Our legal executives Mr. Stanley Hung, Mr. Man Wong and Ms. Hebe Au were invited by Deputy Head of Corporate Banking of Bank of China, Seoul Branch Cheryl Yan to attend an exchange activity at Bank of China, Seoul Branch from 7 to 9 July 2017.

During the visit, Mr. Hung, Mr. Wong and Ms. Au introduced the services of SW and identified the typical requests for legal services which include China appointed attesting services and engaging Hong Kong lawyers to prepare Hong Kong legal opinions. This is the first meeting between SW and Bank of China, Seoul Branch, which was a success to build further communications.

Should you have any enquiry about this event, please contact our Mr. Stanley Hung and Mr. Man Wong for further information.

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.

Between 21 to 24 June 2017, our partner Mr. Eric Lui joined the Sichuan delegation led by The Law Society of Hong Kong and acted as a speaker at the “Hong Kong Law of Finance and Commerce” seminar.

Mr. Lui spoke about “Legal Risk Management of IPO in Hong Kong” and introduced the requirements for IPO’s in Hong Kong and examined the legal risks that mainland enterprises might face during the process, such as suitability of the IPO, responsibility of directors, ongoing obligations of a listed company, connected transactions and market misconduct. He also shared some case studies with the participants to analyse effective planning for risk management.

The seminar was well received and participants raised their understanding of the risks which mainland enterprises might face for an IPO in Hong Kong.

At the same time, The Law Society of Hong Kong held a conference with the Chengdu Lawyers Association and Chengdu Bureau of Justice to discuss future cooperation in training and professional conduct. The delegation also visited the Chongqing Lawyers Association and attended the “Overseas Mergers & Acquisitions” seminar and learnt about the history of the Chongqing legal industry.

Should you have any enquiry about this event, please contact our Mr. Eric Lui for further information.

On 20 June 2017, our partner Ms. Catherine Por attended the signing ceremony of an Arrangement on Reciprocal Recognition and Enforcement of Civil Judgments in Matrimonial and Family cases held in the Offices of the Department of Justice.

The Secretary for Justice, Mr Rimsky Yuen, SC, represented HKSAR and the Executive Vice President of the Supreme People’s Court, Mr Shen Deyong, represented the Mainland in signing the Arrangement.

Mr. Yuen spoke during the ceremony that there has been a rising number of cross-border marriages and an increasing proportion of families having assets in both the Mainland and Hong Kong. As a result, it is generally agreed that there is a rising need to make an arrangement on reciprocal recognition and enforcement of civil judgments in matrimonial and family cases.

It is often the case that enforcement is the most difficult part of civil proceedings, including matrimonial and family proceedings, especially if people or assets are located in different jurisdictions. With the Arrangement soon in place, there are now clear rules on what documents are to be submitted along with an application for such reciprocal recognition and enforcement of matrimonial and family judgments, and in what circumstances the Court will decide not to recognize or enforce such matrimonial and family judgments.

The coverage of the Arrangement is as follows:
– individual identity and relationships (including divorce),
– maintenance orders,
– custody orders in respect of children, and
– protection orders in cases involving domestic violence.

The Chinese version of the Arrangement is available through the Hong Kong Department of Justice Website here.

Please contact our Ms. Catherine Por for any enquiries or further information about the Arrangement or this event.

On 20 June 2017, our partners Mr. Willy Cheng and Ms. Heidi Chui attended the 29th Annual General Meeting and annual dinner of the Association of China-Appointed Attesting Officers Limited held at JW Marriott Hotel Hong Kong.

Representatives from the Ministry of Justice PRC attended the dinner together with CAAOs and members of China Legal Service (Hong Kong) Limited and the Liaison Office of the Central People’s Government in the Hong Kong Special Administrative Region. Mr. Zhou Yuansheng, Head of Department of Directing Lawyers and Notarization of Ministry of Justice of China also joined and gave a speech during the event.

Please contact our Mr. Willy Cheng and Ms. Heidi Chui for any enquiries or further information about this event.