Understanding the Requirements and Risks relating to Overseas Issuers

Introduction

The purpose of The Stock Exchange of Hong Kong Limited (“Exchange”) is to provide a fair, orderly and efficient market for trading of securities. We remain committed to ensuring that risks are managed prudently to maintain the balance between attracting new international listings and ensuring sufficient investor protection.

Our listing regime is open to overseas issuers, which are companies incorporated in jurisdictions other than Hong Kong and the People’s Republic of China. The Listing Rules administered by the Exchange apply as much to overseas issuers as they do to other issuers, subject to the additional or modified requirements in the Listing Rules¹.

We set out below relevant information to facilitate an understanding of (A) the requirements for overseas issuers seeking to list in Hong Kong; and (B) the risks relating to investing in overseas issuers.

A. Requirements for Overseas Issuers Seeking to List in Hong Kong

Core Shareholder Protection Standards

The Listing Rules² set out the core shareholder protection standards in respect of which all issuers must demonstrate how the domestic laws, rules and regulations to which they are subject and their constitutional documents, in combination, provide the shareholder protection standards set out therein.

We must be satisfied that a company’s home jurisdiction provides sufficient regulatory oversight, disclosure and transparency for the protection of investors before we approve its listing.

Primary and Secondary Listings

Overseas issuers may choose to apply for a primary listing or a dual-primary listing on the Main Board or GEM of the Exchange. Primary listed companies need to fully comply with the Listing Rules, while dual-primary listed companies are subject to both full requirements here and those of another market, unless specifically waived.

Overseas issuers may apply for a secondary listing on the Main Board of the Exchange. These overseas issuers must be primary listed on another stock exchange and the majority of trading in their equity securities must take place outside Hong Kong. As this is the case and they already comply with the rules of their primary exchange, we grant them extensive waivers from our Listing Rules. Also, to be eligible for these waivers, we require an overseas issuer seeking a secondary listing to normally have a large market capitalisation and a track record of regulatory compliance on its primary market. These overseas issuers must also be primary listed on a stock exchange recognised by us as having a strong reputation for requiring high shareholder protection and corporate governance standards. Click here for the list of these Recognised Stock Exchanges.

Waivers

The Listing Rules include guidance on the “common waivers” we are prepared to grant to an overseas issuer seeking a listing. We consider applications for each waiver on its own facts and circumstances and an overseas issuer seeking a waiver must demonstrate why the waiver is appropriate.

In addition, for secondary listed issuers, we automatically waive the compliance of many Listing Rules. These waivers have been codified³ for secondary listed issuers. No application to us is required for these “automatic waivers”. Secondary listed issuers must disclose the details of these waivers in their listing documents and Company Information Sheets. Click here for additional information on secondary listings in Hong Kong.

Please see the table below for a summary of the characteristics of primary, dual-primary and secondary listings. You may also refer to Appendix IV in the Frequently Asked Questions on Listing of Overseas Issuers for diagrams setting out the requirements applicable to overseas issuers seeking a primary, dual-primary or secondary listing with and without weighted voting rights structures.

	Primary Listing	Dual-Primary Listing	Secondary Listing
Principal Place of Trading	HKEX	HKEX Other primary listing market	Primary listing market
Regulatory Regime	HKEX Listing Rules	HKEX Listing Rules and rules of the other primary listing market apply	Reliance placed on the regulations and enforcement of the primary listing market
Automatic Waivers	No waivers will be granted automatically		Certain waivers will be granted automatically (see "Secondary Listings in Hong Kong - Automatic waivers")¹
Common Waivers	HKEX will consider granting common waivers on a case-by-case basis²		See "Secondary Listings in Hong Kong - Common waivers and specific waivers"³
Specific Waivers	HKEX will consider granting specific waivers on a case-by-case basis
Company Information Sheet	Required if certain criteria are met (see "Understanding the Requirements and Risks relating to Overseas Issuers - Company Information Sheets")⁴		Mandatory (see "Secondary Listings in Hong Kong - Company Information Sheets")⁵


Please refer to relevant HKEX Listing Rules for further information:
1.	MB Rule 19C.11.
2.	MB Rules 2.07C(4)(a), 4.03, 9.09, 11.06 and 19.10(6), and paragraph 15(2)(c) of MB Appendix D1A and paragraph 49(2)(c) of MB Appendix D1E (or GEM Rules 7.02, 12.11, 14.08, 16.18(3)(a), 24.09(6), paragraph 15(3)(c) of GEM Appendix D1A).
3.	MB Rule 19C.11B.
4.	MB Rule 19.60 (or GEM Rule 24.27).
5.	MB Rule 19C.24.


Enhanced Transparency/Disclosure on Overseas Issuers

We strive to enhance transparency to help investors appreciate the risks of investing in overseas issuers. To achieve this goal:

	We require overseas issuers to prominently disclose the risks associated with their jurisdictions of incorporation, operations located in foreign lands and other foreign affiliations, in their listing documents, corporate communications and Company Information Sheets.
	We have also given certain overseas issuers special stock short name indicators and stock code ranges.

Company Type	Stock Short Name	Stock Code Allocation Plan
Secondary listed companies	Add the letter “S” at the end of the stock short name	-
Secondary listed companies who voluntarily convert or de-list their shares or HDRs from the overseas exchange on which they are primary listed but such companies are under a grace period granted by the Exchange to make necessary arrangements to ensure compliance with applicable listing rules	Add the letter “TP” at the end of the stock short name	-
HDR issuers	Add the letters “DR” at the end of the stock short name	Range between 06200-06499
HDR issuers incorporated in the United States of America whose depositary receipts listed on the Exchange are restricted securities under the United States Securities Act of 1933 ("U.S. Securities Act").	Add the letters “RS” at the end of the stock short name	Range between 06300-06399

SSN_2023_e

Company Information Sheets

For investors to have better access to information on overseas issuers, the following overseas issuers are required to publish a Company Information Sheet:

(1)	All secondary listed issuers;

(2)	An overseas issuer with a primary listing or dual-primary listing that meets any of the following criteria⁴:

	(a)	has been granted novel waiver(s) (for example, where the overseas issuer is allowed to take alternative measures to meet a core shareholder protection standard² without providing such standard in its constitutional documents);

	(b)	the laws and regulations in its home jurisdiction and primary market are materially different from those required by Hong Kong laws regarding:

		(i)	the rights of holders of its securities and how they can exercise their rights;
		(ii)	directors’ powers and investor protection; and
		(iii)	the circumstances under which its minority shareholders may be bought out or may be required to be bought out after a successful takeover or share repurchase;

	(c)	it is subject to any withholding tax on distributable entitlements or any other tax that is payable by shareholders (e.g. capital gains tax, inheritance or gift taxes) whereby such details and whether Hong Kong investors have any tax reporting obligations are to be disclosed; or

	(d)	it is listing depositary receipts; and

(3)	The Exchange exercises its discretion to require an overseas issuer with a primary listing or dual-primary listing to publish a Company Information Sheet if the Exchange is of the view that such publication would be informative to investors (for example, to provide them with information on overseas laws and regulations to which the overseas issuer is subject and which may be unfamiliar to investors in Hong Kong).

Whenever there is any material change to the information disclosed in its Company Information Sheet, an overseas issuer must update its Company Information Sheet to reflect the changes. Materiality should be determined by the overseas issuer and its advisers. Click here for a list of published Company Information Sheets. The Company Information Sheets can also be viewed at the HKEXnews website (http://www.hkexnews.hk) and the overseas issuers’ websites.
B. Risks Relating to Investing in Overseas Issuers

The risks of investing in an overseas issuer include:

An overseas issuer is subject to a different set of corporate laws governing its affairs including duration, organisation structure, governing bodies and their powers, shares transfer, shareholders rights, shareholders’ dispute resolutions.
If an overseas issuer’s principal operations and assets are outside its place of incorporation or Hong Kong, they may be subject to other laws, standards, restrictions and risks that significantly differ from those in Hong Kong.
Hong Kong regulators may not have extra-territorial investigation and enforcement jurisdiction. Instead, reliance has to be placed on the overseas regulatory regimes to enforce against any corporate governance breaches committed by their subject.
It may be difficult for shareholders of an overseas issuer to enforce their shareholder rights against the company or its directors due to complications arising from cross-border access to evidence, legal services, court assistance or the incremental costs related to those services.
As overseas issuers seek to list in our market, we will see more that are structured and operated in a way that is not common to Hong Kong. Different securities regulators and stock exchanges adopt different regulatory mechanisms in their governance of public companies to achieve investor protection. There is no single correct regulatory approach to shareholder protection. Recognising this, we may grant or refuse waivers or impose waiver conditions to ensure satisfactory regulatory outcomes. Additional Risks Relating to Investing in Secondary Listed Issuers Secondary listed issuers are primarily regulated by another stock exchange and statutory securities regulator and are often granted extensive Listing Rule waivers. So, they do not conform to the Listing Rules in their entirety. Additional Risks Relating to Investing in HDR Issuers The Hong Kong depositary receipt (HDR) framework is an alternative facility for issuers to list on the Exchange that helps them overcome certain legal and practical problems that prevent them from issuing shares (see Chapter 5.1 “Hong Kong Depositary Receipts” of the Guide for New Listing Applicants). A company seeking to list in Hong Kong through HDRs will have to comply with generally the same requirements as an issuer of shares, except for the modifications in the Listing Rules⁵. However, HDRs are not shares and therefore do not attract the same legal consequences as those of shares. The HDR Depositary’s obligations are set out in a deposit agreement that is published in the issuer’s listing document and its Company Information Sheet. HDR holders do not have rights of shareholders and must rely on the HDR Depositary to exercise on their behalf the rights of a shareholder. For example, HDR holders may only vote by providing instructions to the HDR Depositary. HDR holders need to pay the fees and expenses charged by the HDR Depositary for services rendered.

Investors are advised to carefully study the HDR issuer’s listing document, deposit agreement and Company Information Sheet and to understand the rights and obligations of an HDR holder. Click here for further information on HDRs. Tax Risk A Hong Kong person may incur foreign tax reporting and payment obligations through holding the shares of an overseas issuers. If withholding tax on distributable entitlements or any other tax is payable (a financial transaction tax such as capital gains tax, inheritance or gift taxes), the overseas issuer must disclose in its listing document details of the tax payable and whether Hong Kong investors have any tax reporting obligations. It must also disclose this information in its Company Information Sheet. Bearer Share Risk Certain overseas issuers’ home jurisdictions may allow the issue of bearer share certificates. Under such regimes, ownership of shares in a company may be transferred by the physical transfer of share certificates without the transferor and transferee having signed any document evidencing such transfer. Shareholders holding bearer share certificates instead of holding shares through CCASS will be subject to the risks of losing the legal ownership of the shares in case of loss or destruction of the physical share certificates. Investors are advised to carefully study the relevant overseas issuers’ listing documents and to understand the risks of holding bearer share certificates and their rights under the relevant law of such overseas issuer’s home jurisdictions.

Warning to Investors An overseas issuer’s listing document and Company Information Sheet (if published) contain salient information on its place of incorporation, place of operation and its business, among other things, which will enable investors to understand the risks associated with investing in it. Investors should read these documents carefully before they make investment decisions. Where in doubt, investors should consult their professional advisers.
Notes:
1.		See Chapters 19 and 19C of the MB Rules or Chapter 24 of the GEM Rules, where applicable.
2.		See MB Appendix A1/ GEM Appendix A1.
3.		See MB Rule 19C.11.
4		See MB Rule 19.60 or GEM Rule 24.27, where applicable.
5.		See Chapter 19B of the MB Rules.

This is a general guide to highlight some basic facts and characteristics of investing in securities of overseas issuers. HKEX and/or its subsidiaries endeavor to ensure the accuracy and reliability of the information provided, but do not guarantee its accuracy and accept no liability (whether in tort or contract or otherwise) for any loss or damage arising from any inaccuracies or omissions.

If investors require further information for investing in overseas issuers, they should refer to the overseas issuer's listing documents, corporate communications and the Company Information Sheet (if published) on the HKEXnews website (http://www.hkexnews.hk) and the overseas issuer’s website and consult their professional advisors prior to making any decision.