Charltons responded on 11 January 2021 to the Hong Kong Stock Exchange’s Consultation Paper: The Main Board Profit Requirement (summarised here) on behalf of a group of 10 Hong Kong sponsor firms who are concerned that the proposals to raise the profit requirement for listing by either 150% or 200% will leave many Hong Kong and Chinese SMEs without access to a viable fund-raising platform in Hong Kong. By the HKEX’s own reckoning, the proposals would have prevented the listings of 59% or 65% of the companies which listed under the profit test between 2016 and 2019. This not only adversely affects these potential issuers, but also the local financial advisers, legal practices and accounting firms who act for them, as well as other businesses such as printers and translators. The HKEX Consultation Paper appears to suggest that the GEM market offers an alternative for SMEs. In practice this is not so. Listing on GEM is expensive and time-consuming. As a result, few companies list on GEM – just 8 companies listed on GEM in the 11 months to 30 November 2020. The consultation response thus advocates a holistic review of the HKEX’s markets and the consideration of proposals to create a diversified and inclusive market. These should, in particular, include an overhaul of GEM’s listing process and procedures to make it an attractive SME board. Further, given the ongoing impact of COVID-19, this is not the time to increase the financial requirements for listing. Any review of the HKEX listing requirements should be delayed until Hong Kong’s economy has recovered to pre-pandemic levels.
For a summary of the Consultation Paper’s proposals, please see Charltons’ November 2020 newsletter.
HKEX Publishes Conclusions on Paperless Listing & Subscription Regime
On 18 December 2020, the Stock Exchange of Hong Kong Limited (the HKEX) published its Consultation Conclusions on Proposals to Introduce a Paperless Listing & Subscription Regime, Online Display of Documents and Reduction of the Types of Documents on Display (the Consultation Conclusions). Having received a number of positive responses, the HKEX decided to adopt all the proposals outlined in the July 2020 Consultation Paper (the Consultation Paper) with minor modifications.
The original Consultation Paper was published on 24 July 2020 with the consultation period closing on 24 September 2020. For an overview of the Consultation Paper, please see Charltons’ August 2020 newsletter.
Key points to note:
- starting from 1 January 2021, listed issuers, listed debt issuers and market practitioners (including sponsors) are required to submit Listing e-Forms through HKEX’s E-Submission System (ESS) only. The list of Listing e-Forms and guidelines for their completion is available at: https://www.hkex.com.hk/Listing/Rules-and-Guidance/eForm-Corner?sc_lang=en;
- amended rules relating to the new headline categories for debt issuance programmes are effective from 1 March 2021;
- all new listing documents must be published solely in an electronic format and new listing subscriptions, where applicable, must be made through online electronic channels only (Paperless Listing and Subscription Regime) with effect from 5 July 2021;
- the requirement for certain documents to be put on physical display will be replaced with a requirement for those documents to be published online (Online Display of Documents) with effect from 4 October 2021; and
- the types of documents that it is mandatory for an issuer to put on display for notifiable transactions and connected transactions will be reduced (Reduction of Documents on Display).