Note to subscribers for the amendments to the rules governing the listing of securities (the "Listing Rules")
Update No. 83
14 February 2006
Various amendments to the Listing Rules
We enclose reprinted pages of the Listing Rules. The reprinted pages incorporate:-
• amendments to the Listing Rules regarding the composition of the Listing Nominating Committee;
• amendments to the Listing Rules regarding the composition of the Listing Committee;
• minor and housekeeping amendments to the Listing Rules; and
• minor amendments to the Listing Rules in respect of the listing of structured products.
We also enclose the filing instructions.
Amendments regarding the composition of the Listing Nominating Committee
Rule 2A.21 provides that the persons eligible for appointment or re-appointment as members of the 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 2A.21 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 the composition of the Listing Committee
The Listing Rules will also be amended to:-
• expand the 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 25;
• change the composition of the 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 Listing Committee members may become more effective as they gain experience on the Listing Committee and consistent with Government best practice, extend the current term for Listing Committee members to six years excluding any period of appointment to fill a casual vacancy. As with the current arrangements (in rule 2A.25
), 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 Listing Committee will come into effect in May 2006 on expiry of the current term of office of the Listing Committee members. The exact date will be announced in due course.
Minor and housekeeping amendments
Various minor and housekeeping amendments to the Listing Rules have been made and are set out as follows:
Disclosure of "advances to entities"
Rules 13.13, 13.14 and 13.16 of the 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 13.13 to 13.16 the applicable tests have been amended to only the total assets test. The rule amendments also introduce a new rule 13.15A that excludes a trade receivable from advances to entities for the purpose of rules 13.13 and 13.14 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 14 for IPO financing and securities margin financing.
Rules 14.04 and 14A.10 have been amended to exempt listed securities houses from the disclosure and shareholder approval provisions of Chapter 14 of the Listing Rules 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 4.05A has been introduced to require the disclosure by new listing applicant of preacquisition 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 13B 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 13.51
(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 the director's emoluments irrespective of whether a service contract has been entered into between issuer and director as required under note (g) to rule 13.51
Certified translation of material contracts and housekeeping rule amendments relating to listing of securities
Certified translation of material contracts
Rules 19.10(6) and 19.36(3) have been amended to reflect the requirement under the Companies Ordinance that translation of material contracts into English is required only where the document is in a language other than English or Chinese.
Housekeeping amendments relating to listing of securities
Amendments have been made to:-
• rule 11.02
and Form C1
of Appendix 5 to remove inconsistency in relation to number of days for submission of final proof of listing document; and
• rule 9.11
(1) to include as documents required to be submitted in an application for listing sponsor's undertaking pursuant to rule 3A.03
and statement pursuant to rule 3A.08
Notifiable transactions and connected transactions
Minor rule amendments have been made to Chapters 14 (notifiable transactions) and 14A (connected transactions). These are amendments to:-
• rule 14.19
to clarify that total assets should be calculated without deducting liabilities;
• rule 14.64
(4) 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;
• introduce a new rule 14.67
(5) to replace the old rule 14.66
(5). The new rule rule 14.67
(5) provides that a circular issued in relation to an acquisition constituting a major transaction must contain a management discussion and analysis of results of the business, company or companies being acquired;
• clarify that direct and indirect wholly owned subsidiaries of a listed company are not treated as connected person;
• rule 14A.31
(1) to clarify 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 14A.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 4.28
to clarify that for a new listing applicant without any published audited consolidated financial statements, any comparison for classifying acquisitions required under the relevant Listing Rule should be made instead to the new applicant's latest audited consolidated financial statements in the accountants' report;
• rule 13.22
to clarify that a combination of balance sheets of affiliated companies is not "pro forma" financial information as required under rule 4.29
• rule 14.69
(7) to clarify 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 4.11
to clarify that any change in accounting standards is not permitted;
• align disclosure requirements required under paragraph 1(1) of Appendix 15
and paragraph 4(1) of Appendix 16
of the Listing Rules 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;
• change the timing for the release of results announcement pursuant to rule 13.45
from 4:00 p.m to 4: 15 p.m so that the release of the results announcements will not affect the price of derivative products in the futures market which closes at 4:15 p.m;
• update references to "security enquiry page" instead of to "teletext page" in paragraph 10 of Appendix 8
• 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 13.51A
• rule 13.51
(5) to require a listed issuer to inform the Exchange and publish an announcement whenever there is a change in its Share Registrar; and
• rule 8.17
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.
Amendments in respect of structured products
Certain minor amendments have been made to Chapter 15A of the Listing Rules to facilitate the listing of callable bull/bear contracts and other types of structured products which may be developed in future.
Coming into effect
These 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.
For and on behalf of
The Stock Exchange of Hong Kong Limited
Head of Listing