The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx), today published a concept paper on weighted voting rights (Concept Paper).
The Concept Paper seeks views on whether governance structures that give certain persons voting power or other related rights disproportionate to their shareholding (weighted voting right structures) should be permissible for companies listed or seeking to list on the Exchange’s markets.
Currently, both applicants and listed companies must ensure that the voting power of their shares bears a “reasonable relationship” to the equity interest those shares represent (Note 1). This means a shareholder cannot have greater voting power than another if both have the same amount of equity in a company. This is commonly known as the “one-share, one-vote” concept.
Subject to comments and views elicited by the Concept Paper, the Exchange anticipates the paper may lead to one of the following outcomes:
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A conclusion that no amendment to the Listing Rules to allow companies to use weighted voting right structures is appropriate at this time and that current practice is supported. In this case, the Exchange would publish conclusions explaining the reasons for any such outcome.
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Support for a material change to the Listing Rules on the acceptability of weighted voting right structures. In these circumstances, the Exchange would again publish conclusions. Any change to the Listing Rules would require a second stage formal consultation process including consultation on the details of the scope and language of any proposed Listing Rule changes.
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“The Listing Rules say they should reflect currently acceptable standards in the market place so the Exchange has a responsibility to review the Rules periodically and consult the market when appropriate. Almost 25 years have passed since the restriction on weighted voting right structures was implemented in the Listing Rules. Our aim in publishing the Concept Paper is to provide a formal opportunity for an informed debate on a topic that is of great market interest and potential significance to Hong Kong, and which has been the subject of much discussion and commentary,” said David Graham, HKEx’s Chief Regulatory Officer and Head of Listing.
“The Concept Paper is intended to be a neutral, factual and analytical presentation of the relevant issues and considerations. The Exchange has formed no view and looks forward to receiving the views of respondents,” Mr Graham added.
The Concept Paper can be downloaded from the HKEx website. Interested parties are encouraged to respond to the Concept Paper by submitting the questionnaire.
Responses to the Concept Paper should be submitted by 30 November 2014.
Notes:
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1.
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Main Board Listing Rule 8.11 (GEM Listing Rule 11.25) states:
“The share capital of a new applicant must not include shares of which the proposed voting power does not bear a reasonable relationship to the equity interest of such shares when fully paid (“B Shares”).The Exchange will not be prepared to list any new B Shares issued by a listed issuer nor to allow any new B Shares to be issued by a listed issuer (whether or not listing for such shares is to be sought on the Exchange or any other stock exchange) except:-
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(1)
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in exceptional circumstances agreed with the Exchange; or
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(2)
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in the case of those listed companies which already have B shares in issue, in respect of further issues of B Shares identical in all respects with those B Shares by way of scrip dividend or capitalisation issue, provided that the total number of B Shares in issue remains substantially in the same proportion to the total number of other voting shares in issue as before such further issue.”
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Ends