Chapter 19

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Question:

Where and for how long should documents on display be published online?

How will these documents be removed from the relevant websites after the expiry of the prescribed display period?

Answer:

Issuers should publish documents on display on both the HKEX website (through EPS under the new headline category “Documents on Display”) and the issuer’s website.

For documents that are published to meet transaction disclosure obligations only, issuers are required to publish them for time period prescribed by the Listing Rules (which is the same as what the Listing Rules originally require for physical display of such documents).

For documents that are published to meet ongoing disclosure obligations (e.g. constitutional documents, audited financial information and previous transaction circulars), these should be published on a continuous basis. There is no time limit on the length of time listing documents should remain online. (Note: These documents are already published online on a continuous basis. Issuers will not have to publish them again to meet any transaction disclosure obligations as such obligations will be removed with the changes to the Listing Rules.)

After the expiry of any relevant display period prescribed by the Listing Rules, issuers should remove the documents on display manually from the EPS themselves and can also remove them from their own website. They should not do so before the expiry of the relevant display period. The Exchange will not automatically remove documents of display from EPS after a relevant display period has expired.

FAQ Series N/A, FAQ No. 075-2021
LR reference: Main Board Rules 4.14, 5.01B(1)(b), 5.02B(2)(b), 14.66(10), 14.67A(2)(b)(viii), 14A.70(13), 15A.21(4), 17.02(2), 19.10(5)(e) and (6), 19A.27(4), 19A.50, 19C.10B, 29.09, 29.10, 36.08(3), Appendix 1A paragraph 53, Appendix 1B paragraph 43, Appendix 1C paragraph 54, Appendix 1D paragraph 27, Appendix 1E paragraph 76, Appendix 1F paragraph 66, Appendix 4 paragraph 9(b), Appendix 7H paragraphs 5 and 15, Appendix 24 / GEM Rules 7.18, 8.01B(1)(b), 8.02B(2)(b), 19.66(11), 19.67A(2), 20.68(13), 23.02(2), 24.09(2), (3), (5)(a),(e) and (6), 25.20(4), 25.37, 32.05(3), 35.10, 35.11, Appendix 1A paragraph 52, Appendix 1B paragraph 42, Appendix 1C paragraph 53, Appendix 4 paragraph 9, Appendix 17
Released on 18/6/2021 (Updated on 01/01/2022)

Question:

Whether the Exchange will allow an applicant, including a biotech company, to adopt generally accepted accounting principles in the United States (US GAAP) in the preparation of accountants’ report and subsequent financial reports after listing?

Answer:

Rule 4.11 requires an accountants’ report in a listing document be prepared in Hong Kong Financial Reporting Standards or International Financial Reporting Standards (IFRS) for non-PRC companies.

US GAAP is acceptable for an overseas issuer with, or seeking, a dual primary or secondary listing in the U.S. and on the Exchange (paragraph 29 of Guidance Letter HKEX-GL111-22).

An applicant already listed in U.S. may apply for a waiver from Rule 4.11 and note 2.1 to paragraph 2 of the Appendix 16 to use US GAAP in the preparation of an accountant’s report in its prospectus and the financial statements issued after listing.

In considering whether to grant the waiver, the Exchange will take into account the following:

(i)  the applicant’s place of operation is in the U.S., and whether it has been adopting US GAAP;
(ii)  whether the adoption of US GAAP enables its investors to make a more meaningful comparison of its performance with its peers;
(iii)  the comparability between US GAAP and IFRS; and
(iv)    whether there is any material difference between the financial statements prepared using US GAAP and IFRS.

Please refer to Guidance Letter HKEX-GL102-19 for the details of the conditions, at a minimum, required by the Exchange on granting such waiver.

Secondary listed issuers that are listed in the US and new secondary listing applications from US-listed applicants should refer to Guidance Letter HKEX-GL111-22 for the transitional arrangements on the use of US GAAP for secondary listing.

FAQ Series N/A, FAQ No. 034-2018
LR reference: Main Board Rules 4.10, 4.11, 19.13, 19.14, 19.25A, 19C.10D, 19C.23 / GEM Rules 7.12, 7.14, 24.18A
Released on 24/8/2018 (Updated on 01/01/2022)

Question:

As from 1 October 2019 (“Effective Date”), the amendments to the Financial Reporting Council Ordinance (Cap. 588) (“FRCO”) took effect and the Financial Reporting Council (“FRC”) became Hong Kong’s independent regulator of listed entity auditors.

After the Effective Date, all audit firms intending to carry out a PIE Engagement are subject to a system of registration (for Hong Kong audit firms) and recognition (for non-Hong Kong audit firms) as PIE Auditors.

Any non-Hong Kong audit firm is required to be recognized by the FRC before the audit firm can (i) “undertake” (i.e. accept an appointment to carry out) any PIE Engagement; and (ii) carry out any PIE Engagement for an overseas entity. Under the FRCO, the Exchange needs to issue a Statement of No Objection (“SNO”) before the FRC considers an application of the overseas audit firm to be recognized as a Recognized PIE Auditor. The overseas audit firm must not accept an appointment for carrying out any PIE Engagement for an overseas entity unless the application for recognition has been granted.

(i) Which types of engagements fall within the PIE Engagements?
(ii) On the appointment of a non-Hong Kong audit firm for the PIE Engagement, who should submit the formal application to the FRC?

Answer:

(i) In relation to equity issuers and applicants, the audit engagements falling within the PIE Engagements are summarized below:
Preparation of auditors’ or accountants’ report Is it a PIE Engagement?
Annual financial statements
Listing document
Very substantial acquisition
Reverse takeover
Major transaction ×
Very substantial disposal ×
Extreme transaction ×
De-SPAC transaction ×

For those engagements not falling within the PIE Engagements, such as accountants’ reports included in major transaction and very substantial disposal circulars, the Listing Rules continue to apply after the Effective Date. Therefore, it is at the Exchange’s discretion to accept an overseas audit firm as the reporting accountant under the Listing Rules and recognition with the FRC is not required.
(ii) The FRC considers the recognition application of a non-Hong Kong audit firm on a case-by-case basis. Therefore, the application should be submitted by the overseas entity. Please see the table below:
Location of audit firm Application should be submitted by
Overseas audit firm Overseas entity,
together with a SNO issued by the Exchange
Endorsed Mainland audit firm Not applicable.
(Endorsed Mainland audit firms are recognized as a PIE Auditors without a recognition application being made to the FRC.)
Notes:
1. A public interest entity (PIE) is either (a) a listed corporation whose listed securities comprise at least shares or stocks; or (b) a listed collective investment scheme. Therefore, an entity with only listed debts without listed shares or stocks is not a PIE.
2. For further details on the recognition of overseas audit firms, please refer to the FRC’s website.

FAQ No. 059-2019
LR reference: Main Board Rules 4.03, 19.20, 19C.16 / GEM Rules 7.02, 24.13
Released on 06/09/2019 (Updated in January 2022)

Question:

The overseas equity issuer or applicant must seek a SNO from the Exchange to engage an overseas audit firm to undertake its PIE Engagements. After the SNO is obtained, that issuer or applicant can submit the recognition application to FRC.

What are the assessment criteria to be considered by the Exchange for the issue of a SNO?

Answer:

SNO is granted on by a case-by-case basis.

As set out in note 2 to Main Board Rule 4.03(1) (note 2 to GEM Rule 7.02(1)), we will issue a SNO if the overseas audit firm:

(a) has an international name and reputation;
(b) is a member of a recognized body of accountants; and
(c) is subject to independent oversight by a regulatory body of a jurisdiction that is a full signatory to the IOSCO MMOU. It would be acceptable if the relevant audit oversight body is not a signatory to the IOSCO MMOU but the securities regulator in the same jurisdiction is a full signatory to the IOSCO MMOU.

In this regard, the overseas equity issuers and applicants are reminded that they should plan their application ahead and allow sufficient time for them to seek the SNO and obtain the FRC’s approval for recognition of a Recognized PIE Auditor.

FAQ No. 060-2019
LR reference: Main Board Rules 4.03, 19.20, 19C.16 / GEM Rules 7.02, 24.13
Released on 06/09/2019 (Updated in January 2022)

Question:

What information should be submitted to the Exchange when making an application for a SNO?

Answer:

The SNO application must be made in writing. Based on all relevant facts and circumstances, the overseas equity issuer or applicant should provide an explanation, that supports the SNO application, and all other relevant information that it reasonably believes should be brought to the Exchange’s attention, including but not limited to:

(1) Details of the PIE Engagement (see FAQ No. 059-2019) and role of the overseas audit firm acting as:
a. auditors; and/or
b. reporting accountants.
(2) Information of the issuer or the applicant or the business, company or companies being acquired (collectively “target” in the case of an acquisition), including its name, address, place of incorporation and nature of the business of the group/target.
(3) Information of the overseas audit firm, including:
a. having an international name and reputation;
b. being a member of, or registered with, an accountancy body (please specify the name of accountancy body in the home country) that is a member of the International Federation of Accountants (IFAC) (see note 1 below); and
c. being subject to independent oversight by a regulatory body of a jurisdiction (please specify the name of regulatory body in the home country) that is a signatory to the IOSCO MMOU (see note 2 below).
(4) Auditing and financial reporting standards adopted in relation to the PIE Engagement.
(5) Reasons of why an overseas audit firm is needed to undertake the PIE Engagement (see note 3 below), such as:
a. the overseas audit firm has a geographical proximity and familiarity with the businesses of that overseas applicant or issuer or the target; and/or
b. that overseas applicant or issuer or the target is listed on a Recognised Stock Exchange (as defined in Rule 1.01), and the overseas audit firm is the auditor of that overseas applicant or issuer or the target; and/or
c. the overseas audit firm is the statutory auditor of that overseas applicant or issuer or the target.

Note 1: A SNO issued by the Exchange is one of the eligibility criteria to be a Recognized PIE Auditor. There is no indication that the overseas audit firm mentioned in the SNO will be approved by the FRC, as the FRC has the following additional criteria:

(a) the overseas audit firm is subject to the regulation of an overseas regulatory organization recognized by the FRC; and
(b) the overseas audit firm has adequate resources and possesses the capability to carry out a PIE Engagement for the overseas entity.

Generally, an overseas regulatory organization is recognized by the FRC, if it is a member of the International Forum of Independent Audit Regulators (IFIAR); or from a jurisdiction which has attained equivalence status granted by the European Commission under Article 46 of the Statutory Audit Directive 2006/43/EC. For details, please refer to the FRC’s website.

Note 2: It would be acceptable if the relevant audit oversight body is not a signatory to the IOSCO MMOU but the securities regulator in the same jurisdiction is a full signatory to the IOSCO MMOU.

Note 3: The Exchange will consider exercising its discretion not to issue a SNO if the overseas issuer or applicant fails to satisfy the Exchange of its reasons for its engagement of an overseas audit firm to undertake the PIE Engagement.

FAQ No. 061-2019
LR reference: Main Board Rules 4.03, 19.20, 19C.16 / GEM Rules 7.02, 24.13
Released on 06/09/2019 (Updated in January 2022)

Question:

Before the amendments to the FRCO became effective, the overseas equity issuer needs to make an enquiry regarding its proposed appointment of an overseas audit firm as its auditor.

After the Effective Date, does the overseas equity issuer, for PIE Engagements, still need to make the enquiry, in addition to seeking the SNO, when it proposes to appoint an overseas audit firm to act as its auditor?

Answer:

No. After the Effective Date, the overseas equity issuer only needs to submit the SNO application to the Exchange. We will arrange to issue a SNO if the overseas audit firm can satisfy the assessment criteria as set out in FAQ No. 060-2019.

Note: For overseas audit firms who have already been recognized by the FRC as Recognized PIE Auditors, although the SNO is not required (see the example set out in FAQ No. 065-2019 (ii) below), the issuers are required to apply Main Board Rule 4.03 (GEM Rule 7.02) waiver or seek our consent under Main Board Rules 19.20(2) and 19C.16(2) (GEM Rule 24.13(2)) for the new engagement as required under the Listing Rules.

FAQ No. 064-2019
LR reference: Main Board Rules 19.20, 19C.16 / GEM Rule 24.13
Released on 06/09/2019 (Updated in January 2022)

Question:

Is an overseas equity issuer required to apply a “new” SNO in the following circumstances:

(i) Annual renewal of the recognition (i.e. “same” overseas audit firm) to the FRC?
(ii) To appoint an overseas audit firm (who is the auditors of the issuer) as its reporting accountants for a transaction circular, which falls within the PIE Engagements?
(iii) To appoint “another” overseas audit firm as its auditors or reporting accountants for a transaction circular (which falls within the PIE Engagements)?

Answer:

In the circumstances described:

(i) No. The SNO is not required when applying for renewal of the recognition to the FRC.
(ii) No. The SNO is not required. In addition, the issuer does not have to re-apply for recognition to the FRC when the recognition of that audit firm remains valid.
(iii) Yes. The issuer should make a fresh recognition application, together with the SNO, to the FRC.

FAQ No. 065-2019
LR reference: Main Board Rules 4.03, 19.20, 19C.16 / GEM Rules 7.02, 24.13
Released on 06/09/2019 (Updated in January 2022)

Question:

Does an overseas equity issuer or applicant need to disclose the fact that its auditors or reporting accountants for a PIE Engagement are the Registered or Recognized PIE Auditors in the annual report, circular or listing document?

Answer:

Yes. It should disclose that fact.

FAQ No. 066-2019
LR reference: Main Board Rules 4.03, 19.20, 19C.16 / GEM Rules 7.02, 24.13
Released on 06/09/2019 (Updated in January 2022)

Question:

Does an overseas equity applicant need to disclose the name of the auditors after listing in the listing document?

Answer:

Yes. For clarity, the overseas applicant should disclose the name of its auditors after listing at the time of the publication of the listing document.

In case where an overseas applicant engaged a Hong Kong audit firm to act as its reporting accountant for preparing the accountants’ report in its listing document, but it intends to appoint an overseas audit firm as its auditors after listing, it should seek a SNO from the Exchange and submit a recognition application to the FRC. At the time of the publication of the listing document, if its application is under the FRC’s consideration, that fact should be disclosed.

FAQ No. 067-2019
LR reference: Main Board Rules 4.03, 19.20, 19C.16 / GEM Rules 7.02, 24.13
Released on 06/09/2019 (Updated in January 2022)

Question:

What are the changes effective from 1 January 2022?

Answer:

In March 2021, the Exchange published the consultation paper on the proposals to enhance and streamline the listing regime for Overseas Issuers. The proposals were generally supported by the market and the consultation conclusions were published on 19 November 2021.

Appendix I (click here) sets out for summary of the changes relating to the listing regime for overseas issuers.

Appendix II (click here) sets out for the amended Main Board & GEM Listing Rules to reflect the consequential changes following the consultation conclusions.

The Exchange also published two new guidance letters, namely, the Guidance Letter on the guidance for overseas issuers (HKEX-GL111-22) and the Guidance Letter on the change of listing status from secondary listing to dual primary or primary listing on the Main Board (HKEX-GL112-22).

FAQ Series 25, FAQ No. 1
LR reference: Main Board Rules Chapter 19 and Chapter 19C and Appendix 3/ GEM Rules Chapter 24 and Appendix 3
Released on 01/01/2022

Question:

What are the eligibility requirements for an overseas issuer seeking a primary listing, a dual primary listing or a secondary listing on the Exchange?

Answer:

Refer to Appendix IV (click here) for a summary of the eligibility requirements for a Main Board overseas issuer seeking a primary listing, a dual primary listing or a secondary listing on the Exchange.

FAQ Series 25, FAQ No. 11
LR reference: Main Board Rules Chapter 19 and Chapter 19C / GEM Rules Chapter 24
Released on 01/01/2022

Question:

Will the Exchange continue to grant “automatic waivers” and “common waivers” under the new regime?

Answer:

Yes, automatic waivers will continue to be available to secondary listed issuers and they should refer to Main Board Rule 19C.11 for details.

For common waivers and related conditions, overseas issuers should refer to Main Board Rule 19.58 (GEM Rule 24.25) (for issuers with, or seeking a dual primary listing) and Main Board Rule 19C.11B (for issuers with, or seeking a secondary listing) for details.

FAQ Series 25, FAQ No. 12
LR reference: Main Board Rules 19.58 and 19C.11 / GEM Rule 24.25
Released on 01/01/2022

Question:

Who needs to publish a Company Information Sheet and what information needs to be included in it?

Answer:

A Company Information Sheet is required to be prepared by:

a)  all secondary listed issuers;
b)  an overseas issuer with a primary listing or a dual primary listing that meets any of the following criteria:
  (i)  there are novel waiver(s) granted to the issuer, including where the issuer is allowed to have alternative measures to meet any Core Standards and without providing such standards in its constitutional documents;
  (ii)  the laws and regulations in its home jurisdiction and primary market are materially different from those required by Hong Kong laws regarding1:
    –  the rights of holders of its securities and how they can exercise their rights;
    directors’ powers and investor protection; and
    the circumstances under which its minority shareholders may be bought out or may be required to be bought out after a successful takeover or share repurchase;
  (iii)  it is subject to any withholding tax on distributable entitlements or any other tax that is payable by shareholders (e.g. capital gains tax, inheritance or gift taxes);
  (iv)  it is listing depositary receipts; and/or
  (v)  where the Exchange, at its own discretion, require the issuer (including an issuer incorporated in Bermuda or the Cayman Islands) to publish a Company Information Sheet in the view that such publication will be informative to investors (for example, to provide them with information on overseas laws and regulations to which the issuer is subject and which may be unfamiliar to investors in Hong Kong).

The information expected to be included in a Company Information Sheet are summarized in sub-paragraphs (i) to (iv) above.

For a primary listed or dual primary listed issuer, where any of the criteria stated in sub-paragraphs (i) to (v) above applies, the issuer is only required to include information relevant to that criterion in its Company Information Sheet. For example, where criteria (i) applies, that is, novel waivers are granted to the issuer and none of the other criteria are applicable, the issuer is only required to include a summary of the novel waivers in its Company Information Sheet.

Note:

(1) The Exchange considers that, as at the date of publication of the conclusion of the consultations on listing regime for overseas issuers, the laws and regulations in the Cayman Islands and Bermuda regarding those areas are not materially different from those required by Hong Kong laws.

FAQ Series 25, FAQ No. 16
LR reference: Main Board Rules 19.60, 19C.10B(7) and 19C.24 / GEM Rule 24.27
Released on 01/01/2022

Question:

What are considered to be novel waivers under Main Board Rule 19.60 (GEM Rule 24.27)?

Answer:

The purpose of a Company Information Sheet is to provide investors with additional information on an issuer to enable them to make informed investment decision taking into account all relevant circumstances of the issuer. An overseas issuer should exercise its judgement in assessing what will constitute novel waivers.

Below are non-exhaustive examples of waivers which the Exchange will consider as novel:

(a)  compliance of any Core Standards or any other Listing Rules which affect shareholders’ rights;
(b) Main Board Rules 4.10 and 4.11 of, and note 2.1 to paragraph 2 of the Appendix 16 to, the Main Board Rules (GEM Rules 7.11 and 7.12 and 18.04) requiring an issuer to prepare its financial statements in the listing document and the subsequent financial reports issued after listing to be in conformity with: (a) Hong Kong Financial Reporting Standards; (b) International Financial Reporting Standards ; or (c) China Accounting Standards for Business Enterprises in the case of companies incorporated in China;
(c) Main Board Rules 8.08(1) and 8.09(1) and Rules 13.32 and 13.33 (GEM Rules 11.23(2)(a), 11.23(7), 11.23(11) and note 5 to GEM Rule 11.23) relating to minimum public float and minimum percentage of public holdings requirements;
(d) Main Board Rules 10.05 and 10.06 (GEM Rules 13.03 to 13.14) relating to the restrictions and notification requirements on issuers purchasing their own shares on a stock exchange; and
(e) any provisions of the Takeovers Code / Securities and Futures Ordinance.

In general, the Exchange would not ordinarily regard the following as novel waivers:

(a)  specific disclosure in the listing document and the offering and/ or placing of shares at the time of IPO e.g. on dealing in shares prior to listing and clawback mechanism; and
(b) Chapter 14A of the Main Board Rules (Chapter 20 of the GEM Rules) waivers in respect of the continuing connected transaction.

FAQ Series 25, FAQ No. 17
LR reference: Main Board Rules 19.60, 19C.10B(7) and 19C.24 / GEM Rule 24.27
Released on 01/01/2022

Question:

When should an overseas issuer publish and update its Company Information Sheet?

Answer:

Where a new overseas applicant is required to publish a Company Information Sheet, it must do so upon commencement of dealings in its securities on the Exchange.

Where an existing listed issuer needs to publish a Company Information Sheet, it should do so within three months but no later than six months after 1 January 2022. An overseas issuer should consult the Listing Division if it is uncertain about or has difficulties complying with the Company Information Sheet requirement.

Publication of a Company Information Sheet is an on-going obligation and issuers are required to update its published Company Information Sheet on a timely basis should there be any material change to the information disclosed.

FAQ Series 25, FAQ No. 18
LR reference: Main Board Rules 19.61 and 19C.25 / GEM Rule 24.28
Released on 01/01/2022

Question:

Where should an overseas issuer publish its Company Information Sheet?

Answer:

An overseas issuer must (i) submit its Company Information Sheet through HKEx-ESS for publication on the HKEx website; and (ii) upload it on its own website.

FAQ Series 25, FAQ No. 19
LR reference: Main Board Rules 19.61 and 19C.25 / GEM Rule 24.28
Released on 01/01/2022

Question:

What are the accounting and auditing related requirements applicable to an overseas issuer?

Answer:

Qualification requirements for auditors and reporting accountants

Where the preparation of an accountants’ report constitutes a PIE Engagement under the Financial Reporting Council Ordinance (“FRCO”), the issuer must normally appoint a firm of practising accountants that is qualified under the Professional Accountants Ordinance and is a Registered PIE Auditor under the FRCO.

An overseas issuer is permitted to appoint an overseas audit firm as its reporting accountant for the preparation of the accountants’ report, provided that the overseas issuer seeks a waiver from strict compliance with Main Board Rule 4.03 (GEM Rule 7.02), and obtains a Statement of No Objection (“SNO”) (in case of a PIE Engagement) from the Exchange.

An overseas audit firm is required to be recognised by the FRC before the audit firm can: (a) “undertake” (i.e. accept an appointment to carry out) any PIE Engagement; and (b) carry out any PIE Engagement for an overseas issuer. An issuer is required to apply to the Exchange for, and the Exchange is required to issue, a SNO before the FRC considers an application to recognise an overseas audit firm. The Exchange grants the SNO on a case by case basis.

For details of the SNO application (including the auditor after listing), please refer to “Frequently asked questions on recognition of overseas audit firms in relation to the amendments to the Financial Reporting Council Ordinance – Effective on 1 October 2019” (FAQ No. 059-2019 to 067-2019).

Preparation of reconciliation statement

Where the Exchange allows an accountants’ report or annual financial statements to be drawn up otherwise than in conformity with HKFRS or IFRS, the accountants’ report or annual financial statements will be required to conform with financial reporting standards acceptable to the Exchange. In such cases the Exchange will normally require the accountants’ report or, as the case may be, the annual financial statements, to contain a reconciliation statement setting out the financial effect of the material differences (if any) from either HKFRS or IFRS.

For US-listed secondary listing applicants, the requirement for the preparation of a reconciliation statement in respect of the accountants’ report prepared under US GAAP in a listing document applies to listing applications submitted on or after 1 January 2023.

For US-listed issuers with a secondary listing on the Exchange that adopted US GAAP in the preparation of their financial statements, the requirement for the preparation of a reconciliation statement applies to the first annual financial statements for the financial year commencing on or after 1 January 2022 and subsequent interim and annual financial statements.

For details, please refer to Section F of the Guidance Letter on the guidance for overseas issuers (HKEX-GL111-22).

Requirement to convert to HKFRS or IFRS upon de-listing

An overseas issuer with a dual primary or secondary listing that adopts one of the alternative overseas financial reporting standards (other than issuers incorporated in a member state of the European Union which have adopted EU-IFRS) for the preparation of its annual financial statements must adopt HKFRS or IFRS if it de-lists from the jurisdiction of that alternative overseas financial reporting standards and must do so for any annual and interim financial statements (and quarterly financial statements for GEM issuer only) that fall due under the Listing Rules, and are published, after the first anniversary of the date of its de-listing.

FAQ Series 25, FAQ No. 20
LR reference: Main Board Rules 4.03, 19.14, Note 4 to 19.14, 19.20, 19.25A, 19C.10D, Note 4 to 19C.10D, 19C.16, 19C.23, Note 4 to 19C.23 and Note 4 to 19.25A / GEM Rules 7.02, 7.14, Note 4 to 7.14, 24.13 and Note 4 to 24.18A
Released on 01/01/2022