Charles Li Direct 

Charles Li Direct

At last! Kicking off a pre-qualifier on weighted voting rights


Last year I launched a discussion in this blog about weighted voting rights shares in Hong Kong.  I tried to present a number of different positions and possibilities on these pages, and said that whether we decide to make changes to Hong Kong's listing regime or maintain the status quo, it should be done proactively after a thorough and comprehensive debate in the market.
Well, the day for that debate has finally come!  On Friday, HKEx announced a Concept Paper on weighted voting rights and is seeking market opinions.

It has sure taken a long time for this Concept Paper to be released!  Almost 15 months since we first began to consider these issues!

Let's all be frank, it would have been nice if this could have been released earlier.  But the time it has taken also means that the final paper fully reflected the broad spectrum of views held by the key stakeholders after months of debates behind closed doors.  The deliberateness speaks to the soundness of Hong Kong's system and our steadfast belief in the merits of due process.  This is something we should be proud of, even though we might sometimes wish things moved along faster.  In the end, it’s always better late than never.

I am not speaking here on behalf of the Listing Committee which oversees this consultation process, but I do want to offer a few personal observations.
The Concept Paper has two main questions: first, whether weighted voting right structures should be permissible for companies listed or seeking to list on the Exchange; if the answer is yes, then the second part digs a bit deeper into under which circumstances they might be allowed.
It's important to be clear about what the Concept Paper is, and what it is not.  It is not a traditional consultation that seeks feedback on specific proposals for market reforms.  It does not contain or advance any specific rule amendment proposal.  It is also not an initiative to attract a particular issuer or group of issuers.  Rather, the paper is designed to promote a focused and coherent discussion on the concept of a weighted voting rights structure in Hong Kong and determine whether our adherence to "one share, one vote" should be universally required or whether we could accommodate more flexibility under appropriate circumstances.
I am a soccer fan and sometimes like to speak in soccer terms.  Thirty-two teams went to Brazil for the World Cup last month and they first played in the qualifying round, where the wins and scores did not count toward the final result.  The qualifying round did help group and rank the winning teams so the best teams may meet in the final.  This Concept Paper will do the same thing for the contest of views on weighted voting rights – it will help the regulators "rank" the ideas and the sentiment on the issue according to their importance to the community.  Then, if there is a community will to proceed further, a meaningful proposal can be put forward as a next step.   But we need that qualifying round to decide whether to proceed at all.

Now that we have a structured forum for debate, I consider my part completed.  The stage is now yours, be you a broker, a lawyer, an accountant, a listed company, an investor, or a common citizen.   I encourage everyone to share his or her views with us.  Hong Kong is a big and diverse international market, and along with that comes a multitude of opinions.  Our Listing Rules should "reflect currently acceptable standards in the market place."  The market needs to be regulated, but it also needs to be developed.  That means all of us have a responsibility to take a closer look at how our market is evolving, assess our competitiveness, and consider the uniqueness of our market in terms of opportunities and risks to determine if any changes or flexibility are required.  By doing so, we can work together to ensure Hong Kong remains a leading and competitive financial centre in the world.
It is now time for you to speak up on a critical issue in Hong Kong and contribute to a discussion that will shape our market for years to come.  I look forward to an open and constructive debate.



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