Exchange Publishes Consultation Paper on Rule Amendments Following Mainland China Regulation Updates and Other Proposed Rule Amendments Relating to PRC Issuers

• Consequential Rule amendments will be introduced to reflect changes in Mainland China regulations announced by the CSRC on 17 February 2023
• Other Rule amendments are proposed to align the requirements for PRC issuers¹ with those for other issuers
• Feedback is sought during a one-month consultation period

The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Friday) published a consultation paper on rule amendments following recent updates and changes to Mainland China regulations and other proposed rule amendments relating to PRC issuers.

On 17 February 2023, the State Council and the China Securities Regulatory Commission (CSRC) announced the implementation of the New Regulations² on overseas listing and repeal of the Special Regulations³ and the Mandatory Provisions⁴ with effect from 31 March 2023. Under the New Regulations, PRC issuers shall formulate their articles of association in line with the Guidelines for the Articles of Association of Listed Companies issued by the CSRC (Guidelines on AoA) in place of the existing Mandatory Provisions. Since holders of domestic shares and H shares (both ordinary shares) are no longer deemed as different classes of shareholders, the class meeting requirement now applicable to holders of domestic and H shares are no longer necessary.

Consequential Rule amendments

In connection with the implementation of the New Regulations, the Exchange will make consequential Hong Kong Listing Rule (Rule) amendments to remove Rule requirements that reflect requirements under the Mandatory Provisions. The amendments will (i) remove the class meeting and related requirements for issuance and repurchase of shares by PRC issuers; (ii) remove the requirements for disputes involving H shareholders to be resolved through arbitration; (iii) remove the requirements for PRC issuers’ articles of association to include the Mandatory Provisions and other ancillary provisions; and (iv) amend the documentary requirements for new listing applications to reflect Mainland China’s new filing requirements for overseas listings of Mainland companies.

Transitional arrangements

PRC issuers listed on the Exchange are bound by both the Listing Rules and the provisions in their articles of association. In other words, these PRC issuers must still adhere to their existing articles concerning class meetings for certain resolutions and other provisions required under the Mandatory Provisions where applicable, until they amend their articles of association. They should also comply with the Listing Rules (or the amended Rules after the effective date of the Rule amendments) at all times.

New applicants incorporated in Mainland China are expected to follow the Guidelines on AoA in preparing their articles of association. The Exchange will allow these applicants to comply with the Rules taking into account the consequential amendments if they are listed on the Exchange during the period between the repeal of the Mandatory Provisions and the effective date of the Rule amendments.

New applicants incorporated in Mainland China or other jurisdictions with principal business operations in the Mainland are required to submit to the Exchange, at least four clear business days before the expected hearing date, a notification issued by the CSRC confirming their completion of the Mainland China’s filing procedures, where the new applicant’s application for listing on the Exchange is required to be filed with the CSRC under the New Regulations.

Other Rule amendments

The Exchange has also taken this opportunity to review the Rules relating to PRC issuers, and proposes changes to certain requirements specific to PRC issuers that are no longer necessary in light of developments in Mainland Chinese law and the Mainland’s financial market.

“Our proposal to review certain requirements for issuers incorporated in Mainland China will help align those with the requirements currently in place for Hong Kong and overseas issuers. This is consistent with the Exchange’s objective of providing a consistent framework for the protection for investors of all issuers regardless of their places of incorporation,” said Katherine Ng, HKEX’s Head of Listing.

Key proposals include:

1. allowing the limits on general mandate for issuance of new shares and scheme mandate for share schemes to be calculated with reference to a PRC issuer’s total issued shares (instead of referencing to each of domestic shares⁵ and H shares⁶);
2. removing the requirements for directors, officers and supervisors of PRC issuers to provide undertakings to the issuers and their shareholders to comply with the PRC Company Law⁷ and the articles of association;
3. aligning minor requirements on compliance advisers under Chapter 19A (for PRC issuers) with those in Chapter 3A (for all issuers); and
4. removing certain requirements in Chapter 19A relating to (i) online display or physical inspection of documents and (ii) disclosure in listing documents of new applicants.

The deadline for responding to the consultation paper is 24 March 2023.

Interested parties are encouraged to respond to the consultation paper by completing and submitting the questionnaire.

 

Notes:

1. issuers which are duly incorporated in Mainland China as joint stock limited companies
2. the “Decision of the State Council to Repeal Certain Administrative Regulations and Documents” issued by the State Council of the PRC on 17 February 2023 and the “Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies” and 5 supporting guidelines issued by the CSRC on 17 February 2023
3. the Special Regulations on the Overseas Offering and Listing of Shares by Joint Stock Limited Companies (國務院關於股份有限公司境外募集股份及上市的特別規定) issued by the State Council of the PRC on 4 August 1994, as amended, supplemented or otherwise modified from time to time
4. the Mandatory Provisions for Companies Listing Overseas set forth in Zheng Wei Fa (1994) No. 21 issued on 27 August 1994 by the State Council Securities Policy Committee and the State Commission for Restructuring the Economic System
5. shares of a PRC issuer that are subscribed for in Renminbi
6. shares of a PRC issuer which are listed on the Exchange
7. the Company Law of the PRC adopted at the Fifth Session of the Standing Committee of the Eighth National People’s Congress on 29 December 1993 and effective from 1 July 1994, as amended, supplemented or otherwise modified from time to time

 

 

About HKEX

Hong Kong Exchanges and Clearing Limited (HKEX) is a publicly-traded company (HKEX Stock Code: 388) and one of the world’s leading global exchange groups, offering a range of equity, derivative, commodity, fixed income and other financial markets, products and services, including the London Metal Exchange.

As a superconnector and gateway between East and West, HKEX facilitates the two-way flow of capital, ideas and dialogue between China and the rest of the world, through its pioneering Connect schemes, increasingly diversified product ecosystem and its deep, liquid and international markets.

HKEX is a purpose-led organisation which, across its business and through the work of HKEX Foundation, seeks to connect, promote and progress its markets and the communities it supports for the prosperity of all.

www.hkexgroup.com

 

 

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