Issues 7 and 9

By Sara Martinez,2014-05-07 17:36
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Issues 7 and 9

    Frequently Asked Questions Series 8 (Released on 28 November 2008/ Last Updated on 31 December 2009)

    Rule Amendments relating to the 2008 Combined Consultation

Status of “Frequently Asked Questions”

The following frequently asked questions (FAQs) are designed to help issuers to understand and comply with the Listing Rules,

    particularly in situations not explicitly set out in the Rules or where further clarification may be desirable.

    Users of the FAQs should refer to the Rules themselves and, if necessary, seek qualified professional advice. The FAQs are not substitutes for the Rules. If there is any discrepancy between the FAQs and the Rules, the Rules prevail.

In formulating our “answers”, we may have assumed certain underlying facts, selectively summarised the Rules or concentrated on

    one particular aspect of the question. They are not definitive and do not apply to all cases where the scenario may at first appear similar. In any given case, regard must be had to all the relevant facts and circumstances.

    The Listing Division may be consulted on a confidential basis. Contact the Listing Division at the earliest opportunity with any queries.

    No. Main Board GEM Query Response

    Rules Rules

    1 2.07A(2A) 16.04A(2A) Good shareholders’ database management by the How should listed issuers manage the

    Issue 1 listed issuer is the key to keeping track of the process of obtaining consent from

    mode of communication applicable to each shareholders and keeping track of individual shareholder and any unexpired 28-day their status having regard to the 12-waiting period or 12-month ban on further month ban on further deeming of deeming. consent?

    If a listed issuer wishes to seek deemed consent

    upon a person becoming a shareholder, it will

    need to manage the fact that the 12-month period

    will vary from shareholder to shareholder. A

    listed issuer may wish to seek deemed consent

    from all relevant shareholders on the same date so

    that it will be much easier to keep track of the 12-

    month periods.

    A listed issuer can at any time encourage and

    invite shareholders to sign up to electronic

    communications, e.g. as part of its standard

    shareholder mailings. It is just that a shareholder

    cannot be deemed to have consented to any

    request for consent from the listed issuer sent for

    the purposes of the deeming procedure less than

    12 months after a previous request made to him

    for the purposes of the deeming procedure in

    respect of the same class of corporate



    No. Main Board GEM Query Response

    Rules Rules

    2.07A(2A) 16.04A(2A) Where a shareholder disposes of all No. For the sake of certainty and consistency, the 2

    Issue 1 his shares in a listed issuer and shareholder will need to be treated as a new

    ceases to be a shareholder but shareholder. He must be sent hard copies of all

    subsequently becomes a shareholder corporate communications unless and until fresh

    consent from him is expressly given or deemed. again with the acquisition of some

    shares, can the listed issuer act upon

    any consent previously given or



     (FAQ withdrawn on 31 December 2009)

    Issue 1

    4 2.07A(2A) 16.04A(2A) Can a listed issuer, in its request for Yes. Although the deeming procedure can only

    Issue 1 consent under the deeming be invoked to deem consent from a shareholder to

    procedure, offer electronic means of website communication, the listed issuer is not

    communication (such as CD or precluded, when requesting consent under the

    email) in addition to publication on deeming procedure, from using the opportunity to

    its website? solicit express consent from the shareholder to

    other electronic means (such as receiving the

    corporate communication on a CD or by email).

    If no response is received at the end of the 28-day

    waiting period and provided that all the relevant

    conditions under the deeming procedure have

    been satisfied, the shareholder will be deemed to

    have consented to website communication.


    2.07A(2A)(d) 16.04A(2A)(d) New Main Board Rule 2.07A(2A)(d) After a request for consent has been sent for the

    / GEM Rule 16.04A(2A)(d) require purposes of the deeming procedure, there will Issue 1

    the listed issuer to notify intended essentially be three classes of shareholders for the

    recipients of corporate purpose of website communication.


    No. Main Board GEM Query Response

    Rules Rules

    communications made available on

    its website only of the presence of 1. Shareholders who reply that they wish to

    the corporate communication on the continue to receive a hard copy do not website, the address of the website, need to be sent a separate notification

    the place on the website where it may about website communication as they are

    be accessed and how to access the to be sent a hard copy. corporate communication. To whom

    and how should such a notification 2. Shareholders who do not reply within the

    be sent? 28-day waiting period can be deemed to

    have consented to website communication

    provided all other relevant requirements

    have been complied with. However, they

    must be sent a hard copy of the

    notification unless they have provided the

    listed issuer with an electronic address for

    this purpose. If any shareholders reply

    within the 28 days opting for website

    communication but do not provide an

    email address, they will be in the same

    position as those who did not reply and

    will likewise have to be sent a hard copy

    of the notification.

    3. In cases where shareholders who reply

    that they wish to be advised electronically

    when any new corporate communication

    is available on the listed issuer’s website

    and who have provided an email address

    for this purpose, the listed issuer will have

    to send them the notification by email.

    (Note that this group is not the same as


    No. Main Board GEM Query Response Rules Rules

    those who may have signed up separately

    to receive email alerts about non-Listing-

    Rule related material such as promotional 2.07A(2A) 16.04A(2A) Main Board Rule 2.07B/ GEM Rule The Note is merely a non-exhaustive example of

    offers.) Issue 1 2.07B 16.04B 16.04B provides that an issuer that how to comply with the Rule. An issuer that

    6 avails itself of that Rule must make wishes to use the deeming procedure under Main

    adequate arrangements to ascertain in Board Rule 2.07A(2A)/ GEM 16.04(2A) may

    which language its shareholders wish modify the example to suit its own circumstances,

    to receive its corporate so long as the arrangement is adequate for the

    communications. The Note under purpose of Main Board Rule 2.07B/ GEM Rule

    Main Board Rule 2.07B/ GEM 16.04B.

    16.04B sets out an example of what

    the Exchange will normally regard as If an issuer is not sure whether its arrangement is

    an adequate arrangement. adequate, the issuer should consult the Exchange.

    However, an issuer that avails itself (Updated 13 March 2009)

    of the deeming procedure under

    Main Board Rule 2.07A(2A)/ GEM

    Rule 16.04A(2A) may not be able to

    follow this example exactly, in

    particular paragraph (3) under the


    Can an issuer deviate from the



    2.07C(3) 16.18(2) For disclosure in the Next Day The listed issuer should choose the new Tier 2

    13.25A 17.27A Disclosure Return pursuant to Main headline category “Share Buyback” under the Issue 8

    Board Rule 13.25A / GEM Rule new Tier 1 headline category “Next Day

    17.27A, which headline category Disclosure Returns”. Where a disclosure other

    should a listed issuer use when than a share buyback is made in the Next Day


    No. Main Board GEM Query Response

    Rules Rules

    submitting a Next Day Disclosure Disclosure Return, the listed issuer should choose

    Return to report a buyback of shares the new Tier 2 headline category “Others” under

    by the listed issuer? the new Tier 1 headline category “Next Day

     Disclosure Returns”. A listed issuer reporting in

    a Next Day Disclosure Return both a share

    buyback and some other type of change in its

    issued share capital should choose both “Share 2.07C(3) 16.18(2) For an announcement published The listed issuer should choose the Tier 2 Buyback” and “Others”. 17.06A 23.06A pursuant to Main Board Rule 17.06A headline category “Share Option Scheme” under Issue 8 8 / GEM Rule 23.06A regarding the the heading “Securities/Share Capital” under the

    granting of an option under a share Tier 1 headline category “Headline Categories for

    option scheme, which headline Announcements and Notices”. category should a listed issuer use

    when submitting the announcement

    for publication?

    9 3.13 5.09 Once an independent non-executive Each INED is required to submit to the Exchange,

    director (“INED”) has submitted to at the same time as the submission of Form B/H Issue 17

    the Exchange the initial written in Appendix 5 of the Main Board Rules or Form

    confirmation concerning his A/B in Appendix 6 of the GEM Board Rules, a

    independence comprising all the written confirmation regarding his independence

    information required by Main Board which must contain all the information required

    Rule 3.13 / GEM Rule 5.09, what by Main Board Rule 3.13(a), (b) and (c) / GEM information must be included in the Rule 5.09(a), (b) and (c). INED’s annual confirmation of

    independence required to be provided Each INED must provide to the listed issuer an

    to the listed issuer? annual confirmation regarding his independence

     which must contain the information required by

     Main Board Rule 3.13 (a) and (c)/GEM Rule 5.09

    (a) and (c).


No. Main Board GEM Query Response 3.24 5.15 Should a listed issuer retain its The Exchange expects that issuers will continue Rules Rules (effective up (effective up to qualified accountant after the to employ accountants with adequate Issue 3 10 to 31 31 December removal of Main Board Rule 3.24 / qualifications and experience to assist the issuers

    December 2008) GEM Rule 5.15? and their Board of Directors fulfil their

    2008) continuing financial and accounting related


    Issuers are reminded of the importance of

    maintaining effective internal controls over their

    financial reporting systems. The board of

    directors of a listed issuer has primary

    responsibility for ensuring that the listed issuer

    has effective internal controls for proper financial

    reporting, including adequate accounting systems

    and appropriate human resources to fulfil its

    continuing financial reporting obligations.


    (FAQ withdrawn on 30 September 2009)

    Issue 3

12 3.24 5.15 Under the new rules, can a PRC A listed issuer will have the freedom to decide the

    (effective up (effective up to qualified accountant be appointed to number of personnel and their accounting Issue 3

    to 31 31 December be in charge of an H-share issuer’s qualifications which are suitable for the company.

    December 2008) accounting and financial reporting The board of directors has the responsibility of

    2008) function? determining the adequacy of qualifications and

     experience of such persons to oversee procedures

    Would a person who is not a member and internal controls governing the issuer’s

    of a professional accounting body but accounting and financial reporting function.

    with another qualification, for

    example a MBA (Finance) Degree A listed issuer should also note that, under the

    from a USA graduate school of new code provision C.2.2 in the Code of


    No. Main Board GEM Query Response Rules Rules

    business, with over 20 years’ Corporate Governance Practices of Appendix 14

    financial management experience, be of the Main Board Rules and Appendix 15 of the

    considered a person who possesses GEM Rules, the board of directors is responsible

    adequate qualifications and for reviewing the adequacy of the resources,

    experience and be employed to qualifications and experience of staff for the

    oversee procedures and internal issuer’s accounting and financial reporting

    controls governing an issuer’s function. If a listed issuer chooses to deviate from

    accounting and financial reporting the code provision requirements, it will be

    function? required to explain in its Corporate Governance

     Report why it did not comply.

     3A.07 6A.07 Will the Exchange accept a new The sponsor must make a statement relating to 13 3A.08 6A.08 listing application for vetting if the Issue 4 independence to the Exchange no later than the sponsor’s statement relating to date on which any documents in connection with independence is not submitted the listing application are first submitted to the together with the advance booking Exchange. form for listing?

     The Exchange will not accept the listing

     application for vetting unless the sponsor’s

    statement relating to independence is submitted

    together with the advance booking form for

    listing and other documents in connection with

    the listing application.

    14 3A.09 6A.09 What should the sponsor do if there Where a sponsor or the new applicant becomes

     is a change in circumstances aware of a change in the circumstances set out in Issue 4

    rendering the sponsor no longer the statement required by Main Board Rule 3A.08

    independent after filing the listing / GEM Rule 6A.08 during the period the sponsor

    application? is engaged by the new applicant, the sponsor and

     the new applicant must notify the Exchange as

    soon as possible.


    No. Main Board GEM Query Response 8.08(2) 11.23(3)(b)(ii) The requirement for a minimum The Exchange would make reference to

    Rules Rules 8.08(3) 11.23(8) spread of securities holders at the announcements on high concentrations of Issue 6

    15 time of listing will not be applicable shareholding made by listed issuers pursuant to

    to a bonus issue of a new class of Main Board Rule 13.34(a) / GEM Rule 17.36 or

    securities involving options, warrants public information, for example, press releases

    or similar rights to subscribe or issued by the SFC in this connection during the 5

    purchase shares. Such exemption years preceding the date of the announcement on

    does not apply where there are the proposed bonus issue.

    circumstances to indicate that the

    shares of the listed issuer may be

    concentrated in the hands of a few

    shareholders. What are the

    circumstances where the Exchange

    considers that there may be a high

    concentration of shareholding?


    9.11(3a) 12.23(2a) Why is it necessary for each The first undertaking (see Main Board Rule 9.16(13) 12.26(9) director/supervisor of a new 9.11(3a) / GEM Rule 12.23(2a)) is intended to Issue 17

     applicant to submit two undertakings cover the listing application stage and is

    Form B/H/I Form A/B/C in to the Exchange regarding the analogous to the practice before 1 January 2009

    in Appendix Appendix 6 accuracy of his personal details? where the declaration and undertaking of each

    5 director/supervisor is submitted at least 15

    business days before the expected hearing date

    and, in the case of the GEM Board, submitted

    together with the application form. The

    requirement for the first undertaking is to help

    maintain the level of accuracy and completeness

    of the information regarding directors/supervisors

    in the hearing proof of the listing document that is

    tabled to the Listing Committee for consideration.

    This practice takes into account that under the


    No. Main Board GEM Query Response

    Rules Rules

    revised Rule the second undertaking, in the form

    set out in Form B/H/I in Appendix 5 of the Main Board Rules or Form A/B/C in Appendix 6 of the

    GEM Rules, will be required to be filed only after

    the listing document is issued and before the

    listing date.

The two sets of undertakings serve to cover the

    listing application stage and the post-hearing

    stage, even though they contain similar

    information. While the two stage undertaking

    requirement will result in directors/supervisors

    signing two similar undertakings,

    directors/supervisors will benefit from the

    relatively simple execution mode of the

    undertakings (as compared to the past

    requirement for a statutory declaration). The same

    rationale applies to the two-stage undertaking requirement under the GEM Rules.

To assist new applicants in the listing process, the

    IPO checklists will be revised to include the new forms relating to the two-stage nature of the undertakings. Such IPO checklists are available




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