Chapter 8A

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Question:

What information is required for an applicant to demonstrate it is innovative under Guidance Letter HKEX-GL93-181 ("GL93-18") (or as the case may be, Guidance Letter HKEX-GL94-18 2 (“GL94-18”)) and suitable to list with a WVR structure?

Answer:

To establish whether an applicant is "innovative" for the purpose of Chapter 8A, the Exchange will take into consideration the characteristics set out in paragraph 4.2 of GL93-18 (or as the case may be, paragraph 3.2 of GL94-18). An innovative company would normally be expected to possess more than one of the characteristics set out in paragraph 4.2 of GL93-18 (or as the case may be, paragraph 3.2 of GL94-18).

In relation to the characteristic in paragraph 4.2(a) of GL93-18 (or as the case may be, paragraph 3.2(a) of GL94-18), an applicant should elaborate on how its operations differ from conventional methods of operating a business in its industry which sets it apart from peers. If the applicant's peers are employing similar technology/business model, the Exchange will take into account whether the applicant was the "first mover" in the industry by reference to the timeline of the implementation of its technology, innovation and/or business model compared to its closest peers.

In relation to the characteristic in paragraph 4.2(b) of GL93-18 (or as the case may be, paragraph 3.2(b) of GL94-18), the applicant should, in addition to providing the amount of its research and development (R&D) expenses during the track record period (both as a figure and as a percentage of revenue/total expenses), also explain how the R&D contributes value to the applicant. In this connection, the Exchange will examine whether the R&D expenses are capitalised as intangible assets in the accounts of the applicant as an indicator of the value generated through the R&D activities. Where a significant portion of the R&D expenses are not capitalised, the applicant should provide the reasons for this.

In relation to the characteristic in paragraph 4.2(c) of GL93-18 (or as the case may be, paragraph 3.2(c) of GL94-18), providing a list of patents and trademarks alone is not sufficient to demonstrate this characteristic. The applicant should provide detailed explanation on how its intellectual properties enabled it to achieve business success.

In providing this information, the applicant should avoid jargons, use plain language and provide graphical illustrations where this aids understanding.

Where appropriate, the relevant details and explanations should be included in the prospectus.

Notes:

1    GL93-18 provides guidance to an applicant on some of the factors that the Exchange will take into account when considering whether an applicant is suitable for listing with a WVR structure that is required to comply with the safeguards of Chapter 8A. For the avoidance of doubt, GL93-18 applies to Non-Grandfathered Greater China Issuers with a WVR structure applying for a secondary listing under Chapter 19C (or a dual primary listing under Chapter 19) because they are required to comply with the WVR safeguards of Chapter 8A.
2    For Grandfathered Greater China Issuers or Non-Greater China Issuers with a WVR structure applying for a dual primary listing under Chapter 19 or a secondary listing under Chapter 19C, they shall refer to GL94-18 for guidance on some the factors that the Exchange will take into account when considering whether it is suitable for listing.

FAQ Series N/A, FAQ No. 030-2018
LR reference: Main Board Rules 8A.04
Released on 24/8/2018 (Updated on 01/01/2022)

Question:

What information is required for a WVR beneficiary demonstrate that they have been materially responsible for the growth of an applicant's business?

Answer:

Paragraph 4.4 of GL93-18 requires the applicant to demonstrate that each WVR beneficiary has been materially responsible for the growth of the business. It is therefore not sufficient for the applicant to simply state the identity of the proposed WVR beneficiary and that the WVR beneficiaries would be directors of the applicant. The applicant should clearly disclose the role of each proposed WVR beneficiary in the applicant and how the knowledge and skills of each proposed WVR beneficiary contributed to the business growth of the applicant.

FAQ Series N/A, FAQ No. 031-2018
LR reference: Main Board Rules 8A.11
Released on 24/8/2018

Question:

Whether the Exchange will accept a corporate WVR holder?

Answer:

Following a public consultation on Corporate WVR Beneficiaries, the Exchange concluded that it would treat Greater China Issuers that were (a) controlled by corporate WVR beneficiaries (as at 30 October 2020) and (b) primary listed on a Qualifying Exchange (on or before 30 October 2020) in the same manner as Grandfathered Greater China Issuers. Grandfathered Greater China Issuers applying for a dual primary listing under Chapter 19 or a secondary listing under Chapter 19C may retain their existing corporate WVR structure by virtue of the special concession. For details, please refer to HKEX-GL94-18.

Save for the above, the Exchange will not accept other applicants with a corporate WVR structure.

FAQ Series N/A, FAQ No. 032-2018
LR reference: Main Board Rules 8A.11, 8A.17, 8A.18, 8A.19
Released on 24/8/2018 (Updated on 01/01/2022)

Question:

The new requirement to establish a nomination committee chaired by the chairman of the board or an INED and comprising a majority of INEDs becomes effective from 1 January 2022. What happens if an issuer fails to meet any of the requirements set out in the Rule on 1 January 2022?

Answer:

If the issuer fails to set up a nomination committee or has failed to meet any of the other requirements in the Rule on 1 January 2022, it must set up a nomination committee and/or appoint appropriate members to the nomination committee to meet the requirement(s) within three months.

From 1 April 2022, if the issuer fails to set up a nomination committee or at any time has failed to meet any of the other requirements in the Rule, it must immediately publish an announcement containing the relevant details and reasons. The issuer must set up a nomination committee and/or appoint appropriate members to the nomination committee to meet the requirement(s) within three months after failing to meet such requirement(s) (“Arrangement”). This is in line with the practice regarding the audit committee and remuneration committee. The issuer may select the current headline category “Miscellaneous – Other – Corporate Governance Related Matter” when submitting the announcement for publication on the HKEXnews website.

The Arrangement would also apply to issuers with a WVR structure in respect of the requirements relating to the establishment and composition of the nomination committee under Rules 8A.27 and 8A.28.

FAQ Series 17, FAQ No. 12B
LR reference: Main Board Rules 3.27A, 8A.27 and 8A.28 / GEM Rules 5.36A
Released on 01/01/2022

Question:

Can an overseas issuer with a weighted voting rights structure seek a primary listing, a dual primary listing or a secondary listing on the Exchange?

Answer:

Yes. 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 with (and without) a weighted voting rights structure on the Exchange.

FAQ Series 25, FAQ No. 13
LR reference: Main Board Rule Chapter 8A
Released on 01/01/2022