Introduction

An underweight of New Economy companies in the Hong Kong capital market has prompted the Hong Kong Exchanges and Clearing Limited (“HKEX”) to publish a New Board Concept Paper (《創新板框架諮詢文件》) prospecting the creation of a stand-alone New Board. This aims to broaden Hong Kong’s capital market diversity and enable companies with non-standard corporate governance structures to list, in hope that it will vitalise Hong Kong’s global listing appeal and competitiveness.

The New Board Concept Paper

The New Board Concept Paper proposes a New Board divided into two segments:

• the New Board PREMIUM (創新主板) focuses on companies that are already meeting the Main Board’s listing requirements, but are currently ineligible to list domestically due to their non-standard governance structures, such as certain companies’ weight voting rights (“WVR”) or dual-share characteristics; and
• the New Board PRO (創新初板) is specifically tailored for professional investors with New Economy companies which are unable to meet the financial or track record requirements of the Main Board and GEM, commonly among start-ups and technology firms.

The below table summarises the key proposals of the New Board Concept Paper:

Consultation Paper on Review of GEM and changes to GEM and Main Board Listing Rules

In light of the proposed framework, a Consultation Paper on Review of the Growth Enterprise Market (GEM) and Changes to the GEM and Main Board Listing Rules (《有關檢討創業板及修訂《創業板規則》及《主板規則》的諮詢文件》) was issued simultaneously to help readjust the current Hong Kong listing regime.

The Main Board will be positioned as a “premier” board, having its minimum market capitalisation requirement raised from HK$200 million to HK$500 million, and a minimum public float value from HK$50 million to HK$125 million.  The Main Board will retain its existing financial and track record criteria.

The GEM will also acquire an increased minimum market capitalisation of HK$100 million to HK$150 million, a public float value increased from HK$30 million to HK$45 million, and a minimum cash flow of HK$30 million in two fiscal years from HK$20 million.  A mandatory public offering mechanism of at least 10 % of its total offer size will also be incorporated.  The Exchange also proposes to remove the GEM’s current treatment as a “stepping stone” to the Main Board and streamline the process for any legible transfers.

Implications

With tech groups such as Alibaba Group Holding Limited and Sea Ltd. (a rebrand of Garena) choosing to list in the U.S., HKEX’s New Board proposal can be seen as its desire to open up greater diversity of issuers as well as an incentive for New Economy companies to list in Hong Kong.

However, a New Board will introduce certain difficult regulatory and administrative complications.  The proposed accelerated delisting mechanism may enable a procedural floodgate due to listing and delisting inflation.  HKEX will also have to ensure that there is sufficient investor protection.  It may also lead a possibility of an overall decrease of issuer quality affecting Hong Kong’s market reputation.

On top of that, there is also still a risk of tier ambiguity.  GEM may be made redundant due to its repositioning as a middle-tier board.  Additional attention should be given to each tier’s demographic in the fear of undesirable overlaps.

Despite the challenges, the New Board proposals, with the help of feedback from various stakeholders and market leaders, could represent an opportunity for Hong Kong to capture the future growth from the New Economy and further consolidate Hong Kong’s position as a  leading international financial centre.  The Exchange aims to finalise detailed New Board listing rules in early 2018, and to publish its conclusions on the GEM
review proposals in late 2017.

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, Eric Lui, Cornelia Chu or Rodney Teoh for any enquiries or further information.

Introduction

In a newest attempt to further open up their capital markets, Hong Kong Exchanges and Clearing Limited (“HKEX”) collaborated with China Foreign Exchange Trade System (“CFETS”) on a joint venture company Bond Connect Company Limited (“BCCL”) to support Bond Connect.

Bond Connect

Bond Connect is a new mutual market access scheme enabling investors from Mainland China and offshore to trade mutually in each other’s bond markets through an infrastructure linkage in Hong Kong. This mimics a structure alike the stock-trading programmes between Shanghai, Hong Kong and Shenzhen’s stock exchanges in the past two years. BCCL is 60% owned by CFETS and 40% owned by HKEX.

Initial trading begins Northbound, allowing international investors direct access to the China Interbank Bond Market via the CFETS system. The launch of Southbound trading will be explored at a later stage.

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

SW acted as the legal adviser in the following IPO transactions:

We look forward to assist clients reaching more of their business milestones by delivering high quality, efficient and professional legal services. Please contact our Hank Lo, Eric Lui, Cornelia Chu, Erica Cheng or Rodney Teoh for any enquiries or further information about the above transactions.

Stevenson, Wong & Co. has again been recognized for its success in the legal industry by being ranked fifth among all Hong Kong domestic firms in the Top 50 research of Asian Legal Business. Up to date, we have more than 50 lawyers serving our clients. Since 1978, we have been delivering effective legal solutions to our clients and we maintain and advance our status in the legal field by looking ahead for different opportunities and continuously enhancing our quality of services to ensure our clients’ needs are fulfilled. Our business has been evolving through expansion, new partnerships and development of our business networks and our aim is to continue to excel and meet new challenges in the coming years.

AllBright Law Offices was ranked fourth among all Asian law firms. AllBright has always been recognized as one of the top law firms in China and our strategic association with AllBright has increased our flexibility to meet the changing needs of our clients and expanded our geographical presence in China.

Asian Legal Business, owned by Thomson Reuters, is the world’s leading source of intelligent information for businesses and professionals. It provides authoritative and unbiased insights to legal professionals throughout Asia-Pacific and the Middle East regions.

Please contact our Mr. Willy Cheng or Mr. Eric Lui for any enquiries or further information.

Stevenson, Wong & Co has again been recognized for its success and dedication in the legal industry by being voted “Best Full-Service Law Firm – Hong Kong” and “Sustained Excellence in Banking & Finance Law – Hong Kong” by APAC-Insider.

APAC-Insider is a magazine from the UK focusing on business strategy and analysis in the Asia-Pacific region. Winners are voted by respected industry individuals and by in-house research.

Stevenson, Wong & Co has long been practising banking and finance law such that we are on the approved list of all the major banks in Hong Kong.

Please contact our Mr. Willy Cheng or Mr. Eric Lui for any enquiries or further information.

We are excited to announce that Stevenson, Wong & Co. is launching a new project, “One Belt, One Road Legal Service Centre”.

In light of “One Belt, One Road” initiative introduced by President Xi Jinping, we anticipate that there will be much more cross-border business opportunities and foreign direct investments between OBOR countries in the coming years. To cater for the growing demand for legal consultancy services concerning such business activities, the Legal Service Centre will cooperate with our trusted Interlaw member firms in Southeast Asian countries, including Blumenthal, Richter & Sumet of Thailand, Colin Ng & Partners LLP (CNP) of Singapore, Lee Hishammuddin Allen & Gledhill of Malaysia, Mochtar Karuwin Komar of Indonesia, Quasha, Ancheta, Peña & Nolasco of The Philippines and Vision & Associates Legal of Vietnam, to create and deliver tailored legal solutions that will comprehensively take care of your needs in each country.

Please refer to our brochure and contact our Mr. Eric Lui for more information.