Chapter 1

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Question:

Do "close associate" and "associate" include a trustee where the beneficiary of the trust is a company controlled by a director, chief executive or substantial shareholder or any of his family interests/ immediate family members?

Answer:

Yes. For the purpose of the definitions of "close associate" and "associate", the interest of a director, chief executive or substantial shareholder, or any of his family interests/ immediate family members includes all beneficial interests directly or indirectly held by any of these parties. This would include the trustee of any trust of which -a company beneficially controlled by a director, chief executive or substantial shareholder, or any of his family interests/ immediate family members is a beneficiary. Similarly, where the substantial shareholder is a corporation, "close associate" and "associate" include the trustee of any trust of which a subsidiary of the substantial shareholder is a beneficiary.

FAQ Series 1, FAQ No. 1
LR reference: Main Board Rules 1.01, 14A.12(1)(b), 14A.13(2), 19A.04 / GEM Rules 1.01, 20.10(1)(b), 20.11(2), 25.04
Released on 30/3/2004 (Updated in February 2020)

Question:

What are depositary receipts?

Answer:

Depositary receipts (DRs) are securities issued by a depositary representing underlying shares of an issuer which have been placed with the depositary or its nominated custodian. The subject matter of listing is the underlying shares represented by DRs. DRs are purchased by investors (DR holders) in accordance with the terms of the deposit agreement. The depositary is the agent of the issuer and acts as a bridge between the DR holders and the issuer.

DRs are issued to investors in the target market (the host market) where they are traded, cleared and settled in host market currency in accordance with host market procedures. One DR will represent a number of underlying shares (or a fraction of a single share), according to the DR ratio. The depositary converts dividends into the host market currency and pays the amounts (net of its own fees) to the DR holders. The depositary also transmits other entitlements and corporate communications from the issuer to the DR holder, and transmits the DR holder's instructions back to the issuer. The rights and obligations of the issuer, the depositary and the DR holders are set out in the deposit agreement.

FAQ Series 6, FAQ No. A1
LR reference: Main Board Rules 1.01
Released on 9/5/2008 (Updated on 1/12/2010)

Question:

Which jurisdictions are approved for DR issuance?

Answer:

Issuers from any jurisdiction which can meet the related requirements of the Listing Rules are welcome to apply to the Exchange.

FAQ Series 6, FAQ No. B4
LR reference: Main Board Rules Chapter 1, Chapter 19B
Released on 09/05/2008 (Last updated on 01/01/2022)

Question:

What protections are there for Hong Kong investors in HDRs?

Answer:

To be admitted to listing on the Exchange, the HDR issuer will have to demonstrate compliance with all the core shareholder protection standards that apply to issuers of shares, as set out in Appendix 3 of the Listing Rules, Guidance Letter HKEX-GL111-22 (Updated in January 2022), the Securities and Futures Ordinance, the prospectus provisions of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32), and the Codes on Takeovers and Mergers and Share Buybacks. (Updated in April 2014)

The HDR holder’s rights are set out in the deposit agreement, which is subject to approval by the Exchange in accordance with the provisions of Chapter 19B. Investors in HDRs should understand that they are bound by the terms of the deposit agreement. Investors are advised to read the deposit agreement to understand what their rights are and how they may be exercised.

FAQ Series 6, FAQ No. C5
LR reference: Main Board Rules Chapter 1, Chapter 19B
Released on 09/05/2008 (Last updated on 01/01/2022)

Question:

Can HDR holders vote at the shareholders meeting?

Answer:

As with other corporate communications, the depositary, on behalf of the issuer, will pass information from the issuer on resolutions and voting procedures through to the DR holder, and will in turn pass the DR holder’s voting instructions back to the issuer. Besides, DR holders can also access shareholders meeting announcements and other corporate communication by issuers on the HKEX website.

The right of HKSCC to appoint proxies or corporate representatives to attend the issuer’s general meetings and creditors meetings and those proxies or corporate representatives must enjoy rights equivalent to the rights of other shareholders, including the right to speak and vote is set out in paragraph 19 of the Appendix 3 of the Listing Rules. The HDR issuer must ensure its constitutional documents provides such right.

FAQ Series 6, FAQ No. C7
LR reference: Main Board Rules Chapter 1, Chapter 19B
Released on 09/05/2008 (Last updated on 01/01/2022)

Question:

What transaction fees do investors pay to buy or sell HDRs?

Answer:

As with buying and selling stocks, investors need to pay brokerage commission, SFC transaction levy, FRC transaction levy, trading fee and stamp duty.

FAQ Series 6, FAQ No. E3
LR reference: Main Board Rules Chapter 1, Chapter 19B
Released on 09/05/2008 (Updated on 01/01/2022)

Question:

Where written shareholder approval has been obtained for a transaction, the amended rule requires an information circular to be despatched within 15 business days after publication of the announcement.

If the stock market is open for only half day due to a typhoon or other reason, is it counted as a business day?

Answer:

The Listing Rules define a "business day" as any day on which the Exchange is open for the business of securities dealing. Accordingly if, for whatever reason, the Exchange is open for the business of dealing in securities for only half day, it is counted as a business day.

FAQ Series 11, FAQ No. 11
LR reference: Main Board Rules 1.01, 14.41, 14A.46, 14A.48 / GEM Rules 1.01, 19.41, 20.44, 20.46
Released on 20/5/2010 (Updated on 1/7/2014)

Question:

Does "chief executive" in these Rules mean "chief executive officer"? Or does it also refer to chief financial officer, chief operations officer, etc.?

Answer:

The definition of chief executive is set out in the Rules: "a person who either alone or together with one or more other persons is or will be responsible under the immediate authority of the board of directors for the conduct of the business of a listed issuer".

FAQ Series 17, FAQ No. 8
LR reference: Main Board Rules 1.01 / GEM Rules 1.01
Released on 19/12/2011

Question:

Listco has appointed Trustee A the trustee of its employee share scheme established for a wide scope of participants including Listco's directors and certain employees who are not connected persons. Since the interests of Listco's directors in the scheme are together less than 30%, Trustee A is not an "associate" of the directors under Rule 14A.12(1)(b) and therefore not a connected person of Listco.

(a)    Is Trustee A a "close associate" of the directors under Rule 1.01?
(b)    Will the shares held by Company A on behalf of the beneficiaries of the scheme be regarded as being "in public hands"?
(c)    Trustee A, acting as the trustee of the scheme, holds more than 10% of Listco's total issued shares. Under the scheme, it is not allowed to exercise the voting rights attaching to shares. Is Trustee A a substantial shareholder of Listco?

Answer:

(a)    Yes. The exclusion for the definition of "associate" under Rule 14A.12(1)(b) does not apply to the definition of "close associate" under Rule 1.01.
(b)    No, because Trustee A is a close associate of Listco's directors and therefore a core connected person for the purpose of Rule 8.24.
(c)    No. Trustee A does not fall under the definition of "substantial shareholder" under Rule 1.01.

FAQ Series 28, FAQ No. 4A
LR reference: Main Board Rules 1.01, 8.24, 14A.12(1)(b) / GEM Rules 1.01, 11.23(11) Notes 2 and 3, 20.10(1)(b)
Released on 1/7/2014

Question:

The revised Hong Kong Standards on Auditing (“HKSAs”) issued by the HKICPA on 31 August 2015 which became effective for audits of financial statements for periods ending on or after 15 December 2016, require the issuer’s auditors to report “Key Audit Matters” (“KAM”) in their audit report. Will the issuer need to:

(i)    provide details of KAM in the preliminary results announcement; and
(ii)    select the headline category “Modified Report by Auditors” when submitting the results announcement for publication?

Answer:

(i)    Currently, there is no specific requirement under the Rules for an issuer to provide details of KAM in its results announcement.

For investors to better understand the financial statements and the audit that was performed, it is considered more appropriate that KAM should be read and considered together with the full audit report and the complete set of financial statements. Therefore, the issuer is recommended to publish its full annual report as soon as practicable after the preliminary results announcement has been issued.
(ii)    No. Given that KAM is part of a clean audit report, the issuer should not select the headline category “Modified Report by Auditors” when submitting the results announcement for publication on the HKEXnews website.

The issuer is reminded that paragraphs 45(7) and 46(8) of Appendix 16 to the Main Board Rules and GEM Rules 18.50(8) and 18.78(5) require, where its auditors are likely to issue a modified report on its financial statements, the issuer to provide details of the modification in the results announcement and select the headline category “Modified Report by Auditors”. The newly defined term “modified report” in Main Board Rule 1.01/ GEM Rule 1.01 refers to:
  (a) where the audit opinion in the auditors’ report is a “modified opinion” (i.e. a qualified opinion, an adverse opinion or a disclaimer of opinion); and/or
  (b)  where the auditors’ report contains any of the following without modifying the audit opinion:
    - an emphasis of matter paragraph; and
    - a material uncertainty related to going concern.
  There is no policy change to the Rules in this regard.

FAQ 002-2017
LR reference: Main Board Rules 1.01, Appendix 16 Paragraphs 45(7) and 46(8), Appendix 24 / GEM Rules 1.01, 18.50(8), 18.64, 18.76, 18.78(5), Appendix 17
Released on 6/1/2017 (Updated on 1/3/2019)

Question:

When the auditors express an unmodified opinion but include an “Emphasis of Matter” paragraph or a separate section under the heading “Material Uncertainty Related to Going Concern”, will the issuer need to provide details in the preliminary results announcement and select the headline category “Modified Report by Auditors” when submitting the results announcement for publication?

Answer:

Yes. See the definition of “modified report” in Main Board Rule 1.01/ GEM Rule 1.01 (FAQ 002-2017).

Where the auditors’ report is expected to include an “Emphasis of Matter” paragraph or a separate section under the heading “Material Uncertainty Related to Going Concern”, the issuer should provide details in its results announcement. In such case, the issuer should also select the headline category “Modified Report by Auditors” when submitting its results announcement for publication on the HKEXnews website.

FAQ 003-2017
LR reference: Main Board Rules 1.01, Appendix 16 Paragraphs 45(7) and 46(8), Appendix 24 / GEM Rules 1.01, 18.50(8), 18.64, 18.76, 18.78(5), Appendix 17
Released on 6/1/2017 (Updated on 1/3/2019)

Question:

(i)    Given the Exchange has now updated the audit terminology in the Rules with reference to the revised HKSAs on auditor reporting, the terms “modified opinion” and “modified report” are defined in Main Board Rule 1.01/ GEM Rule 1.01. However, there is no definition of “modification” in the Rules.

Please clarify the use of the term “modification”.
(ii)    Where the financial information has been reviewed and a review conclusion has been expressed by the auditors/ reporting accountants (e.g. FAQ 004-2017), what is meant by “modification” referred to in the Rules, interpretation and guidance issued by the Exchange?

Please clarify the use of the term “modification” in that context.

Answer:

(i)    “Modification” is a generic term which should be read in the context of the Rule.

Audit engagements

The terms “modified opinion” and “modified report” defined in Main Board Rule 1.01/ GEM Rule 1.01 relate to an accountants’ report or auditors’ report containing an audit opinion.

Where a Rule explicitly refers to a “modified opinion”, then the term “modification” should be read in the context of that Rule and should refer to a “modified opinion”.

The same applies when a Rule explicitly refers to a “modified report”, then the term “modification” should be read in the context of that Rule and should refer to a “modified report”.

For reference, the table below summarises the terminologies used in the current Rules and the HKSAs:
  Terminology used
Meanings Current Rules HKSAs

Matters that affect the audit opinion:
 -  qualified opinion
 -  adverse opinion
 -  disclaimer of opinion

Modified opinion Modified
opinion

Matters that affect the audit opinion:
 -  qualified opinion
 -  adverse opinion
 -  disclaimer of opinion

AND/OR

Matters that do not affect the audit opinion:
 -  emphasis of matter
 -  material uncertainty related to going concern

Modified report No specific
equivalent term

 
(ii)    Where the financial information has been reviewed and a review conclusion has been expressed by the auditors/ reporting accountants, then the term “modification” in the Rules and FAQs should refer to:

Review engagements
  (a)    a modified review conclusion (i.e. qualified conclusion, an adverse conclusion or a disclaimer of conclusion); and/or
  (b)    an emphasis of matter paragraph or a paragraph to highlight a material uncertainty related to going concern without modifying the review conclusion.
  (Note: A review is substantially less in scope than an audit conducted in accordance with relevant HKICPA standards (or equivalent standards issued by IAASB and China Ministry of Finance). Currently, the applicable HKICPA standards for a review engagement are Hong Kong Standards on Review Engagements 2400 (Revised) and 2410.)

FAQ 053-2019
LR reference: Main Board Rules 1.01, 4.18, 14.68(2)(a)(i), Appendix 1A Paragraph 35, Appendix 1C Paragraph 42(2), Appendix 1E Paragraph 35, Appendix 16 Paragraphs 45(7) and 46(8) / GEM Rules 1.01, 7.22, 18.50(8), 18.64, 18.76, 19.68(2)(a)(i), Appendix 1A Paragraph 35, Appendix 1C Paragraph 42(2)
Released on 1/3/2019

Question:

Which companies are considered “overseas issuers” under the Listing Rules?

Answer:

All companies incorporated outside Hong Kong and the People’s Republic of China are “overseas issuers” under the Listing Rules.

FAQ Series 25, FAQ No. 5
LR reference: Main Board Rule 1.01/ GEM Rule 1.01
Released on 01/01/2022

Question:

What are the new definitions on the role of intermediaries under the Rule Amendments?

Answer:

The following new definitions on the role of intermediaries are added to the Listing Rules: “capital market intermediary” (or “CMI”), “syndicate CMI”, “overall coordinator”, “sponsor-overall coordinator” (for Main Board Rules only) and “syndicate member”.

FAQ 077-2022, FAQ No. 1
LR reference: Main Board Rule 1.01/ GEM Rule 1.01
Released on 22/4/2022

Question:

Despite the introduction of new definitions on the role of intermediaries under the Rule Amendments, can intermediaries still be awarded titles such as “global coordinator”, “bookrunner”, “lead manager”, etc. which is currently the market norm, and disclosed accordingly in listing documents?

Answer:

Yes, intermediaries may still be awarded titles which are currently used in the market and identified by these titles in the listing documents to be issued in connection with the relevant transactions. The definitions of “capital market intermediary”, “overall coordinator” and “sponsor-overall coordinator” are for the purpose of identifying them based on the specified activities they engage in as stipulated in the New Code Provisions. However, as the definitions under the New Code Provisions relate directly to the specified activities performed, intermediaries should approach with caution being awarded titles that appear to be inconsistent with how their roles are defined under the New Code Provisions.

FAQ 077-2022, FAQ No. 2
LR reference: Main Board Rule 1.01/ GEM Rule 1.01
Released on 22/4/2022

Question:

If SPAC Promoter A holds the Promoter Shares through a special purpose vehicle (“SPV”), should the SPV itself also be regarded as a SPAC Promoter?

Answer:

The SPV will not be regarded as a SPAC Promoter as long as its sole purpose is to hold Promoter Shares on behalf of SPAC Promoter A (as permitted under the Note to Rule 18B.27).

Although the SPV will not be regarded as a SPAC Promoter, it is expected to give an undertaking to the Exchange and the SPAC that so long as it has any direct or indirect interest in any Promoter Shares and/or Promoter Warrants, it will comply with the provisions of the Listing Rules which apply to SPAC Promoter A.

FAQ 102-2022 to 117-2022, FAQ No. 102-2022
LR reference: Main Board Rules 1.01, 18B.26, 18B.27
Released on 16/09/2022

Question:

Should an entity be regarded as a SPAC Promoter if it controls the beneficial ownership of Promoter Shares?

If so, should all levels in the control chain, including the ultimate controlling shareholder, be regarded as a SPAC Promoter, or are SPACs permitted to identify which entity it believes should be treated as a SPAC Promoter within the control chain?

Answer:

According to Rule 1.01, a SPAC Promoter refers to a person who establishes a SPAC and/or beneficially owns Promoter Shares issued by a SPAC.

A SPAC should identify the entities in its shareholding structure that should be regarded as SPAC Promoters for the purpose of the Listing Rules, and such entities must satisfy the suitability and eligibility requirements set out in Rule 18B.10. In general, holding a controlling stake in an identified SPAC Promoter in itself would not result in that controlling shareholder being regarded as a SPAC Promoter.

In addition, according to Rule 18B.27, a SPAC must only allot, issue or grant Promoter Shares or Promoter Warrants to a SPAC Promoter, which may hold these securities through SPVs. As such, a SPV holding Promoter Shares on behalf of a SPAC Promoter should not have any minority shareholders who are not SPAC Promoters.

SPAC Promoters and SPVs holding Promoter Shares and Promoter Warrants should undertake to the Exchange and the SPAC that they will comply with the relevant provisions of the Listing Rules for so long as they hold any direct or indirect interests in any Promoter Shares and/or Promoter Warrants.

FAQ 102-2022 to 117-2022, FAQ No. 103-2022
LR reference: Main Board Rule 1.01, 18B.26, 18B.27
Released on 16/09/2022

Question:

Can multiple SPAC Promoters beneficially own Promoter Shares through a common SPV?

Answer:

Yes. The Exchange may impose additional conditions on the multiple SPAC Promoters having regard to the specific facts and circumstances of each case, for example, any departure or change in shareholding by the multiple SPAC Promoters in the common SPV will be regarded as a material change of SPAC Promoter under Rule 18B.32.

FAQ 102-2022 to 117-2022, FAQ No. 104-2022
LR reference: Main Board Rule 1.01, Note 1 to 18B.32
Released on 16/09/2022