph 38 of Listing Agreement [now Rule 13.24] and Rules 6.04; 6.10
      Decision
      1.   No extension of time for considering resumption proposal
      2.   Exchange has broad discretion in determining whether resumption proposal viable

      Summary of Facts

      Company A was in the 3rd stage of the delisting procedures. Trading in its shares had been suspended for nearly 18 months and it was unable to meet the requirements of paragraph 38 of Listing Agreement [now Rule 13.24].

      Company A submitted a resumption proposal just a few days before the scheduled expiry of the 3rd stage. The proposal would involve, among other things, a change in control and change of business for Company A.

      Company A asked the Exchange to grant an extension of time for the proposal to be considered.

      Analysis

      Paragraph 38 of Listing Agreement [now Rule 13.24]requires that "[a]n issuer shall carry out, directly or indirectly, a sufficient level of operations or have tangible assets of sufficient value and/or intangible assets for which a sufficient potential value can be demonstrated to the Exchange to warrant the continued listing of the issuer's securities". Issuers that are unable to comply with paragraph 38 of Listing Agreement [now Rule 13.24] face suspension and resumption will only be permitted where they are able to demonstrate that they comply.

      Rule 6.04 of the 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." Practice Note 17 of the Listing Rules clarifies the procedures the Exchange 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. Essentially, it provides a 4-stage procedure as follows:

        For the initial period of 6 months following the suspension, the Exchange will monitor developments.
       
        The 2nd stage involves the Exchange writing to the issuer drawing attention to its continued failure to meet paragraph 38 of Listing Agreement [now Rule 13.24] and advising that the issuer is required to submit resumption proposals within the next 6 months. At the end of the 6-month period, the Exchange will determine whether to proceed to the 3rd stage.
       
        Where the Exchange determines to proceed to the 3rd stage, it will publish an announcement naming the issuer, indicating that it does not have sufficient assets or operations for listing and imposing a deadline (generally 6 months) for the submission of resumption proposals.
       
        At the end of the 3rd stage, where no viable proposals have been received for resumption, the listing will be cancelled.
       

      The Exchange requires sufficient time to vet a resumption proposal and determine whether it is viable. For this purpose, resumption proposals should be submitted at least 10 business days before the expiry of the 3rd stage. No extensions of the 3rd stage will be granted unless a proposal has been submitted before the 10-day deadline and the proposal is considered a viable one.

      In determining whether a resumption proposal is viable, the Exchange will principally assess whether the issuer, upon implementation of the proposal, will be able to meet the requirements of paragraph 38 of Listing Agreement [now Rule 13.24]. The Exchange has a broad discretion in respect of fulfillment of these requirements, particularly where the resumption proposal involves a substantial change in the nature of the issuer's business or assets.

      Pursuant to Rule 6.10, "/w/here the Exchange considers that an issuer or its business is no longer suitable for listing it will publish an announcement naming the issuer and specifying the period within which the issuer must have remedied those matters which have rendered it unsuitable for listing ...... Any proposals to remedy those matters will be treated as if they were an application for listing from a new applicant for all purposes".

      Decision

      As Company A had missed the 10-day deadline, it would not in any event be granted an extension of time for its resumption proposal to be considered. Accordingly, it was to be immediately delisted.

      It was noted that, even if Company A had met the 10-day deadline, the Exchange would have had a broad discretion in determining whether the resumption proposal was viable.

      It was further noted that, even if Company A had met the 10-day deadline and its resumption proposal, after consideration by the Exchange, were ruled to be a viable one, the proposal would, based on the particular facts and circumstances of the case, have resulted in Company A being treated as a new listing applicant for all purposes.

      Note:   On 1 October 2019, Rule 13.24 was amended to require an issuer to carry out, directly or indirectly, a business with a sufficient level of operations and assets of sufficient value to support its operations to warrant the continued listing of the issuer’s securities. The Rule amendments would not change the analysis and conclusion in this case.

    • LD36-3

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      HKEx LISTING DECISION
      Cite as HKEx-LD36-3 (October 2003)

      Summary
      Name of Party Company A — a new listing applicant
      Subject Whether an offer size adjustment option is allowed for purposes other than stabilization
      Listing Rule General principles
      Decision Allowed subject to certain conditions

      Summary of Facts

      Company A's proposed IPO offering would have a total value of less than HK$100 million.

      Company A proposed to include in its IPO an over-allotment option (or, more correctly, an offer size adjustment option) which was not to be used for price stabilization purposes and would only be exercisable before the commencement of trading in its shares. Under the option, Company A might increase (but not decrease) the number of shares to be offered under the IPO by up to 10 per cent.

      Company A's sponsor submitted that, since the proposed offer size adjustment option would not be for price stabilization purposes, it would not contravene the provisions of the Securities and Futures (Price Stabilizing) Rules. A relevant point to note was that the Securities and Futures (Price Stabilizing) Rules, which is a piece of subsidiary legislation made under the Securities and Futures Ordinance and which came into effect on 1 April 2003, provide that, among other things, no price stabilization action may be undertaken in respect of offers with a total value of less than HK$100 million. Accordingly, price stabilization action would not be allowed in the case of Company A's offering.

      The Exchange was asked whether it had any objection in principle to the inclusion of the proposed option mechanism and, if not, whether any additional requirements would be imposed in connection with the use of such a mechanism.

      Analysis

      The issue of offer size adjustment was considered in the Consultation Paper on Offering Mechanisms published jointly by the Securities and Futures Commission and the Exchange in June 1997. In the Consultation Conclusions published in February 1998, it was decided that changes in the size of an IPO during the subscription process should be permitted. This essentially remains the Exchange's position and the Exchange therefore has no objection to the inclusion of an offer size adjustment option either on IPO's or in respect of subsequent offers.

      In the interests of an orderly and informed market, the Exchange believes that it is necessary to establish certain requirements, most of which would be analogous to those applicable in circumstances where the use of an over-allotment option for price stabilization purposes is permitted under the law. The Exchange also considers it necessary to impose a cap on the relative size of the option and decided that a 15 per cent threshold for options of this type will apply.

      Decision

      Company A's offer size adjustment option was permitted subject to the following conditions:

      •   the number of additional shares which can be issued under the offer size adjustment option must not exceed in aggregate 15 per cent of the total number of shares initially available under the offering;
      •   the IPO applicant would need to meet the minimum listing criteria even if the offer size adjustment option were not exercised;
      •   the option must be exercised prior to listing or lapse;
      •   the following disclosure must be included in the prospectus:
      •   full details of the offer size adjustment option including the exercise period and a statement that Company A would disclose in its allotment results announcement whether the option has been exercised;
      •   a statement that the offer size adjustment option would not be used for price stabilization purposes and was not subject to the Securities and Futures (Price Stabilizing) Rules;
      •   the extent of potential dilution resulting from the exercise of the offer size adjustment option; and
      •   the use of the additional proceeds resulting from the exercise of the offer size adjustment option; and
      •   Company A would need to disclose in its allotment results announcement whether the option has been exercised and, where the option has not been exercised, confirm in the announcement that the option has lapsed and cannot be exercised at any future date.

      In order to distinguish it from an option which can be used for price stabilization purposes, the offer size adjustment option should not be described as an "over-allotment option".

    • LD35-1

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      HKEx LISTING DECISION
      Cite as HKEx-LD35-1 (July 2003) (Updated in April 2013 and April 2014)

      Summary
      Name of Parties Company A — an applicant for new listing
      Mr X — company secretary of Company A
      Subject PRC issuer — company secretary not possessing relevant professional qualifications
      Listing Rules Rules 8.171 and 19A.182
      Decision To be assisted by suitably qualified person for three years

      Summary of Facts

      Company A proposed to retain Mr X as its company secretary after listing. However, Mr X did not possess the qualifications required under Rule 8.171 of the Listing Rules.

      Analysis

      Rule 8.171 provides as follows:

      "The secretary of the issuer must be a person who is ordinarily resident in Hong Kong and who has the requisite knowledge and experience to discharge the functions of secretary of the issuer and who:-

      (1) in the case of an issuer which was al listed on 1st December 1989 held the office of secretary of the issuer on that date;
      (2) is a member of The Hong Kong Institute of Company Secretaries, a solicitor or barrister as defined in the Legal Practitioners Ordinance or a professional accountant; or
      (3) is an individual who, by virtue of his academic or professional qualifications or relevant experience, is, in the opinion of the Exchange, capable of discharging those functions."

      In the case of a PRC issuer, this requirement is modified by Rule 19A.182 which provides as follows:

      "The secretary of a PRC issuer need not be ordinarily resident in Hong Kong, provided such person can meet the other requirements of rule 8.171.

      Note: Where the secretary of a PRC issuer does not possess a qualification as required by Rule 8.17(2)1, the PRC issuer will have to satisfy the Exchange the requirement under Rule 8.17(3)1. In assessing the "relevant experience" of person under rule 8.17(3)1, the Exchange will normally have regard to, among other considerations, period of his employment with the PRC issuer and his familiarity with the Exchange Listing Rules. The Exchange would expect submission from the sponsor demonstrating that (a) sufficient time and efforts have been spent on training the appointee by way of induction courses or other means which are satisfactory to the Exchange; and (b) the sponsor is satisfied that the appointee will be able to discharge a secretary's duties."

      The company secretary plays an important role in the corporate governance of an issuer, particularly in assisting the issuer as well as its directors in complying with the Listing Rules and the applicable company law. For these purposes, he should possess the requisite knowledge and experience to discharge his functions as company secretary.

      The Note to Rule 19A.182 sets out a non-exhaustive list of factors which the Exchange will take into account in assessing the "relevant experience" of a proposed company secretary of a PRC issuer where he does not possess the professional qualifications required under Rule 8.17(2)1. These factors include, among other things, the period of his employment with the PRC issuer and his familiarity with the Listing Rules.

      Since, generally speaking, a PRC issuer does not conduct any business in Hong Kong and its management does not reside in Hong Kong, it is particularly important that its company secretary should possess sufficient knowledge and experience in discharging his functions as company secretary.

      For the protection of shareholders and to promote good corporate governance, the Exchange was of the view that, where the company secretary of a PRC issuer does not possess the relevant professional qualifications required under Rule 8.17(2)1 or the academic or professional qualifications or relevant experience under Rule 8.17(3)1, the company secretary should be assisted by a suitably qualified person so as to enable him to acquire the "relevant experience" (required under Rule 8.17(3)1) to discharge his functions as company secretary. Such person would need to possess the professional qualifications required under Rule 8.17(2)1. Such person's place of residence would not be relevant, so long as the rendering of assistance by him to the company secretary would not in any way be hindered. Such person should be engaged for an initial period of three years from the date of listing ("Three-year Period").

      It was noted that, under this arrangement, a waiver of Rule 8.171 would be necessary as the company secretary himself would not, in the absence of such a waiver, be considered as having met the requirements of any of the limbs of that Rule.

      At the end of the Three-year Period, a further evaluation of the qualifications and experience of the company secretary and the need for on-going assistance would be necessary. The expectation was, however, that the issuer should then endeavour to demonstrate to the Exchange's satisfaction that the company secretary, having had the benefit of the additional person's assistance for three years, would have acquired "relevant experience" within the meaning of Rule 8.17(3)1 such that a further waiver would not be necessary. Accordingly, a further waiver would only be granted in exceptional circumstances.

      Decision

      Mr X could remain as the company secretary of Company A after listing provided that Company A engaged an additional person possessing the professional qualifications required under Rule 8.17(2)1 for the Three-year Period. A waiver of Rule 8.171 for the Three-year Period would be granted upon such terms.

      At the end of the Three-year Period, the Exchange would re-visit the situation in the expectation that the issuer should then endeavour to demonstrate to the Exchange's satisfaction that Mr X, having had the benefit of the additional person's assistance for three years, would have acquired "relevant experience" within the meaning of Rule 8.17(3)1 such that a further waiver would not be necessary.

      Subsequent Cases

      In a number of subsequent cases, the Exchange had accepted an issuer's company secretary, who did not possess the academic or professional qualifications under note 1 to Rule 3.28 or relevant experience under note 2 to Rule 3.28, to be assisted by a suitably qualified person under the Rules for an initial period of one year from the date of listing ("One-year Period"). In considering these waivers, the Exchange took into consideration the fact that the relevant company secretary: (i) had been involved in company secretarial matters for more than one year, (ii) had more than ten years of work experience in the finance field or corporate management, (iii) had academic qualifications in accounting, law, business management and/or economics, and (iv) professional qualification in law. The sponsor had also confirmed that the issuer had established procedures, systems and controls which were adequate and sufficient under Rule 3A.15(5). (Added in April 2013)

      At the end of the One-year Period, the Exchange would re-visit the situation in the same manner as in the case where an issuer applied for a waiver for the Three-year Period. (Added in April 2013)

      Conclusion

      The Exchange normally takes the following into consideration when determining whether to grant a waiver for a One-year Period or a Three-year Period:

      (i) the individual's experience in handling company secretarial matters (e.g. through acting as the secretary of the issuer's board of directors while the issuer is listed on overseas exchange), relevant professional qualifications and/or academic background;
      (ii) whether the issuer has established measures and systems in place to facilitate the individual in discharging his duties as a company secretary; and
      (iii) the issuer's regulatory compliance and/or deficiencies/weaknesses in internal controls during the track record period, and the sponsor's confirmation under Rule 3A.15(5) that the issuer has established procedures, systems and controls which are adequate and sufficient. (Added in April 2013)

      In any event, each application will be considered on a case-by-case basis having regard to all relevant facts and circumstances. The issuer should include in its listing document details of its company secretary's experience in handling company secretarial matters, his work experience (including his roles and responsibilities for his jobs), professional qualifications and academic background. (Added in April 2013)

      Notes:

      1. In January 2012, Rule 8.17 was amended as "[t]he issuer must appoint a company secretary who satisfies Rule 3.28". Rule 3.28 states that:

      "The issuer must appoint as its company secretary an individual who, by virtue of his academic or professional qualifications or relevant experience, is, in the opinion of the Exchange, capable of discharging the functions of company secretary.

      Notes:
      1 The Exchange considers the following academic or professional qualifications to be acceptable:
      (a) a Member of The Hong Kong Institute of Chartered Secretaries;
      (b) a solicitor or barrister (as defined in the Legal Practitioners Ordinance);and
      (c) a certified public accountant (as defined in the Professional Accountants Ordinance).
      2 In assessing "relevant experience", the Exchange will consider the individual's:
      (a) length of employment with the issuer and other issuers and the roles he played;
      (b) familiarity with the Listing Rules and other relevant law and regulations including the Securities and Futures Ordinance, Companies Ordinance3, and the Takeovers Code;
      (c) relevant training taken and/or to be taken in addition to the minimum requirement under rule 3.29; and
      (d) professional qualifications in other jurisdictions."
      2. Rule 19A.18 was subsequently amended as Rule 19A.16 and Rule 19A.16 was repealed in January 2012.

      3 Retitled as the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) with effect from March 2014 (Updated in April 2014).

    • LD33-1

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      HKEx LISTING DECISION
      Cite as HKEx-LD33-1 (Published in February 2003) (Updated in September 2010)

      Summary
      Name of Party Company A — a new listing applicant
      Company B — Company A's sponsor
      Subject IPO — shares being placed to investment funds — extent of information to be disclosed
      Listing Rules Paragraph 11 of Appendix 6 to Listing Rules; Rule 9.11(35)(b)
      Decision Certain further information required

      Summary of Facts

      Shares in Company A's IPO would be placed under the placing tranche to certain investment funds. Company B sought guidance from the Exchange on the extent of the information to be provided to the Exchange in relation to the funds.

      Analysis

      Where an issuer wishes to bring securities to listing, the Exchange must be provided with a list setting out the names, addresses and identity card or passport numbers (where individuals) and the names, addresses and registration numbers (where companies) of all placees, the names and addresses of the beneficial owners (in the case of nominee companies) and the amounts taken up by each placee (Paragraph 11 of Appendix 6 to the Listing Rules). This wording is essentially mirrored in Rule 9.11(35)(b).

      In any placing, it is necessary to establish the independence of the placees. This is principally for the purpose of verifying whether any placee is a core connected person1, which is of relevance in determining the size of the public float.

      Therefore, where shares are placed to investment funds, the Exchange may request such information as it considers necessary for the purpose of determining whether the fund is in fact independent. Depending on the circumstances, the Exchange may ask to be provided with the names and Hong Kong identity card numbers of the beneficial owners of the fund.

      Decision

      Company B was informed accordingly.


      1 Rule amended in July 2014.