Market Turnover


Update No. 34

Note to subscribers for the amendments to the rules governing the listing of securities on the Growth Enterprise Market (the "GEM Listing Rules")

Update No. 34

May 2010

Dear Sirs,

Various amendments to the GEM Listing Rules

We enclose reprinted pages of the GEM Listing Rules and the filing instructions.  The reprinted pages incorporate:

B02A24241D934714AD273561037F6D6D amendments to implement the proposals in the consultation conclusions on “Proposed Changes to Connected Transaction Rules”, “Proposed Changes to Requirements for Circulars and Listing Documents of Listed Issuers”, and “New Listing Rules for Mineral Companies” published in May this year; and
B02A24241D934714AD273561037F6D6D minor amendments.

We have amended the GEM Listing Rules to:

Connected transactions

B02A24241D934714AD273561037F6D6D exempt transactions with connected persons at the subsidiary level where the size of the subsidiary is insignificant to the issuer;
B02A24241D934714AD273561037F6D6D exempt revenue transactions with associates of a substantial shareholder who is a passive investor;
B02A24241D934714AD273561037F6D6D revise the percentage thresholds for the de minimis exemptions:
- from 0.1% to 1% for fully exempt transactions which involve persons connected only at the subsidiary level; and
- from 2.5% to 5% for exemption from shareholder approval requirements;
B02A24241D934714AD273561037F6D6D extend the de minimis exemptions to issues of securities by an issuer’s subsidiary (ie deemed disposals);
B02A24241D934714AD273561037F6D6D exempt provision of financial assistance by an issuer to a connected person in which the issuer is a shareholder provided it is on normal commercial terms, pro-rata, and on a several basis;
B02A24241D934714AD273561037F6D6D exempt a disposal by an issuer of its interest in a subsidiary to a third party where the subsidiary has a substantial shareholder that is a controller only because of his/its relationship with the subsidiary under Rule 20.13(1)(b);
B02A24241D934714AD273561037F6D6D extend the exemption for an issuer acquiring consumer goods or services from connected persons for the purpose of or in connection with the issuer’s business if there is an open market and transparency in pricing the goods or services concerned;
B02A24241D934714AD273561037F6D6D restrict the circumstances in which a non wholly-owned subsidiary is a connected person by:
- excluding a non wholly-owned subsidiary which is connected simply because it is (i) a substantial shareholder of another subsidiary or (ii) an associate of a person connected only at the subsidiary level; and
- introducing an exemption for intra-group transactions between a “connected subsidiary” (as defined in Rule 20.11(5)) and its subsidiaries or between its subsidiaries;
B02A24241D934714AD273561037F6D6D remove the following persons from the definition of connected person:
- management shareholders;
- promoters of PRC issuers; and
- “PRC Governmental Body” for non PRC issuers;
B02A24241D934714AD273561037F6D6D remove the following persons from the definition of associate:
- the holding company of an investee company (ie a company over which a connected person and/or any party closely related to this connected person, individually or together, has control); or a fellow subsidiary of this holding company; and
- a company controlled by the investee company (not being a subsidiary of the investee company), and its subsidiary, holding company or fellow subsidiary;
B02A24241D934714AD273561037F6D6D extend the definition of “associate” to a company in which a connected person’s relative has a majority control; and
B02A24241D934714AD273561037F6D6D clarify that the annual review requirements apply to continuing connected transactions subject to reporting and disclosure requirements under the connected transaction Rules.
Circulars and listing documents
B02A24241D934714AD273561037F6D6D for very substantial disposal circulars, introduce options to allow (i) the issuer to disclose its disposal target’s financial information, and (ii) the issuer’s auditors or reporting accountants to conduct a review of the financial information.  These options are alternatives to the current requirement for an accountant’s report on the issuer group (including separate note disclosure on the disposal target);
B02A24241D934714AD273561037F6D6D relax the reporting period deadline in an acquisition circular.  Under the new Rule, the reporting period will include at least three consecutive financial years and end not more than six months before the circular date;
B02A24241D934714AD273561037F6D6D allow issuers to incorporate previously published financial information in their circulars or listing documents by reference;
B02A24241D934714AD273561037F6D6D for listing documents of listed PRC and overseas issuers, remove disclosure and inspection requirements regarding provisions in their constitutional documents and regulatory provisions in the relevant jurisdictions;
B02A24241D934714AD273561037F6D6D for a notifiable transaction involving an acquisition and a disposal, allow each of the acquisition and disposal to comply with the circular content requirements applicable to its respective transaction classification, rather than the higher classification;
B02A24241D934714AD273561037F6D6D require the working capital sufficiency statement in transaction circulars to take into account the effect of the transaction;
B02A24241D934714AD273561037F6D6D remove the requirement to disclose combined financial information of the enlarged group;
B02A24241D934714AD273561037F6D6D allow PRC issuers to despatch circulars after issuing notice of general meeting and before the deadline for giving such notice under the PRC Company Law;
B02A24241D934714AD273561037F6D6D require information in board minutes for connected transactions to be disclosed in circulars instead of in submissions to the Exchange;
B02A24241D934714AD273561037F6D6D remove the 21-day deadline for despatching circulars (other than information circulars), and require disclosure of the expected date of despatch and any delay;
B02A24241D934714AD273561037F6D6D change the timing for despatching information circulars from calendar days to business days; and
B02A24241D934714AD273561037F6D6D align the directors’ responsibility statement with the general disclosure principles under Rule 17.56.
Mineral Companies
B02A24241D934714AD273561037F6D6D allow companies with at least a meaningful portfolio of Contingent or Indicated Resources to list;
B02A24241D934714AD273561037F6D6D require new applicant Mineral Companies to demonstrate that they have rights to participate actively in the exploration for and/or extraction of natural resources;
B02A24241D934714AD273561037F6D6D require new applicant Mineral Companies to demonstrate that they have available working capital for 125% of the group’s present requirements, that is for the next twelve months;
B02A24241D934714AD273561037F6D6D require new applicant Mineral Companies to include independent technical reports (“a Competent Person’s Report”) on reserves and resources in their listing documents;
B02A24241D934714AD273561037F6D6D require new applicant Mineral Companies that have not commenced production, to disclose plans to proceed to production with indicative dates and costs;
B02A24241D934714AD273561037F6D6D require Mineral Companies acquiring or disposing of mineral or petroleum assets as part of a major (or above) transaction to present a Competent Person’s Report in the relevant shareholder circular.  Major (or above) acquisitions must also be accompanied by Valuation Reports prepared by Competent Evaluators;
B02A24241D934714AD273561037F6D6D require listed issuers that acquire mineral or petroleum assets as part of a major (or above) transaction to provide a Competent Person’s Report and a Valuation Report in the relevant shareholder circular;
B02A24241D934714AD273561037F6D6D require Mineral Companies, and listed issuers that publicly disclose statements on reserves and resources, to update such statements once a year in their annual reports;
B02A24241D934714AD273561037F6D6D require Mineral Companies to include in their interim (half-yearly) and annual reports details of their exploration, development and mining production activities and a summary of expenditure incurred on these activities during the period under review;
B02A24241D934714AD273561037F6D6D require that Competent Persons’ Reports be prepared under a recognized Reporting Standard.  Other standards may be used but reconciliation to a Reporting Standard must be provided; and
B02A24241D934714AD273561037F6D6D require that Valuation Reports be prepared under CIMVAL, the VALMIN Code or the SAMVAL Code.
B02A24241D934714AD273561037F6D6D change the subscription periods for right issues and open offers from calendar days to business days, which relate to the proposals to accelerate rights issues and open offers implemented in February 2010; and
B02A24241D934714AD273561037F6D6D update the reference to property valuation standards to “The Hong Kong Institute of Surveyors Valuation Standards on Properties” and the “International Valuation Standards”.

Coming into effect

The amendments will come into effect on 3 June 2010.

Please click HERE to see the amendments to the connected transaction Rules.

Please click HERE to see the amendments to the requirements for issuers’ circulars and listing documents.

Please click HERE to see the amendments to the requirements for mineral companies.

Please click HERE to see other amendments to the GEM Listing Rules.

Yours faithfully,

For and on behalf of
The Stock Exchange of Hong Kong Limited


Mark Dickens
Head of Listing

Updated 02 Jun 2010