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Highlights:
• Exchange announces way forward on Corporate Weighted Voting Rights (Corporate WVR)
• New grandfathering arrangements introduced to enable qualifying issuers with Corporate WVR to seek secondary listings in Hong Kong
• Strong investor protection safeguards to remain in place
The Stock Exchange of Hong Kong Limited, a wholly-owned subsidiary of HKEX, today published conclusions to its consultation on the Corporate WVR beneficiaries.
Consultation Conclusions
The Exchange received 65 responses to its Consultation Paper on Corporate WVR Beneficiaries from a broad range of respondents that were representatives of all stakeholders in the Hong Kong market. While a majority of respondents agreed, in principle, that corporate WVR beneficiaries should be permitted, there were very diverse views and expectations as to how the proposed regime would operate in practice and whether (and if so what) modifications were required for it to operate as intended.
Bonnie Chan
Head of Listing, HKEX
After carefully considering the feedback from respondents, we have decided to give more time for the market to develop a better understanding of Hong Kong’s regulatory approach towards regulating listed companies with WVR structures and their controllers, and for regulators to monitor that the existing Listing Rule Chapter 8A regime operates as intended.
Way Forward
As a way forward, the Exchange will treat Greater China Issuers that are (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) (Qualifying Corporate WVR Issuers) in the same manner as current Grandfathered Greater China Issuers for the purposes of Chapter 19C of the Main Board Listing Rules.
Bonnie Chan
Head of Listing, HKEX
To secondary list here in Hong Kong, these Greater China issuers must demonstrate that they have been able to safeguard the interests of public investors through good regulatory compliance with their existing regulatory regimes. The insight and understanding that we, and the market gain from this approach, will help inform any future amendments that we make to our WVR regime.
Strong existing investor protection safeguards will apply to Qualifying Corporate WVR Issuers seeking to secondary list in Hong Kong. These issuers must:
(a) meet a very high minimum market capitalisation threshold of at least $40 billion, or at least $10 billion with at least $1 billion of revenue for its most recent audited financial year;
(b) be an “innovative company” as part of the demonstration of their suitability for listing; and
(c) demonstrate that the domestic laws, rules and regulations to which they are subject and their constitutional documents, in combination, provide certain shareholder protection standards (including that it will hold an annual general meeting each year and provide members holding 10% of the voting rights or more, on a one vote per share basis, with the right to convene an extraordinary general meeting).
Like other secondary issuers listed under Chapter 19C of the Main Board Listing Rules, Qualifying Corporate WVR Issuers would be exempt from certain Listing Rules (eg notifiable transaction and connected transaction Listing Rules). However, if trading in their shares migrates to the Exchange’s markets on a permanent basis, these exemptions would fall away. The Exchange would then treat the issuer as having a dual-primary listing and it would be required to comply with the Listing Rules that apply to such issuers after a grace period of one year. The Exchange would allow these issuers to retain their existing Corporate WVR structures at that time, as already permitted for all Grandfathered Greater China Issuers.
Tap Read More to learn more for the Consultation Conclusions and respondents’ submissions.
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