Note to subscribers for the amendments to the rules governing the listing of securities on the Growth Enterprise Market (the "GEM Listing Rules")
Update No. 28
2008 Combined Consultation – Various amendments to the GEM Listing Rules
Following the publication of the Consultation Conclusions on Proposals in the 2008 Combined Consultation Paper on 28 November 2008, we enclose reprinted pages of the GEM Listing Rules incorporating amendments to the GEM Listing Rules in relation to corporate governance issues, continuing listing obligations and amendments aimed at improving the clarity of the GEM Listing Rules.
The GEM Listing Rule amendments cover the following 15 areas:
||Information gathering powers |
||Qualified accountants |
||Review of sponsor’s independence |
||Bonus issues of a class of securities new to listing |
||Review of the Exchange’s approach to pre-vetting public documents of listed issuers |
||Disclosure of changes in issued share capital |
||Disclosure requirements for announcements regarding issues of securities for cash and allocation basis for excess shares in rights issue |
||Alignment of requirements for material dilution in major subsidiary and deemed disposal |
||Voting at general meetings |
||Disclosure of information about and by directors |
||Codification of waiver to property companies |
||Disclosure of information in takeovers |
||Review of director’s and supervisor’s declaration and undertaking |
||Review of Model Code for Securities Transactions by Directors of Listed Issuers |
The principal amendments are as follows:
Use of websites for communication with shareholders
Amendments have been made to the GEM Listing Rules to:
|introduce a procedure which, if complied with, will permit a listed issuer to deem consent on the part of a shareholder to a corporate communication being made available to him solely on the listed issuer’s website; and |
|make clear that express, positive confirmation is required not only for the use of electronic means (e.g. emailing a corporate communication or its hyperlink to a shareholder), but also for making available a corporate communication to a shareholder in electronic format (e.g. on a CD). |
Information gathering powers
A new Rule has been introduced to codify the powers of the Exchange to gather information from issuers.
The GEM Listing Rules have been amended to remove the requirement for a qualified accountant. The code provisions of Appendix 15 – Code on Corporate Governance Practices regarding internal controls have been amended to make specific references to the responsibility of the directors to conduct an annual review of the adequacy of staffing of the financial reporting functions and the oversight role of the audit committee.
Amendments have been made to the GEM Listing Rules so that a sponsor is required to be independent from the date of submission of an application for listing on Form 5A to the date of listing.
Bonus issues of a class of securities new to listing
The GEM Listing Rules have been amended to disapply the requirement for a minimum spread of securities holders at the time of listing in the event of a bonus issue of a new class of securities involving options, warrants or similar rights to subscribe or purchase shares, provided that the existing listed shares of the issuer are not concentrated in the hands of a few shareholders.
Review of the Exchange’s approach to pre-vetting public documents of listed issuers
The GEM Listing Rules have been amended to:
|remove the circular requirement for discloseable transactions; |
|implement a progressive phased approach to reduction in pre-vetting activities for different types of listed issuers’ announcements and to remove from the GEM Listing Rules pre-vetting requirements in respect of circulars for matters of a routine nature that normally do not raise material regulatory concerns, including: circulars for proposed amendments to a listed issuer’s Memorandum and/or Articles of Association and explanatory statements relating to a listed issuer purchasing its own shares on a stock exchange; and |
|codify the Exchange’s existing practice in relation to pre-vetting circulars for significant transactions or arrangements. |
Disclosure of changes in issued share capital
The GEM Listing Rules have been amended to require listed issuers:
|to submit a Next Day Disclosure Return to the Exchange in respect of changes in issued share capital, in some cases by 9:00 a.m. the next business day and in other cases subject to a 5% de minimis threshold and certain other relevant factors (e.g. aggregation); |
the Next Day Disclosure Return will be merged with the current Share Buyback Report; |
|to submit a Monthly Return to provide a regular update on information relating to a listed issuer’s share capital and other movements in its securities, including future obligations and commitments to issue shares; and |
|to make an announcement as soon as possible upon the grant of any share options pursuant to a share option scheme. |
Disclosure requirements for announcements regarding issues of securities for cash and allocation basis for excess shares in rights issue
The GEM Listing Rules have been amended to require disclosure of:
|additional items of information codifying the disclosure practices in respect of announcements for issues of securities for cash; and |
|the basis of allocation of excess shares in the announcement, circular and listing document for a rights issue or an open offer. |
These amendments codify the former disclosure practices in respect of announcements for issues of securities for cash (irrespective of whether general mandates are involved) and require disclosure of the basis of allocation of the excess securities in the announcement, circular and listing document for a rights issue or open offer.
Alignment of requirements for material dilution in major subsidiary and deemed disposal
The Exchange has amended the Rules to align the requirements for material dilution in a major subsidiary and deemed disposal such that the requirement for shareholders’ consent will be based on a size test threshold of 25% (i.e. the threshold for a major transaction) and that a written certificate may be accepted in lieu of a physical shareholders’ meeting.
Voting at general meetings
The GEM Listing Rules have been amended to make voting by poll mandatory on all resolutions at general meetings of listed issuers. In addition, a new code provision has been introduced in the Code on Corporate Governance Practices so that notice to shareholders should be sent in the case of annual general meetings at least 20 clear business days before the meeting and at least 10 clear business days in the case of all other general meetings.
Disclosure of information about and by directors
The GEM Listing Rules have been amended to:
|introduce a new Rule whereby information disclosure previously required only at the time of appointment or re-designation will need to be made either periodically or continuously during the term of a director or supervisor’s office; |
|clarify that the disclosure of information concerning directors and supervisors required under the relevant Rules need not be made if prohibited by law; |
|require disclosure of directors’ and supervisors’ current and past directorships (for the past three years) in all public companies with securities listed in Hong Kong and/or overseas; |
|require disclosure of directors’ professional qualifications; |
|include an additional reference to statutory provisions; and |
|clarify that the disclosure obligation arises where a conviction falls under any one (rather than all) of the three limbs in paragraph (m) of Rule 17.50(2). |
Codification of waiver to property companies
The GEM Listing Rules have been amended to codify the conditional waiver to exempt listed issuers actively engaged in property development as a principal business activity from the shareholders’ approval requirement in certain scenarios of acquisitions of land or property development projects in Hong Kong from Government or Government-controlled entities through public auctions or tenders.
Disclosure of information in takeovers
A new Rule has been introduced to codify the Exchange’s practice of granting waivers to allow a listed issuer to publish certain prescribed information on target companies being acquired by the listed issuer in a supplemental circular at a later time when the listed issuer has access to the necessary underlying information.
Review of director’s and supervisor’s declaration and undertaking
The following changes have been made to a director’s and supervisor’s declaration and undertaking:
|the questions relating to the director’s or supervisor’s biographical information in the various prescribed forms of declaration and undertaking have been removed; |
|the requirement for a statutory declaration has been removed; |
|the listing documents relating to new listing applicants for the listing of equity and debt securities must contain no less information about directors and supervisors than that required under Rule 17.50(2); and |
|the director’s undertaking has been amended to include a provision that codifies the Exchange’s powers to gather information from directors and to include detailed provisions for service of disciplinary proceedings. |
Review of Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”)
The following changes have been made to the GEM Listing Rules:
|3 new exceptions have been introduced to the definition of “dealing” in Rule 5.52(4); |
|the “black out” period in respect of a director’s dealing in the listed issuer’s securities has been extended to start from the listed issuer’s financial period end to the date on which the listed issuer publishes the relevant results announcement; |
|a note has been introduced to clarify the meaning of the term “price sensitive information” in the context of the Model Code; and |
|a time limit has been imposed on an issuer to respond to a director’s request to deal and on the director to deal (if he so chooses) once clearance is given. |
We also enclose the filing instructions.
Coming into effect
The amendments will become effective on 1 January 2009.
Please click HERE to see the amendments to the GEM Listing Rules.
For and on behalf of
The Stock Exchange of Hong Kong Limited
Head of Listing