Hong Kong proposes easier rules for deals, spin-offs

HONG KONG: Hong Kong Exchanges and Clearing on Monday (Sep 21) proposed easing rules for listed companies making large deals and spin-offs, as the bourse seeks to boost the city's appeal as a listing venue.

Under a consultation paper produced by HKEX, shareholder approval for most major acquisitions, sales and other transactions would be required only when a deal equals 50 per cent or more of a company's size, up from 25 per cent now.

"This reform seeks to give issuers greater flexibility and certainty in their corporate transactions," HKEX Head of Listing Katherine Ng said in a statement.

She added that the proposal would improve efficiency in cost and time, while keeping investor protections.

Deals between 25 per cent and 50 per cent would still require an announcement, but would no longer need a shareholder vote or a detailed circular, the paper said.

The higher threshold would not apply to loans and other financial assistance, or to securities and investments held for investment or cash management purposes. Such transactions would keep the 25 per cent threshold, according to the paper.

HKEX also proposed raising the ownership threshold for a subsidiary to be treated as connected to a listed company to 30 per cent from 10 per cent, the paper said.

For spin-offs, eligible main board companies could assess their own compliance with HKEX rules rather than seek advance approval.

They must have a market value of at least HK$10 billion (US$1.27 billion), annual revenue of at least HK$1 billion and retain more than half of group revenue and assets, according to the paper.

HKEX also proposed cutting the waiting period for a spin-off application to one year from three years.

Companies have raised US$89.1 billion through equity listings and share sales in Hong Kong so far this year, up 47 per cent from a year earlier, LSEG data showed. High technology companies accounted for US$34.2 billion, or 38 per cent, of the total.

The consultation closes on Nov 30, according to HKEX. The proposals are not final.