We are delighted to announce that Stevenson, Wong & Co. has been recognized as “Best Full-Service Law Firm 2018” in APAC Insider’s Hong Kong Business Awards 2018. APAC Insider’s Hong Kong Business Awards aims to recognize the perseverance and dedication of entire corporations to key personnel in value-added businesses. Each award nominee is carefully examined, with the judging panel taking into account their performance over the past 12 months to ensure that only the most deserving firms are handed one of the trophies.

About The Firm

Founded in 1978, Stevenson, Wong & Co. (SW) is a forward-looking, full-service law firm. The firm is ranked fifth among all Hong Kong domestic firms in the Top 50 research of Asian Legal Business. SW provides services including Banking & Finance, Corporate Finance/Capital Markets, China Practice, Corporate Commercial Law and Corporate Services, Employment Law, Family Law and Private Clients, Immigration, Intellectual Property, Litigation & Disputes Resolution, Media and Entertainment Law, Property, Regulatory Enforcement and Technology and Communications. SW has a strategic association with AllBright Law Offices, one of the nation’s largest full service law firms. SW is also a founding member of INTERLAW, an international association. Through our membership in INTERLAW and our association with AllBright, clients are assured of the same personal, open-minded and highly effective approach delivered by our lawyers in Hong Kong and China.

Please contact Mr. Willy Cheng, Mr. Hank Lo or Ms. Catherine Por for any enquiries or further information.

Introduction

On 15 December 2017, Hong Kong Exchanges and Clearing Limited (“HKEX”) published the Consultation Conclusions (the “Conclusions”) on the Review of the Growth Enterprise Market (“GEM”) and Changes to the GEM and Main Board Listing Rules. The revised Listing Rules took effect from 15 February 2018 with transitional arrangements.

Under the revised regime, Growth Enterprise Market (创业板) is renamed as “GEM” for both English and Chinese names and repositioned from a market for emerging companies to a market for small to mid-sized companies.

All the proposals in the consultation paper are adopted except for the proposals regarding the (a) the admission requirements for GEM transfer to the Main Board; and (b) extending the post-IPO lock up requirement on controlling shareholders for Main Board listing applicants which are not adopted.

Key Conclusions

Transitional Arrangements in relation to Listing Applications

Listing applications submitted before 15 February 2018

Listing applications submitted to the HKEX before 15 February 2018 will be processed in accordance with the GEM or Main Board Listing Rules in force as at the date of the Conclusions. Only one renewal of such applications will be permitted thereafter.

Listing applications submitted on or after 15 February 2018

Listing applications submitted to the HKEX on or after 15 February 2018 will be processed in accordance with the revised GEM or Main Board Listing Rules.

Transitional Arrangements in relation to GEM Transfer Applications

GEM transfer applications submitted before 15 February 2018

Applications to transfer from GEM to the Main Board that are submitted by eligible issuers before 15 February 2018 and have not lapsed, been rejected or returned as at that date, will be processed under the GEM streamlined process. The eligibility for the Main Board will be assessed in accordance with the Main Board Listing Rules in force at the date of the Conclusions, i.e. 15 December 2017. Only one renewal of such applications will be permitted thereafter.

GEM transfer applications submitted from 15 February 2018 to 14 February 2021

The Conclusions provide a 3-year transitional period. All GEM transfer applications submitted by eligible issuers within the period from 15 February 2018 to 14 February 2021 will have eligibility for the Main Board assessed in accordance with the Main Board Listing Rules in force as at the date of the Conclusions, i.e. 15 December 2017, and subject to the following requirements:

(a) applicants that have changed their principal businesses and/or controlling shareholders since listing on GEM will be required to:

• appoint a sponsor to conduct due diligence; and

• publish a listing document as a new listing applicant to the Main Board; or

(b) applicants that did not change their principal business and controlling shareholders since listing on GEM will only need to:

• prepare a GEM transfer announcement in connection with its GEM transfer; and

• appoint a sponsor to conduct due diligence in respect of their activities during the most recent full financial year and up to the date of the GEM transfer announcement to ensure that the information in the GEM transfer announcement is accurate, complete and not misleading.

Implications

One of the main implications of the HKEX’s proposal was the reform of GEM as a stand-alone board. Without the streamlined transfer process, GEM transfer applicants will be required to appoint a sponsor to conduct due diligence and publish a “prospectus-standard” listing document for its transfer application.

Nevertheless, in the light of the three-year transitional arrangement, eligible GEM issuers without change of principal business nor controlling shareholders since listing will still be allowed to only issue a GEM transfer announcement and appoint a sponsor to conduct due diligence in respect of their activities during the most recent full financial year for their transfer application to the Main Board.

Another amendment to the rules relates to a controlling shareholder’s lock-up period after a GEM listing. Following the revision, the post IPO lock up will be extended to a “12+12” lock up period, in the sense that the controlling shareholder(s) cannot dispose any of the issuer’s shares held by it (with exceptions) during the first year after listing and must retain a controlling stake of the issuer for the subsequent year.

This newsletter is for information purposes only. Its content does not constitute legal advice, and should not be treated as such. Stevenson, Wong & Co. will not be liable to you in respect of any special, indirect or consequential loss or damage.

Please contact our Hank Lo or Rodney Teoh for any enquiries or further information.

We are delighted to announce that our Partner and Head of Litigation and Dispute Resolution Department Ms. Heidi Chui has been appointed by the Secretary for Financial Services and the Treasury of the Government of the Hong Kong Special Administrative Region as a member of Disciplinary Panel A of the Hong Kong Institute of Certified Public Accounts (“HKICPA”) in February 2018 for a term of two years.

The HKICPA is the statutory licensing body of accountants in Hong Kong. It is responsible for matters including the maintenance of the quality of entry to the profession; the promulgation of standards on financial reporting, auditing and assurance, and accounting ethics standards; as well as the development of the profession.

Ms. Heidi Chui is an Arbitrator (on the panel list of the Law Society of Hong Kong), Fellow of the Chartered Institute of Arbitrators (U.K.) and an Accredited General Mediator with both the Hong Kong International Arbitration Centre and the Law Society of Hong Kong. She is also a member of the Arbitration Committee of The Law Society of Hong Kong. She is also a China Appointed Attesting Officer.

Please contact Ms. Heidi Chui for any enquiries or further information.

Stevenson, Wong & Co. is delighted to announce 3 awards, a testament to the excellence and territory wide recognition of our Family Department.

First, our Family Department has been selected as the winner of “Family – Law Firm of the Year – Hong Kong” in Lawyer Monthly Legal Awards 2017

Secondly, we have been awarded “Family Mediation Law Firm of the Year in Hong Kong 2018” by Corporate INTL. Corporate Intl Magazine Global Award which commemorates those who have been successful over the past 12 months and who have shown excellence not only in expertise but in service.

Thirdly, our Family Department has again been recognized for its success and dedication in the legal industry by being awarded as “Family Law Firm of the Year – Hong Kong” in Corporate USA Today Annual Awards 2018 and Lawyer International – Legal 100 2018 Awards.

Stevenson, Wong & Co has one of the leading family law practices in Hong Kong with over 40 years of experience. The practice has grown and become a significant part of a developing Private Client department which uniquely also provides wealth protection and succession planning, estates and trusts, Committee work, wealth and asset management, all under one roof. Our teams are dedicated and aim to provide effective and practical solutions and support to people going through changes in their family circumstances. We have expertise in dealing with all aspects of contentious and non-contentious family matters. We also deal with cases with an international element, whether they relate to children or finances. We regularly help clients with PRC issues.

We also offer and promote mediation as an alternative dispute resolution procedure. We regularly conduct mediations for a variety of family issues with a high success rate. We are dedicated to the use of alternative dispute resolution in litigation, providing assistance to parties to reach a mutually agreed settlement in a timely and flexible manner.

Our Succession planning and estates practice group, in addition to assisting our clients with the preparation of wills, succession planning and the handling of probate applications, works closely with our family team to assist separating parties in wealth protection. We handle financial and maintenance claims of family and dependants against the estate of deceased persons. We offer advice and help resolve financial disputes involving complex issues, substantial assets or complicated company and trust structures

As well as with SW Trustee, we also work closely with international trust corporations to establish trusts to meet the needs of our domestic and international clients.

Committee Work is a growing area in Hong Kong and we are experienced in handling applications under Part II of the Mental Health Ordinance, advising Committees and acting as a Professional Committee appointed by the Court of First Instance.

Please contact Ms. Catherine Por for any enquiries or further information.

Stevenson, Wong & Co. is delighted to announce that we have been awarded “Business Law Firm of the Year – China” at Corporate LiveWire Legal Awards 2017/18. Each award nominee is carefully examined, with the judging panel taking into account their performance over the past 12 months to ensure that only the most deserving firms are handed one of the trophies.

About The Firm
Founded in 1978, Stevenson, Wong & Co. (SW) is a forward-looking, full-service law firm. The firm is ranked fifth among all Hong Kong domestic firms in the Top 50 research of Asian Legal Business. SW provides services including Banking & Finance, Corporate Finance/Capital Markets, China Practice, Corporate Commercial Law and Corporate Services, Employment Law, Family Law and Private Clients, Immigration, Intellectual Property, Litigation & Disputes Resolution, Media and Entertainment Law, Property, Regulatory Enforcement and Technology and Communications. SW has a strategic association with AllBright Law Offices, one of the nation’s largest full service law firms. SW is also a founding member of INTERLAW, an international association. Through our membership in INTERLAW and our association with AllBright, clients are assured of the same personal, open-minded and highly effective approach delivered by our lawyers in Hong Kong and China.

Please contact Mr. Hank Lo for any enquiries or further information.

Introduction

On 15 December 2017, Hong Kong Exchange and Clearing Limited (“HKEX”) published the Consultation Conclusions on the New Board Concept Paper.  Instead of creating a stand-alone board, the conclusions confirmed the previous “signals” to drop the plan and adopt an alternative by adding new chapters to the listing rules to welcome issuers from the emerging and innovative sectors.  The reform will benefit weighted voting rights (“WVR”) companies, pre-revenue Biotech companies and also overseas issuers pursuing a secondary listing. 

HKEX is in the process of finalising the details of the proposals, and has started drafting the proposed amendments to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Main Board Listing Rules”).  Formal consultations on the rule amendments are expected in the first quarter of 2018.

Highlights: Proposed Way Forward

• HKEX to extend the existing listing regime to allow the listing of:

• issuers from emerging and innovative sectors that have WVR structures with a minimum expected market capitalisation of HK$10 billion at the time of listing; and

• pre-revenue Biotech issuers with a minimum expected market capitalisation at the time of listing of HK$1.5 billion.

• HKEX to create a new concessionary secondary listing route, to attract overseas issuers, especially issuers with a “centre of gravity” in Greater China (“Greater China Companies”), from emerging and innovative sectors that have a primary listing on either the NYSE, NASDAQ or on the “premium listing” segment of the LSE’s Main Market

• HKEX to issue a guidance letter on the characteristics to be used for defining “innovative” companies to provide guidance to the market.  The guidance letter would be applicable to issuers with WVR structures or issuers going for the new concessionary secondary listing route.

Issuers with a WVR Structure

HKEX proposes to allow the listing of high growth and innovative companies with WVR structures.  The main entry requirements are set out below:

Since companies with WVR structures potentially carry additional risks to investors, the following safeguards will be put in place (note that this WVR safeguards are mostly exempted if the issuers are eligible in the concessional secondary listing route discussed below):

Listing of Pre-revenue Biotech Issuers

To widen market access, HKEX proposes to facilitate the listing of pre-revenue new economy companies, but this would be limited to Biotech issuers for the time being.  Pre-revenue biotech issuers should meet the following requirements:

HKEX will continue to look at whether other types of new economy companies may also be permitted to list under the pre-revenue regime.

Concessionary Route to Secondary Listing

HKEX aims to widen the market for secondary listings by creating a new concessionary route for secondary listing requirements in addition to the existing route currently in the Main Board Listing Rules and the 2013 Joint Policy Statement (“2013 JPS”).  The new concessionary route targets overseas issuers from emerging and innovative sectors that have a primary listing on a Qualifying Exchange (as defined below).  Greater China Companies, currently not allowed to secondary list with HKEX, will be able to apply through the new concessionary route for secondary listing as long as it satisfies the relevant requirements.

Issuers satisfying the requirements below may consider a secondary listing on the new concessional route:

In light of the above, HKEX has classified companies seeking secondary listings in Hong Kong into three categories:

• Grandfathered Greater China Companies – Greater China Companies that are primary listed on a Qualifying Exchange on or before the publication of the Consultation Conclusions
• Non-Grandfathered Greater China Companies – Greater China Companies that are primary listed on a Qualifying Exchange after the Consultation Conclusions
• Non-Greater China Companies – Companies that are not Greater China Companies

Equivalence Requirement
It will not be necessary for Grandfathered Greater China Companies and Non-Greater China Companies to demonstrate Hong Kong equivalent shareholders protection standards (“Equivalence Requirements”) by amending constitutional documents.  They will only be required to comply with the Key Shareholder Protection Standards set out in the 2013 JPS (which will be written into the Main Board Listing Rules), such as a super-majority vote of members required to approve of fundamental matters, and issuers must hold an AGM at least every 15 months.

WVR Structures
Furthermore, both Grandfathered Greater China Companies and Non-Greater China Companies with a WVR structure are eligible to be secondary listed in Hong Kong without the need to change their WVR structures or meet the proposed WVR safeguards (as set out in the section “Issuers with a WVR Structure” above), apart from disclosure requirements.

Non-Grandfathered Greater China Companies
Non-Grandfathered Greater China Companies will not be granted concessions regarding Equivalence Requirements and WVR Structures granted to Grandfathered Greater China companies and Non-Greater China companies

The requirements for the three types of potential candidates under the concessional secondary listing route are briefly summarised as follows:

Definition of “New Economy”

At present, HKEX considers that an “innovative” company would normally contain more than one of the following characteristics:

• has been successful due to the application of new technologies, innovations, or business models in the core business
• has R&D as a significant contributor to value and also as a major activity and cause of expense
• has had its success demonstrably attributable to unique features of innovation / intellectual property
• has an outsized market capitalisation or intangible asset value relative to tangible value

HKEX proposes to issue a guidance letter on the characteristics to be used for defining “innovative” companies to provide guidance to the market, as opposed to putting in place a fixed definition.

Implications

The question of dual class shares and pre-revenue companies have been contentious issues, being intricately tied with HKEX’s initiatives in maintaining competitiveness compared to other prominent exchanges.  Many market players have long anticipated a way forward for the issue, and may have wished that the regulators lead the market to a broad consensus sooner rather than later.

Nevertheless, the blueprint just released sets out a robust framework and is in many ways a commendable effort.  HKEX has taken a measured approach in drawing out the parameters of the initial target companies, which is appropriate, as balancing market development and shareholders’ protection has always been a challenge in Hong Kong.

A consensual framework that works to make Hong Kong a realistic listing venue for new economy companies while giving the regulators a suitably firm grip on the reins will always be a difficult task.  With this encouraging first step towards liberalisation, we look forward to seeing our market grow in prosperity and diversity.

This newsletter is for information purposes only.  Its content does not constitute legal advice, and should not be treated as such.  Stevenson, Wong & Co. will not be liable to you in respect of any special, indirect or consequential loss or damage.

Please contact our Eric Lui or Rodney Teoh for any enquiries or further information.