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Depositary Receipt Framework to be Introduced in Hong Kong 1 July 2008

Market Operations
Products
09 May 2008

The Stock Exchange of Hong Kong, a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx) announces today (Friday) that the framework for issuers to list in Hong Kong through Hong Kong depositary receipts (HDRs) will be effective from Tuesday, 1 July 2008. 

The HDR framework is an alternative facility for issuers to list on the Stock Exchange.  There are no changes to the listing regime.  An issuer seeking to list in Hong Kong through HDRs will have to comply with generally the same requirements as an issuer of shares.  The requirements of the Listing Rules for admission to listing and the continuing obligations; relevant guidance material such as the Joint Policy Statement Regarding the Listing of Overseas Companies; and relevant statutes will apply to a HDR issuer in the same manner as to an issuer of shares.

The HDR initiative flows from the HKEx Strategic Plan 2007-09.  HKEx’s strategic plan sets a goal of listing more overseas companies in Hong Kong.  At present, issuers listing equity securities in Hong Kong have to do so in the form of shares, and have to maintain their share register or a branch of their share register in Hong Kong.  This listing route may not be convenient for issuers from jurisdictions that prohibit the issuance of shares or the maintenance of a share register overseas.  HDRs will provide an alternative listing route for these issuers.

HDRs will also be convenient for the Hong Kong investor.  If the issuer lists HDRs, the depositary (the financial institution, deemed acceptable by the Stock Exchange, which creates the HDRs and acts as agent of the issuer), will help take care of compliance with investment regulations in the issuer’s home jurisdiction on behalf of the HDR holder (the investor).  HDRs will be traded and settled and pay dividends in Hong Kong dollars (or US dollars if the issuer so chooses).  On behalf of the issuer, the depositary will take care of currency conversion and the transmission of corporate information and details of corporate actions to the investor. 

The trading, clearing and settlement arrangements for HDRs will be the same as the present arrangements for shares.

“The launch of the HDR framework is a milestone in the implementation of our strategic plan,” said HKEx Chief Executive Paul Chow.  “We are very pleased to have the ability to accommodate issuers who prefer to list in the form of depositary receipts.  We appreciate the support and guidance of the Listing Committee and the Securities and Futures Commission in developing the HDR framework.”

The HDR framework comprises the following amendments to the Listing Rules of the Stock Exchange’s Main Board.  

A new Chapter 19B has been added. Its main functions include:
- Describing the applicable rules for the HDR issuer.
- Setting out the requirements for the depositary and the obligations of the HDR issuer on any change of depositary.
- Setting out the required contents of the deposit agreement, which defines the rights of the HDR holder.
Two new parts have been added to Appendix 1 of the Listing Rules setting out the requirements for listing documents in respect of HDRs. These are closely modelled on certain existing parts of Appendix 1.
There are minor modifications to certain other chapters, for example a definition of ‘depositary receipts’ has been added to Chapter 1.

The Listing Rule amendments can be viewed at the HKEx website.  Minor amendments have also been made to the rules and procedures of the Central Clearing and Settlement System (CCASS) for securities.

For further information on the HDR framework, see Frequently Asked Questions.

Updated 09 May 2008

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