• Exchange publishes Guidance Letter to further facilitate listings of companies from emerging and innovative sectors
• Guidance addresses characteristics of internet-related companies

 

The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), published today (Friday) a Guidance Letter for applicants in the internet technology sector or that have internet-based business models (collectively, Relevant Sectors).

On 24 April 2018, following an extensive consultation on facilitating the listing of companies from emerging and innovative sectors, the Exchange announced the addition of three new chapters to the Main Board Listing Rules to allow the listings of such companies.

In addition to the new chapters, respondents to the consultation urged the Exchange to make the Listing Rules more appropriate to the characteristics of companies in emerging and innovative sectors.  In particular, they asked the Exchange to accommodate:

• The high degree of reliance that internet technology companies often have on the internet platforms operated by their parent companies (or other “connected persons¹”) or major suppliers;

• The heightened need of internet technology companies to attract and retain staff through share option schemes; and

• The difficulties internet technology companies have in demonstrating that they are compliant with relevant laws and regulations when they may yet to be fully established in their industry.

The guidance the Exchange is publishing today reflects the results of a review it conducted of its rules and guidance on these areas of concern.  The Exchange’s guidance states the following:

• An applicant may be able to list with a high degree of reliance on a parent company/ connected person/ major suppliers/ major customers if it demonstrates that it meets certain conditions (eg that it is an industry norm for businesses like its business to rely on the dominant internet based platform operated by its parent).

• Waivers may be granted to listing applicants on a case by case basis to allow annual caps on continuing connected transactions to be set as a formula instead of a monetary amount.

• Waivers may be granted to allow (a) a higher percentage cap on outstanding share options to be granted; and (b) a longer than 10 year take-up limit for a share incentive scheme.

• A legal opinion is not required if the relevant laws and regulations applicable to an applicant are still developing and are not expected to be promulgated in the near future.Disclosure of the associated risks in the listing document would be sufficient.

“Over the last few years internet technology firms have become dominant players in many industries.  The guidance we are publishing today reflects these changes and provides the flexibility these companies need to list whilst still providing the necessary protections for investors,” said David Graham, HKEX’s Head of Listing.

The Guidance Letter is available on the HKEX website.

The Exchange retains the discretion to reject any waiver request made under the Guidance Letter based on the facts and circumstances of individual cases.

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1}Has the meaning in Main Board Rule 14A.06(7).

 

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