Amendments to the Exchange Listing Rules
Practice Note 15
The Exchange has amended the requirements of Practice Note 15 to the Exchange Listing Rules with regard to the remaining business of listed issuers after spin-off of assets or businesses. A new provision has been introduced in Practice Note 15 so that the Exchange may grant a waiver to a listed issuer from strict compliance with the minimum profit requirement of Rule 8.05 of the Exchange Listing Rules in respect of its remaining business after the spin-off, provided certain criteria can be satisfied.
The Exchange has also made minor changes to Practice Note 15 to clarify the circumstances in which a listed issuer is required to seek shareholders' approval for its spin-off proposal and issue a circular to its shareholders.
The rule changes will come into effect on 6 September 2000.
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Practice Note 15 to the Exchange Listing Rules sets out the Exchange's requirements on proposals submitted by listed issuers to effect a separate listing of assets or businesses wholly or partly within their existing group ("spin-offs"). The requirements apply irrespective of whether the entity ("Newco") to be spun off by the existing listed issuer (the "Parent") is to be listed on the Exchange or elsewhere.
Following a recent market consultation, the Exchange has amended the requirements relating to the remaining business of the Parent after spin-off of assets or businesses. Practice Note 15, as amended, expressly provides that the Exchange may grant a waiver to the Parent if the Parent is able to demonstrate that it, excluding its interest in Newco, fails to meet the minimum profit requirement of Rule 8.05 due solely to an exceptional factor or a significant market downturn. The Parent must also demonstrate to the satisfaction of the Exchange that such factor was temporary in nature and is not likely to continue or recur in the future or that appropriate measures have been taken by the Parent to negate the impact on its profit of the market downturn (as the case may be). In addition, the Parent, excluding its interest in Newco, must have an aggregate profit attributable to shareholders of not less than HK$50 million in respect of any three out of the five financial years immediately preceding the spin-off application. Practice Note 15, as amended, also sets out the criteria for meeting the minimum aggregate profit requirement and requires the Parent to demonstrate that the profit/loss of any financial year whose profit/loss is not taken into account in the calculation of the minimum net profit of HK$50 million was affected by the exceptional factor and/or significant market downturn.
The Exchange has also made minor changes to Practice Note 15 to clarify the circumstances in which a listed issuer is required to seek shareholders' approval for its spin-off proposal and issue a circular to its shareholders.
The rule changes will come into effect on 6 September, 2000. Reprinted pages of the Exchange Listing Rules will be distributed in due course. The revised rules will also be available for viewing on the Exchange's website at http://www.sehk.com.hk from 6 September 2000.
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