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Secondary Listings in Hong Kong

This is a general guide to highlight some basic facts and characteristics of investing in securities of secondary listed 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 secondary listed issuers, they should refer to the company’s listing documents and corporate communications on the HKEXnews website (http://www.hkexnews.hk), the company’s Company Information Sheet (if published) and consult their professional advisors prior to making any decision.

Secondary listings in Hong Kong           
 

Overseas companies which have (i) a primary listing on the Recognised Stock Exchange; and (ii) the majority of their equity securities traded outside Hong Kong may apply for a “secondary” listing on the Main Board of the Exchange. Secondary listings, which are usually subject to less stringent regulation by the Exchange than primary listings, are principally regulated by the rules and authorities of the jurisdiction where they are primary listed, such as Australian Securities Exchange and Singapore Exchange Limited.

 
The key requirements to a secondary listing are summarised below:
 
  Without weighted voting rights (“WVR”) With WVR
Stock Exchange of Primary Listing Recognised Stock Exchanges Note 3 Qualifying Exchanges Note 2  Qualifying Exchanges(*)  Note 2 
Centre of Gravity in Greater China Note 1 Generally Prohibited(**)  Permitted Permitted
"Innovative Company" Requirement Note 4  Not Required Required
Minimum Market Capitalisation at Listing HK$ 3 billion  HK$ 3 billion HK$40 billion or HK$10 billion and revenue of at least HK$1 billion for the most recent audited financial year
Minimum Track Record on Primary Exchange 5 years of listing with good compliance record (***) 5 years of listing with good compliance record (***)

(or 2 years of listing with good compliance record if its market capitalisation has at least HK$ 10 billion at the time of Listing)
2 years of listing with good compliance record

Remarks:
* To secondary list on the Exchange with WVR structure, it must be an issuer with a primary listing on the Qualifying Exchanges Note 2.

**Applications for secondary listing from issuers with a centre of gravity in Greater China Note 1 and without a WVR structure that are primary listed on a Recognised Stock Exchange Note 3 other than a Qualifying Exchange Note 2 may be considered in exceptional circumstances on the basis of the issuer’s individual circumstances and the merits of the case.

***A waiver of such listing track record criteria may be granted if the applicant seeking a secondary listing is well-established and has a market capitalisation at listing that is significantly larger than HK$10 billion.

 

Overseas companies must also demonstrate how the domestic laws, rules and regulations to which they are subject, and their constitutional documents, in combination, provide the core shareholder protection standards as set out in Appendix 3 of the Main Board Rules, or the GEM Rules (where applicable). For this purpose, the Exchange may require an issuer seeking a secondary listing to amend its constitutional documents to provide for the core shareholder protection standards.

Waivers and exemptions for secondary listings

Unlike issuers primary listed on the Exchange, secondary listings are principally regulated by the rules and authorities of the jurisdiction where they are primary listed and the dominant market of their securities are also on that overseas primary exchange. On this basis, the Exchange exempts or waives certain requirements of the Listing Rules for issuers with, or seeking, a secondary listing.

Automatic waivers

Automatic waivers from full compliance with certain Listing Rules are available to secondary listing issuers. Such secondary listing issuers are not required to apply to the Exchange for these waivers which are granted automatically.

For certain Listing Rules, the effect of the automatic waiver is limited to the particular circumstances described (e.g. issues of securities outside the Exchange’s markets). Nonetheless, a number of Listing Rules which the investing public in Hong Kong may be familiarised with and would otherwise apply in case of a primary or dual primary listing on the Exchange are waived in their entirety primarily on the basis that reliance can be placed on the regulations of the exchanges where these secondary listing issuers are primary listed. The Listing Rules automatically waived include but not limited to:  

compliance with the Model Code for Securities Transactions by Directors of Listed Issuers;
establishment of audit committee and remuneration committee;
appointment of company secretary with the requisite qualifications or experience;
compliance with the reporting, announcement, circular, shareholders’ approval, annual report (where applicable) with respect to notifiable transactions and connected transactions;
compliance with the Corporate Governance Code;
content requirements for annual and interim reports;
publication of environmental, social and governance report; and
certain continuing disclosure requirements (such as next day return, advance to an entity, financial assistance and guarantees to affiliated companies, pledging of shares by controlling shareholder, loan agreements with covenants relating to specific performance of controlling shareholder and breach of loan agreement).
   
A list of the automatic waivers is set out under Rule 19C.11of the Listing Rules .
 
Common waivers and specific waivers

Secondary listing issuers may also apply to the Exchange for the common waivers for compliance of certain Listing Rules (see Main Board Rule 19C.11B for the list of common waivers) as well as waivers from compliance of other Listing Rules based on their specific circumstances. These waivers are not automatically granted and the Exchange will consider such applications on a case by case basis with reference to the individual merit and in light of all relevant facts and circumstances.

 

Non-compliant WVR and/ or VIE structures Notes 7 and 8

Subject to the satisfaction of the “Innovative Company” Requirement Note 4, Grandfathered Greater China Issuers Note 6 and Non-Greater China Issuers Note 5 are allowed to secondary list with their existing WVR structures without full compliance with the safeguards in respect of WVR under Chapter 8A of the Listing Rules. Note 11 This would mean that a Grandfathered Greater China Issuer Note 6 or a Non-Greater China Issuer Note 5 with a WVR structure may not be subject to Hong Kong WVR safeguards, such as the restriction not to increase the number or proportion of WVR shares after the date of listing; nor will it be required to comply with the requirement for certain resolutions to be subject to voting on a one vote per share basis. However, those allowed to adopt non-compliant WVR Structures are still required to comply with the disclosure requirements in Main Board Rules 8A.37 to 8A.42.

The Exchange would like to emphasise that it reserves the right, in its absolute discretion, to refuse a listing of securities of an overseas company, for example, if its WVR structure represents an extreme case of non-conformance with corporate governance norms.

Further, certain overseas companies adopt a VIE structure whereby such issuers and their subsidiaries do not have direct ownership of the operating companies or the operating licenses and rely on contractual arrangements to control them. Grandfathered Greater China Issuers Note 6 and Non-Greater China Issuers Note 5 are allowed to secondary list with their existing VIE structures in place without full compliance Note 9 with the VIE guidance Note 10 issued by the Exchange. This would mean that a Grandfathered Greater China Issuer Note 6 or a Non-Greater China Issuer Note 5 with a VIE structure may not be subject to the Exchange’s requirements with respect to VIE structures, such as any VIE structure adopted must be “narrowly tailored” to achieve its business purpose and minimise potential for conflict with the relevant PRC laws and regulations. However, those allowed to adopt non-compliant VIE Structures are still required to comply with the disclosure requirements set out in the VIE guidance Note 10.

All issuers with VIE structures must monitor any changes in the relevant PRC laws and regulations and ensure compliance.

Non-Grandfathered Greater China Issuers which have secondary listing on the Exchange must, unless otherwise waived, comply with the Exchange’s requirements set out in the VIE guidance and WVR safeguards under Chapter 8A of the Listing Rules (where applicable).
 
Company Information Sheet
 
All secondary listed issuers must disclose the following information in a Company Information Sheet for publication on the designated page of the HKEX website and the overseas company’s website.
     
  (a) a summary of the waivers and exemptions that have been granted to the issuer;
  (b) a summary of the provisions in the laws and regulations in its home jurisdiction and primary market that are 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) details of withholding tax on distributable entitlements or any other tax that is payable by shareholders (e.g. capital gains tax, inheritance or gift taxes) and whether Hong Kong investors have any tax reporting obligations; and
  (d) where an overseas company is listing depositary receipts, a summary of the terms and conditions in the depositary agreement and deed poll.


Stock marker “S”

With the exemptions pursuant to the automatic waivers and other concessions available to secondary listings, secondary listing issuers will not be subject to certain provisions of the Listing Rules, including, among others, rules on notifiable transactions, connected transactions, share option schemes and content of financial statements as well as certain other continuing obligations. As a result, they adopt different practices as to those matters as compared with other issuers primary or dual primary listed on the Exchange.

Secondary listings may also be subject to other risks such as significantly fluctuating trading prices as a result of the failure to develop or sustain an active trading market for the securities on the Exchange and/or ineffective liquidity arrangements.

Accordingly, the Exchange requires all secondary listing issuers to be prominently identified through a unique stock marker “S” at the end of their stock name to help Hong Kong investors to differentiate them from other listed issuers.

 
Notes____________________________________________________________________________________________________
1 Rule 1.01 of the Listing Rules sets out the factors to determine whether an issuer has a “centre of gravity in Greater China”.
“Qualifying Issuers” refer to issuers primary listed on a “Qualifying Exchange”, namely, The New York Stock Exchange LLC, Nasdaq Stock Market and the Main Market of the London Stock Exchange plc (and belonging to the UK Financial Conduct Authority’s “Premium Listing” segment)
Please click here for the list of “Recognised Stock Exchange”
See paragraphs 3.1 to 3.4 of Guidance Letter HKEX-GL94-18.
5 “Non-Greater China Issuer” refers a Qualifying Issuer that is not a Greater China Issuer and “Greater China Issuer” refers to a Qualifying Issuer with its centre of gravity in Greater China. Also see Notes 1 and 2 above.
“Grandfathered Greater China Issuer” refers to a Greater China Issuer that was: (a) primary listed on a Qualifying Exchange on or before 15 December 2017; or (b) primary listed on a Qualifying Exchange after 15 December 2017, but on or before 30 October 2020 and controlled by corporate WVR beneficiaries as at 30 October 2020.
7 “VIE structure” refers to a variable interest entity structure that allows a person or entity to control and receive the economic benefits of a variable interest entity through contractual arrangements despite not having a majority of, or at all any, voting rights or legal ownership.
“WVR structure” refers to a structure of an issuer that results in any shareholder having “weighted voting rights” where the voting power attached to a share of a particular class that is greater or superior to the voting power attached to an ordinary share, or other governance right or arrangement disproportionate to the beneficiary’s economic interest in the equity securities of the issuer.
9 See paragraph 4.4 of Guidance Letter HKEX-GL94-18.
10 Listing Decision HKEX-LD43-3.
11  See Rule 8A.46(b) of the Listing Rule.
12 “Non-Grandfathered Greater China Issuer” refers to a Greater China Issuer that is not a Grandfathered Greater China Issuer.