Hong Kong Exchanges and Clearing Limited (HKEx) published a consultation paper today (Friday) on proposed changes to requirements for Qualified Property Acquisitions and formation of joint ventures.

The paper seeks the public’s views on proposals to relax the Listing Rules on notifiable and connected transactions in which property developers acquire government land through public auctions or tenders, on a sole or joint basis, in their ordinary and usual course of business.  

Presently, a listed property developer’s land acquisition for investment holding is defined as a transaction and will be classified based on the issuer’s total commitment.  A general waiver was introduced in 2006 to exempt issuers from obtaining prior shareholder approval in certain scenarios of acquisitions of government land through public auctions or tenders.  The conditional waiver was codified in January 2009 after a market consultation. 

"We conducted a review in response to market comments that the current Qualified Property Acquisition exemption is not practicable. For example, it excludes property developments in the Mainland through acquisitions of government land through public auctions or tenders,” said Mark Dickens, HKEx’s Head of Listing.  

The proposals include:

• Expanding the scope of the Qualified Property Acquisition exemption to cover government land acquisitions in the Mainland through auctions or tenders (the current exemption applies to land acquisitions in Hong Kong only);

• Removing the exemption conditions that restrict the joint venture’s financing and profit distribution arrangements when the Qualified Property Acquisition is undertaken on a joint basis.  Instead, the issuer’s directors would be required to confirm that the terms of the joint venture are fair and reasonable and in the interests of the shareholders as a whole;

• Removing the exemption condition that requires an issuer to obtain an annual general mandate from shareholders before it engages in any Qualified Property Acquisition(s) on a joint basis with a Qualified Connected Person (ie a person connected only because it is a joint venture partner with the issuer in one or more existing single-purpose joint property project) in the coming year;

• Requiring certain information relating to Qualified Property Acquisitions and joint ventures be disclosed in the issuer’s announcement and circular regarding the acquisition instead of the next annual report; and

• Introducing an exemption from the property valuation requirement for Qualified Property Acquisitions.

The paper also seek views on a proposal to exempt the formation of a joint venture from being treated as a transaction under the Rules on notifiable transactions if it is engaging in a single-purpose project of a revenue nature to the issuer.  This exemption would be available to all issuers which use joint ventures for revenue transactions in their ordinary course of business.

"We also reviewed some exemption conditions that are considered by the market to be impractical or burdensome.  These reviews help ensure our Rules meet their purposes as intended,” Mr Dickens added. 

The consultation paper can be downloaded from the HKEx website.  Interested parties are encouraged to respond to the consultation paper by completing and submitting the questionnaire.

The deadline for replies to the consultation paper is 12 November 2010.

Ends