Entire Section

  • 2006

    Update Number Effective Date

    (DD/MM/YY)
    Topics
    Update No. 22 22/09/2006 Appointment of additional Listing Committee deputy chairman
    Update No. 21 01/03/2006 Various amendments to the GEM Listing Rules relating to minor and housekeeping amendments
    03/02/2006 (amendment to GEM Listing Rule 3.22); 05/2006 (other amendments) Composition changes to the GEM Listing Committee

    • Update No. 22

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

      Update No. 22

      13 November 2006

      Dear Sirs,

      Various amendments to the GEM Listing Rules

      We enclose reprinted pages of the GEM Listing Rules. The reprinted pages incorporate:-

      •   amendments to the GEM Listing Rules relating to the regulation of Sponsors and Compliance Advisers; and
      •   amendments to the GEM Listing Rules regarding the number of deputy chairmen on the GEM Listing Committee.

      We also enclose the filing instructions.

      Amendments relating to the regulation of Sponsors and Compliance Advisers

      In October 2004 the Exchange and the SFC concluded a joint consultation regarding the regulation of Sponsors, Compliance Advisers and independent financial advisers. In the consultation conclusions report published on 19 October 2004 (the 2004 Conclusions) the Exchange and the SFC stated that, in the light of responses to the consultation, going forward, the SFC, as statutory regulator, would be responsible for assessment of eligibility, on-going supervision, discipline and enforcement of the conduct of corporate finance advisers who discharge the work of Sponsors and Compliance Advisers, whilst the Exchange, as market operator, should continue to be responsible for implementation and administration of the GEM Listing Rule requirements including the practice notes on due diligence.

      The 2004 Conclusions stated that the SFC would consult in relation to amendments to its licensing regime and that once that consultation was completed, in order to avoid regulatory duplication, the Exchange intended to remove the existing eligibility criteria from the GEM Listing Rules.

      The SFC has completed its second phase consultation. It published consultation conclusions in April 2006. Consequently, the Exchange now intends to amend the GEM Listing Rules as anticipated in the 2004 Conclusions.

      Key amendments

      The key GEM Listing Rule amendments are set out below.

      •   Currently, in order to undertake work as a Sponsor or Compliance Adviser, a firm must be approved by the Exchange and admitted to the list of Sponsors maintained by the Exchange. The GEM Listing Rules set out detailed eligibility criteria for admission to the Sponsor list. The Rules also provide that generally Sponsors' eligibility to remain on the list is reviewed by the Exchange annually.
      •   Consistent with removing regulatory overlap regarding the eligibility of Sponsors and Compliance Advisers, the GEM Listing Rules will be amended to provide that the Exchange will permit a firm to work as a Sponsor or Compliance Adviser provided the firm is appropriately licensed or registered by the SFC. Also, the whole of Chapter 6 of the GEM Listing Rules will be repealed although some Rules that were in Chapter 6 will be retained under Chapter 6A.
      •   Similarly, the Exchange will no longer have any role in relation to monitoring a firm's ongoing eligibility to undertake Sponsor work or Compliance Adviser work. Again, consistent with the 2004 Conclusions, that will be the sole responsibility of the SFC. Amongst other things, this means that the Exchange will no longer undertake annual reviews of Sponsor firms nor maintain a list of approved Sponsors.
      •   The GEM Listing Rules will be amended such that the SFC alone will be responsible for the discipline and sanctioning of Sponsors and Compliance Advisers. However, the Exchange will continue to co-operate with the SFC in relation to relevant issues regarding the performance of Sponsors and Compliance Advisers, as appropriate.

      Coming into effect

      These Rule amendments will become effective on 1 January 2007. Transitional arrangements are set out in new Rule 6A.38.

      Amendments regarding the number of deputy chairmen on the GEM Listing Committee

      The GEM Listing Rules have been amended to provide the flexibility for the Listing Nominating Committee to nominate and the Exchange Board to appoint more than one deputy chairman to the GEM Listing Committee. The appointment of more than one deputy chairman will allow a reduction in the workload of the Deputy Chairman to the GEM Listing Committee and also aid in succession planning for the role of GEM Listing Committee Chairman.

      Coming into effect

      These Rule amendments became effective on the date they were published, that is, 22 September 2006.

      Please click HEREHERE to see the amendments relating to the regulation of Sponsors and Compliance Advisers.

      Please click HEREHERE to see the amendments regarding the number of deputy chairmen on the Listing Committee.

      Yours faithfully

      For and on behalf of

      The Stock Exchange of Hong Kong Limited

      Richard Williams

      Head of Listing

    • Update No. 21

      • Various amendments to the GEM Listing Rules relating to minor and housekeeping amendments

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

        Update No. 21

        14 February 2006

        Dear Sirs,

        Various amendments to the GEM Listing Rules

        We enclose reprinted pages of the GEM Listing Rules. The reprinted pages incorporate:-

        •   amendments to the GEM Listing Rules regarding the composition of the Listing Nominating Committee;
        •   amendments to the GEM Listing Rules regarding the composition of the GEM Listing Committee; and
        •   minor and housekeeping amendments to the GEM Listing Rules.

        We also enclose the filing instructions.

        Amendments regarding composition of the Listing Nominating Committee

        Rule 3.22 provides that the persons eligible for appointment or re-appointment as members of the GEM Listing Committee shall be nominated by the Listing Nominating Committee comprising the Chief Executive of the Exchange and two members of the Board of Hong Kong Exchanges and Clearing Limited (HKEx) and the Chairman and two Executive Directors of the Securities and Futures Commission.

        Amendments to rule 3.22 provide for a change to the composition of the Listing Nominating Committee such that the HKEx representatives will be three non-executive members of the HKEx Board rather than two members of the HKEx Board and the Chief Executive of the Exchange.

        Coming into effect

        This rule amendment became effective on the day it was announced.

        Amendments regarding composition of the GEM Listing Committee

        The GEM Listing Rules will also be amended to:-

        •   expand the GEM Listing Committee to comprise at least 28 members (that is, 28 members or such greater number as the Exchange Board from time to time agree) increased from the current membership of 21;
        •   change the composition of the GEM Listing Committee to include at least eight investor representatives, the HKEx Chief Executive and nineteen members who are a suitable balance of listed issuers and market practitioners including lawyers, accountants, corporate finance advisers and brokers; and
        •   in recognition of the fact that GEM Listing Committee members may become more effective as they gain experience on the GEM Listing Committee and consistent with Government best practice, extend the current term for GEM Listing Committee members to six years excluding any period of appointment to fill a casual vacancy. As with the current arrangements (in rule 3.26), GEM Listing Committee members would not be eligible for re-appointment for at least two years after completing a maximum term save in exceptional circumstances.

        Coming into effect

        These rule amendments regarding the composition of the GEM Listing Committee will come into effect in May 2006 on expiry of the current term of office of the GEM Listing Committee members. The exact date will be announced in due course.

        Minor and housekeeping amendments

        Various minor and housekeeping amendments to the GEM Listing Rules have been made and are set out as follows:-

        Disclosure of "advances to entities"

        Rules 17.15, 17.16 and 17.18 of the GEM Listing Rules respectively require the disclosure of "advances to entities" and financial assistance and guarantees to affiliated companies where certain thresholds are exceeded. For the purpose of rules 17.15 to 17.18 the applicable tests have been amended to only the total assets test. The rule amendments also introduce a new rule 17.17A that excludes a trade receivable from advances to entities for the purpose of rules 17.15 and 17.16 in the calculation of the assets ratio where the trade receivable (other than as a result of the provision of financial assistance) arose in the ordinary and usual course of business of the issuer and the transaction from which the trade receivable arose was on normal commercial terms.

        Listed securities houses — exemption from Chapter 19 for IPO financing and securities margin financing.

        Rules 19.04 and 20.10 have been amended to exempt listed securities houses from the disclosure and shareholder approval provisions of Chapter 19 in respect of IPO financing and securities margin financing provided by listed securities houses in the ordinary and usual course of business and upon normal commercial terms.

        Disclosure of pre-acquisition financial information

        A new rule 7.04A has been introduced to require the disclosure by new listing applicant of pre-acquisition financial information on material businesses/companies acquired in an accountants' report for a listing document in order to provide full and useful information to investors.

        Rule amendments relating to corporate governance

        Removal of director by ordinary resolution

        Paragraph 4(3) of Appendix 3 and paragraph 5(1) of Appendix 11B have been amended to provide that a director may be removed by an ordinary resolution in general meeting instead of a special resolution and also to reflect the requirement of the Companies Ordinance.

        Other amendments relating to directors

        These are rule amendments to require director of an issuer to:-

        •   disclose his directorships held in other listed companies in a prospectus pursuant to paragraph 41(1) of Appendix 1A and paragraph 34 of Appendix 1B;
        •   include in the disclosure of his biographical details under rule 17.50(2) other relevant details that mirror the disclosure made in director's declaration and undertaking to The Stock Exchange of Hong Kong Limited (the Exchange); and
        •   disclose in an announcement upon appointment full particulars of a director's emoluments irrespective of whether a service contract has been entered into between issuer and director as required under note 3(g) to rule 17.50(2).

        Housekeeping rule amendments relating to listing of securities

        Housekeeping rule amendments have been made to rule 12.23(2) to include as documents required to be submitted in an application for listing sponsor's undertaking pursuant to rule 6A.03 and a statement pursuant to rule 6A.08.

        Notifiable transactions and connected transactions

        Minor rule amendments have been made to Chapters 19 (notifiable transactions) and 20 (connected transactions). These are amendments to:-

        •   rule 19.19 to clarify that total assets should be calculated without deducting liabilities;
        •   rule 19.64(5) to clarify that a circular required for discloseable transaction also includes a transaction that does not involve any acquisition or disposal of assets, such as in the case of a financial assistance transaction;
        •   clarify that direct and indirect wholly owned subsidiaries of a listed company are not treated as connected persons;
        •   rule 20.31 to clarify that that the applicability of the intra-group transaction exemption is subject to the proviso that none of the subsidiaries concerned itself falls within the definition of "connected persons"; and
        •   rule 20.14 to codify our existing interpretation that continuing connected transactions include financial assistance.

        Accounting matters and the pro forma rules

        Rule amendments have been made to:-

        •   the note to rule 7.30 to clarify that for a new listing applicant without any published audited consolidated financial statements, any comparison for classifying acquisitions required under the relevant GEM Listing Rule should be made instead to the new applicant's latest audited consolidated financial statements in the accountants' report;
        •   rule 17.24 to clarify that a combination of balance sheets of affiliated companies is not "pro forma" financial information as required under rule 7.31;
        •   rule 19.69(8) to clarify that that two separate management discussion and analysis statements, one on the existing group and one on the business or company acquired or to be acquired, are required in a circular for a very substantial transaction;
        •   rule 7.12 to clarify that any change in accounting standards is not permitted;
        •   align disclosure requirements required under rules 18.50B(1) and 18.80 with prevailing accounting standards; and
        •   clarify that the basis for the requirement that annual accounts must be audited by a person who must be a practising accountant of good standing is independent of the requirements under the Companies Ordinance and rest on the premise that such requirement is in fact a "reasonable man test" applicable to overseas auditor who is a practising accountant in another jurisdiction. By this test, it is reasonable to expect that the auditor and practising accountant has satisfied basic professional standards, is a current member of a professional regulatory body and is not disqualified from being a member of such body.

        Other rule amendments

        Other minor amendments have been made to:-

        •   change the definition of "subsidiary" to reflect amendments made to the definition of "subsidiary" in the Companies Ordinance;
        •   codify the practice to require listed issuers to display their stock codes in a prominent place in all announcements, circulars and other documents as codified by the new rule 17.52A;
        •   update references to "security enquiry page" instead of to "teletext page" in paragraph 9 of Appendix 9;
        •   rule 17.50(3) to require a listed issuer to inform the Exchange and publish an announcement whenever there is a change in its Share Registrar; and
        •   rule 5.14 to reflect the change of name of the Hong Kong Institute of Company Secretaries to The Hong Kong Institute of Chartered Secretaries (the "Institute") and in reference to the Institute's members to Ordinary Members.

        Coming into effect

        These minor and housekeeping rule amendments will come into effect on 1 March 2006.

        Please click HEREHERE to see the amendments regarding the composition of the Listing Nominating Committee and the amendments regarding the composition of the Listing Committee.

        Please click HEREHERE to see the minor and housekeeping amendments.

        Yours faithfully

        For and on behalf of

        The Stock Exchange of Hong Kong Limited

        Richard Williams

        Head of Listing

      • Composition changes to the GEM Listing Committee

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

        Update No. 21

        14 February 2006

        Dear Sirs,

        Various amendments to the GEM Listing Rules

        We enclose reprinted pages of the GEM Listing Rules. The reprinted pages incorporate:-

        •   amendments to the GEM Listing Rules regarding the composition of the Listing Nominating Committee;
        •   amendments to the GEM Listing Rules regarding the composition of the GEM Listing Committee; and
        •   minor and housekeeping amendments to the GEM Listing Rules.

        We also enclose the filing instructions.

        Amendments regarding composition of the Listing Nominating Committee

        Rule 3.22 provides that the persons eligible for appointment or re-appointment as members of the GEM Listing Committee shall be nominated by the Listing Nominating Committee comprising the Chief Executive of the Exchange and two members of the Board of Hong Kong Exchanges and Clearing Limited (HKEx) and the Chairman and two Executive Directors of the Securities and Futures Commission.

        Amendments to rule 3.22 provide for a change to the composition of the Listing Nominating Committee such that the HKEx representatives will be three non-executive members of the HKEx Board rather than two members of the HKEx Board and the Chief Executive of the Exchange.

        Coming into effect

        This rule amendment became effective on the day it was announced.

        Amendments regarding composition of the GEM Listing Committee

        The GEM Listing Rules will also be amended to:-

        •   expand the GEM Listing Committee to comprise at least 28 members (that is, 28 members or such greater number as the Exchange Board from time to time agree) increased from the current membership of 21;
        •   change the composition of the GEM Listing Committee to include at least eight investor representatives, the HKEx Chief Executive and nineteen members who are a suitable balance of listed issuers and market practitioners including lawyers, accountants, corporate finance advisers and brokers; and
        •   in recognition of the fact that GEM Listing Committee members may become more effective as they gain experience on the GEM Listing Committee and consistent with Government best practice, extend the current term for GEM Listing Committee members to six years excluding any period of appointment to fill a casual vacancy. As with the current arrangements (in rule 3.26), GEM Listing Committee members would not be eligible for re-appointment for at least two years after completing a maximum term save in exceptional circumstances.

        Coming into effect

        These rule amendments regarding the composition of the GEM Listing Committee will come into effect in May 2006 on expiry of the current term of office of the GEM Listing Committee members. The exact date will be announced in due course.

        Minor and housekeeping amendments

        Various minor and housekeeping amendments to the GEM Listing Rules have been made and are set out as follows:-

        Disclosure of "advances to entities"

        Rules 17.15, 17.16 and 17.18 of the GEM Listing Rules respectively require the disclosure of "advances to entities" and financial assistance and guarantees to affiliated companies where certain thresholds are exceeded. For the purpose of rules 17.15 to 17.18 the applicable tests have been amended to only the total assets test. The rule amendments also introduce a new rule 17.17A that excludes a trade receivable from advances to entities for the purpose of rules 17.15 and 17.16 in the calculation of the assets ratio where the trade receivable (other than as a result of the provision of financial assistance) arose in the ordinary and usual course of business of the issuer and the transaction from which the trade receivable arose was on normal commercial terms.

        Listed securities houses — exemption from Chapter 19 for IPO financing and securities margin financing.

        Rules 19.04 and 20.10 have been amended to exempt listed securities houses from the disclosure and shareholder approval provisions of Chapter 19 in respect of IPO financing and securities margin financing provided by listed securities houses in the ordinary and usual course of business and upon normal commercial terms.

        Disclosure of pre-acquisition financial information

        A new rule 7.04A has been introduced to require the disclosure by new listing applicant of pre-acquisition financial information on material businesses/companies acquired in an accountants' report for a listing document in order to provide full and useful information to investors.

        Rule amendments relating to corporate governance

        Removal of director by ordinary resolution

        Paragraph 4(3) of Appendix 3 and paragraph 5(1) of Appendix 11B have been amended to provide that a director may be removed by an ordinary resolution in general meeting instead of a special resolution and also to reflect the requirement of the Companies Ordinance.

        Other amendments relating to directors

        These are rule amendments to require director of an issuer to:-

        •   disclose his directorships held in other listed companies in a prospectus pursuant to paragraph 41(1) of Appendix 1A and paragraph 34 of Appendix 1B;
        •   include in the disclosure of his biographical details under rule 17.50(2) other relevant details that mirror the disclosure made in director's declaration and undertaking to The Stock Exchange of Hong Kong Limited (the Exchange); and
        •   disclose in an announcement upon appointment full particulars of a director's emoluments irrespective of whether a service contract has been entered into between issuer and director as required under note 3(g) to rule 17.50(2).

        Housekeeping rule amendments relating to listing of securities

        Housekeeping rule amendments have been made to rule 12.23(2) to include as documents required to be submitted in an application for listing sponsor's undertaking pursuant to rule 6A.03 and a statement pursuant to rule 6A.08.

        Notifiable transactions and connected transactions

        Minor rule amendments have been made to Chapters 19 (notifiable transactions) and 20 (connected transactions). These are amendments to:-

        •   rule 19.19 to clarify that total assets should be calculated without deducting liabilities;
        •   rule 19.64(5) to clarify that a circular required for discloseable transaction also includes a transaction that does not involve any acquisition or disposal of assets, such as in the case of a financial assistance transaction;
        •   clarify that direct and indirect wholly owned subsidiaries of a listed company are not treated as connected persons;
        •   rule 20.31 to clarify that that the applicability of the intra-group transaction exemption is subject to the proviso that none of the subsidiaries concerned itself falls within the definition of "connected persons"; and
        •   rule 20.14 to codify our existing interpretation that continuing connected transactions include financial assistance.

        Accounting matters and the pro forma rules

        Rule amendments have been made to:-

        •   the note to rule 7.30 to clarify that for a new listing applicant without any published audited consolidated financial statements, any comparison for classifying acquisitions required under the relevant GEM Listing Rule should be made instead to the new applicant's latest audited consolidated financial statements in the accountants' report;
        •   rule 17.24 to clarify that a combination of balance sheets of affiliated companies is not "pro forma" financial information as required under rule 7.31;
        •   rule 19.69(8) to clarify that that two separate management discussion and analysis statements, one on the existing group and one on the business or company acquired or to be acquired, are required in a circular for a very substantial transaction;
        •   rule 7.12 to clarify that any change in accounting standards is not permitted;
        •   align disclosure requirements required under rules 18.50B(1) and 18.80 with prevailing accounting standards; and
        •   clarify that the basis for the requirement that annual accounts must be audited by a person who must be a practising accountant of good standing is independent of the requirements under the Companies Ordinance and rest on the premise that such requirement is in fact a "reasonable man test" applicable to overseas auditor who is a practising accountant in another jurisdiction. By this test, it is reasonable to expect that the auditor and practising accountant has satisfied basic professional standards, is a current member of a professional regulatory body and is not disqualified from being a member of such body.

        Other rule amendments

        Other minor amendments have been made to:-

        •   change the definition of "subsidiary" to reflect amendments made to the definition of "subsidiary" in the Companies Ordinance;
        •   codify the practice to require listed issuers to display their stock codes in a prominent place in all announcements, circulars and other documents as codified by the new rule 17.52A;
        •   update references to "security enquiry page" instead of to "teletext page" in paragraph 9 of Appendix 9;
        •   rule 17.50(3) to require a listed issuer to inform the Exchange and publish an announcement whenever there is a change in its Share Registrar; and
        •   rule 5.14 to reflect the change of name of the Hong Kong Institute of Company Secretaries to The Hong Kong Institute of Chartered Secretaries (the "Institute") and in reference to the Institute's members to Ordinary Members.

        Coming into effect

        These minor and housekeeping rule amendments will come into effect on 1 March 2006.

        Please click HEREHERE to see the amendments regarding the composition of the Listing Nominating Committee and the amendments regarding the composition of the Listing Committee.

        Please click HEREHERE to see the minor and housekeeping amendments.

        Yours faithfully

        For and on behalf of

        The Stock Exchange of Hong Kong Limited

        Richard Williams

        Head of Listing