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.

On 16-17 January 2018, Stevenson, Wong & Co. legal executive, Mr. Man Wong from our firm’s banking department was invited to give a presentation on the new stamp duty measures in a seminar organized by Bank of Communications.

The seminar attracted nearly 60 banking practitioners from branches in Hong Kong and Wan Chai. The seminar covered the computation of stamp duty under the new measures together with the possible exemptions and exceptions.

Please contact Mr. Eric Lui or Mr. Wong for any enquiries or further information about this event.

“Forum on New Era: Family Wealth Management and Inheritance” & the Launch Ceremony of AllBright Law Offices (Shenzhen) New Office was successfully held on 12 January 2018 at The Ritz-Carlton, Shenzhen. Stevenson, Wong & Co. Partners Ms. Catherine Por, Mr. Eric Lui and Ms. Wendy Lam, Consultant Ms. Shirley Sin, Associates Mr. Calvin Lo, King Tan and Mr. Raymond Lam, and Head of Business Development (China) Ms. Connie Yeung attended the event. The event attracted nearly three hundred guests from Bureau of Justice of Shenzhen Municipality, Shenzhen Lawyers Association, financial institutions, family wealth management practices, and colleagues from all 19 AllBright Law Offices in China.

rom left to right: Mr. Eric Lui, Ms. Catherine Por, Senior Partner of AllBright Law Office Mr. Du Xiao Dong, Ms. Wendy Lam, Associate Mr. Calvin Lo, Mr. King Tan, Mr. Raymond Lam and Ms. Shirley Sin

The event began with the opening ceremony of AllBright Law Offices (Shenzhen) New Office. The Forum featured three sessions including speeches from leaders, keynote speeches and roundtable discussions. Managing Director of AllBright Law Office, Mr. Wu Mingde, Secretary for Bureau of Justice of Shenzhen Municipality, Mr. Jiang Xi Lin and President of Shenzhen Lawyers Association, Mr. Lin Chang Chi were invited to deliver speeches to the audience and introduce their legal services in Shenzhen.

From left to right: Ms. Connie Yeung, Mr. King Tan, Ms. Catherine Por, Ms. Wendy Lam, Ms. Shirley Sin, Mr. Calvin Lo and Mr. Raymond Lam

Distinguished guests including Senior Partner of AllBright Law Office, Mr. Li Xian Ming and Zong, Shi Cai; Vice President of Da Tang Wealth, Mr. Li Xiao Jun; and Partner of Bird & Bird Ms. Ow Kim Kit were invited to share their insights and experience on topics regarding family wealth management.

Ms. Catherine Por and Mr. Du Xiao Dong

The final session was a roundtable discussion moderated by Senior Partner of AllBright Law Office, Mr. Li Xian Ming. Consultant of Summit Club Family Office Ms. Li Yu Shan, Executive Director of Product Department of Ping Au Trust Mr. Kang Chao Feng, Senior Partner of AllBright Law Office Mr. Justin Ouyang and Ms. Libby Guo were the speakers and discussed the topic of “Private Banking Wealth Management and Family Wealth Management and inheritance”.

From left to right: Lawyer from AllBright Law Office (Qing Dao) Ms. Xiao Xue Jing, Senior Partner from AllBright Law Office Ms. Libby Guo and Head of Business Development (China) Ms. Connie Yeung

“We are delighted to attend the forum and meet the experts who have extensive experience in wealth management. We look forward to attending the forum again.” said SW Family Team members.

Please contact Ms. Catherine Por or Ms. Wendy Lam for any enquiries or further information about this event.

Immigration Department combats sham marriages

The Immigration Department deployed an officer in disguise to meet sham marriage organizing agents. The operation was known as “Snare 1205”. Five suspects were arrested on 6 December 2017, including the organization’s group leader, 3 members and a women from Mainland China who was suspected of participating in a sham marriage.

The suspects were aged between 26 and 54, four of whom were Hong Kong residents. Upon further investigation, the Immigration’s staff seized the related documents and mobile phones at the suspects’ premises. More people might have been involved and may be arrested later on.

Cases of non-Hong Kong residents and Hong Kong residents entering into a sham marriage have always been under the scrutiny of the Immigration Department. Such illegal organizations or agents will advertise through different social platforms with the aim to lure people to join their illegal activities.

According to the current laws in Hong Kong:
1. Anyone who provides false information to Immigration officers is guilty of an offence with a maximum penalty of HK$150,000 and 14 years imprisonment.
2. It is also an offence to knowingly and willfully make a false oath or declaration for the purpose of procuring a marriage. The maximum penalty for the offence is up to 7 years imprisonment and a fine.
3. Anyone who participates in a conspiracy to defraud is also liable for an offence with a maximum imprisonment of 14 years.

Source: http://www.immd.gov.hk/hkt/press/press-releases/20171208b.html

“The Inauguration of the Qianhai One Belt One Road Legal Services Federation” was successfully held on 9 January 2018 at Vanke (Qianhai) International Convention Center. The event was led by Bureau of Justice of Shenzhen Municipality, Authority of Qianhai Shenzhen-Hongkong Modern Service Industry Cooperation Zone of Shenzhen and China Council for the Promotion of International Trade, Shenzhen Council. Stevenson, Wong & Co. Partner Mr. Eric Lui was invited to attend this event and Partner Mr. Stephen Wong and Associate Ms. Ann Chan were also present.

Ms. Ann Chan and Mr. Stephen Wong

The event attracted more than three hundred distinguished guests at the inauguration which included the Deputy Secretary-General of the NPCSC and Chairman of the Hong Kong Special Administrative Region (HKSAR) Basic Law Committee under the NPCSC, Mr Li Fei; the Deputy Director of Legal Department, Hong Kong and Macao Affairs Office of the State Council, Mr. Xi Jun Jian; the Deputy Observer of Department of Justice, Guangdong, Mr. Chen Rong Guang; Department Head of Legal Department of the Liaison Office of the Central People’s Government, Mr. Wang Zhen Min; the Deputy Solicitor General, Mr. Peter Wong; the deputy party secretaries of Shenzhen Municipal Committee, Party Secretaries of Politics and Law Committee Mr. Li Hua Nan; Secretary for Bureau of Justice of Shenzhen Municipality Mr. Jiang Xi Lin; Director of Shenzhen China Council for the Promotion of International Trade, Mr. Ye Jian De; Secretary for the Authority of Qianhai, Mr. Du Peng; and representatives from reputable legal institutions in China.

The Federation is the first international legal platform led by Chinese lawyers. It aims to provide legal services to Chinese enterprises who wish to invest in countries alongside the OBOR. Our Partner Mr. Eric Lui is pleased to be member of the Qianhai One Belt One Road Legal Services Federation. He believes that the Federation can provide international legal services to enterprises with the support from various parties.

In 2016 Stevenson, Wong & Co., one of the leading law firms in Hong Kong, established an OBOR Legal Service Centre with the vision to provide Hong Kong and Chinese enterprises who wish to invest in Southeast Asia countries alongside the OBOR with comprehensive and efficient legal services. Headed by the firm’s senior partners, the OBOR Legal Service Centre consists of lawyers who have rich experience in Banking & Finance, Corporate Finance, China Practice, FDI and Dispute Resolution. In addition, the Service Centre aims to cooperate with six leading law firms in their respective regions in Southeast Asia.

Please contact Mr. Stephen Wong or Mr. Eric Lui for any enquiries or further information about this event.

SW advised Titan Financial Services Limited, the sole sponsor, and the other underwriters of WT Group Holdings Limited (Stock Code: 8422) (“WT Group”) in its successful listing on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

From left to right: Ms. Ellie Cheung, Ms. Veronica Cheung, Executive Director of WT Group Mr. Kam Kin Bun, Executive Director of WT Group Mr. Kung Cheung Fai Patrick, Executive Director and Chairman of WT Group Mr. Yip Shiu Ching and Mr. Rodney Teoh

The shares were listed on the Stock Exchange on 28 December 2017. The final offer price was HK$0.22 per offer share and the net proceeds amounted to approximately HK$32.4 million.

WT Group and its subsidiaries (the “Group”) principally provide specialised works and general building works as a main contractor in Hong Kong. The Group undertakes specialised works which include foundation and site formation works, demolition works and ground investigation field works. The Group also undertakes general building works including superstructure building works, slope maintenance works, hoarding works, A&A works and other miscellaneous construction works.

Mr. Rodney Teoh and Executive Director of Titan Financial Services Limited Mr. Arthur Kan

We acted for Titan Financial Services Limited as the sole sponsor, and Titan Financial Securities Limited and Sincere Securities Limited as joint lead managers, as well as other underwriters.

From left to right: Mr. Rodney Teoh, Ms. Ellie Cheung and Ms. Veronica Cheung

Our team was led by our partners Eric Lui and Rodney Teoh, supported by team members including Ellie Cheung (associate), Veronica Cheung (associate), Wilfred Cheng (trainee solicitor), Jane Yip (paralegal) and Justin Chui (paralegal).

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