[Reed Smith Client Alerts] Rule changes following consultation on backdoor listings

2019, August 14
[Reed Smith Client Alerts] Rule changes following consultation on backdoor listings 14th August 2019
We summarise below the changes to the Hong Kong Listing Rules (the Listing Rules) and related guidance letters that will take effect on 1 October 2019, relating to reverse takeovers (RTO), extreme transactions, sufficiency of operations and cash company tests, large-scale issues of securities and restrictions on disposals and distribution in specie.

Authors: Janet Bo Chun Cheung Delpha Ho Denise Jong Ivy Lai Kar Chung Mok Angel On Ki NgMichael Pepper Gregory Wang May Ling Wong Patrick Ho Yin Wong Cynthia Wei Anthony WooMichael J. Fosh


Just under a year after the Hong Kong Stock Exchange (the Exchange) conducted its consultation on backdoor listings and continuing listing criteria, the Exchange published its consultation conclusions and proposed Listing Rules changes.  With effect from 1 October 2019, when the Listing Rules change and the three accompanying guidance letters and FAQ come into effect, Hong Kong-listed issuers will be subject to a stricter regulatory regime that is designed to combat backdoor listings and shell activities.

An acquisition or a series of transactions that takes place over a period of 36 (previously, 24) months and involves a change of control or falls into the new category of a ‘change of de facto control’ may be subject to reverse takeover requirements (as it is deemed a new listing), unless the Exchange accepts that the acquisition or series of acquisitions could properly be treated as an ‘extreme transaction’ (that attracts enhanced due diligence but not new listing requirements).   The revised Listing Rules also seek to restrict the creation, maintenance and sales activities of listed “shell”, as follows: (i) with regard to the sufficiency of operations test, by ignoring proprietary trading investment activities as part of operations (with certain limited exceptions); (ii) with regard to the cash company test, by treating short-term investments, including listed equity securities and other liquid investments, in the same way as cash; (iii) by restricting large-scale issues of securities to finance a new business that is or will likely be disproportionately large compared with the issuer’s existing principal business; and (iv) by restricting disposals and distribution in specie.

The Listing Rules changes will be particularly relevant to any issuer that is planning to undertake an acquisition, in which event the issuer should pay careful attention if the target is large compared with its existing principal business or is related to an earlier acquisition (over at least the previous 36 months).   Further, an issuer whose principal business involves securities trading or an issuer with small-scale operations should be mindful of the risks of being required to demonstrate to the Exchange’s satisfaction that its operations are of a sufficient scale to justify its listing status and that it is not a cash company.

Our more detailed outline and analysis of the Listing Rules changes and related guidance letters and FAQ can be downloaded here.



作者: 张宝珍 何德范 杨能妮 赖爱慧 莫家聪 伍安琪 彭怀谷 王飞鸿 黄美玲 黄浩然 韦诗咏 胡元森 傅石


在36个月(以前规定为24个月)内发生、涉及控制权或新定义的「实际控制权」变更的收购或一连串收购可能受到反收购规则的限制(发行人会被视为新上市申请人)。联交所认为该等收购或一连串收购可以被视为「极端交易」者,则发行人需额外进行尽职审查而将不被视为新上市申请人。「空壳公司」的成立、维持和买卖也将受到其他修订的上市规则的限制,如:(i)排除自營證券交易和投資業務(除有限的豁免外)后,业务运作的足够性; (ii)就现金资产公司测试而言,视短期投资(包括上市股本证券和其他流動資產)与为现金; (iii)与发行人现有主要业务相比,大规模发行证券以资助发展新业务,且发行规模远大于发行人现有的主营业务; 及(iv)对出售和实物配发的限制。



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