INTERLAW is an elite global law firm network comprising top-tier independent law firms from over 150 cities worldwide. To enhance strategic partners’ relations and provide training and development opportunities, seminars and networking meetings are held regularly for members to discuss topical issues and the latest legal developments. Our firm was one of the founding members of INTERLAW in 1982 and the only representative in Hong Kong.

Throughout the 4-day conference, Mr. Cheng and Ms. Lam attended different special team meetings and panels to exchange ideas and insight on various legal topics. Mr. Cheng chaired the Tax meeting titled “Advantage Asia Pacific: The Tax Shift Opportunity” whilst Ms. Lam, the vice-chair of INTERLAW’s Diversity, Inclusion and Community Committee (Asia Pacific), co-chaired the Diversity, Inclusion and Community meeting titled “What is ‘Belonging’ really?”.

Please contact our Partners Mr. Willy Cheng or Ms. Lai Lam for further enquiries about this event.

ALB is a leading legal magazine under Thomson Reuters, providing readers with cutting-edge legal and business information and law firm professional ratings and is considered one of the most influential legal media. “ALB Women in Law Awards 2023 “aims to recognize the outstanding performance and achievements of female lawyers and legal counsels in the legal industry. The award judges evaluated the candidate’s significant achievements in the past 12 months, innovative strategies, awards and recognitions, client recommendations, and market feedback to nominate nine finalists for the North Asia Litigator of the Year Award.

Heidi Chui | Partner Head of Banking and Finance and Litigation and Dispute Resolution

“I am very honoured to be nominated for the ALB Women in Law Awards 2023 along with other outstanding women practitioners. I sincerely thank ALB for its nomination, my team members’ dedication and the long-term trust and support of our clients. I look forward to having closer collaborations with our clients and providing them with innovative and pragmatic solutions.”

For any inquiries, please contact our Partner Ms. Heidi Chui, or visit the “ALB Women in Law Awards 2023” here.

I. Regulation Updates in the PRC
The following two regulations (the “New PRC Regulations”) will take effect from 31 March 2023:

(a) the “Decision of the State Council to Repeal Certain Administrative Regulations and Documents” （《國務院關於廢止部分行政法規和文件的決定》）issued by the State Council of the People’s Republic of China (the “

State Council

”) on 17 February 2023; and

(b) the “Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies” （《境内企業境外發行證券和上市管理試行辦法》）and related guidelines issued by the China Securities Regulatory Commission (“CSRC”) on 17 February 2023.

In light of the implementation of the New PRC Regulations, the following two regulations will be repealed on 31 March 2023:

(a) the Mandatory Provisions for Companies Listing Overseas set forth in Zheng Wei Fa (1994) No. 21 （《到境外上市公司章程必備條款》（證委發(1994)21 號文件））issued by the State Council Securities Policy Committee and the State Commission for Restructuring the Economic System on 27 August 1994 (the “

Mandatory Provisions

”); and

(b) the Special Regulations on the Overseas Offering and Listing of Shares by Joint Stock Limited Companies（國務院關於股份有限公司境外募集股份及上市的特別規定）issued by the State Council on 4 August 1994, as amended, supplemented or otherwise modified from time to time (the “Special Regulations”).

Pursuant to the New PRC Regulations, PRC issuers shall formulate their articles of association in line with the Guidelines for the Article of Association of Listed Companies issued by the CSRC. As holders of domestic shares and H shares (both being ordinary shares) are no longer deemed as different classes of shareholders, the current applicable class meeting requirements are no longer necessary.
In addition, the New PRC Regulations introduce a new filing regime (the “New Filing Requirements”) which requires PRC companies to register their direct and indirect overseas listings and securities offerings with the CSRC by filing materials on key compliance issues.

II. Consequential Amendments to the Listing Rules
In view of the upcoming implementation of the New PRC Regulations, the Exchange will amend the Listing Rules, without market consultation, as follows:

(a) amend Chapter 19A to remove the class meeting and related requirements for issuance and repurchase of shares by PRC issuers;

(b) amend Chapter 19A to remove the requirements for disputes involving H shareholders to be resolved through arbitration;

(c) repeal Appendix 13D which requires PRC issuers’ articles of association to include the Mandatory Provisions and other ancillary requirements; and

(d) amend the documentary requirements for new listing applications in Chapters 9 and 19A to reflect the New Filing Requirements.

The amended Listing Rules will become effective on a date to be announced by the Exchange, subject to the necessary regulatory approvals. During the period between the repeal of the Mandatory Provisions and the amendments to the Listing Rules becoming effective, the Exchange will allow new listing applicants incorporated in the PRC to comply with the Listing Rules taking into account the consequential amendments if they are listed on the Exchange during such time gap.
For the avoidance of doubt, PRC issuers must still adhere to their existing articles of association concerning class meetings for certain resolutions and other provisions required under the Mandatory Provisions, where applicable before they amend their articles of association.
III. Other Proposed Amendments to the Listing Rules
As holders of domestic shares and H shares (both are ordinary shares) are no longer deemed as different classes of shareholders under the New PRC Regulations, the Exchange proposes to modify the Listing Rules that address issues arising from domestic shares and H shares being treated as different classes. In view of other developments in PRC law and the financial market in the PRC, the Exchange further proposes to remove or modify certain additional shareholder protection requirements specific to PRC issuers:

(a) amend the Listing Rules, so as to allow the limits on the general mandate for issuing new shares and scheme mandate for share schemes to be calculated with reference to a PRC issuer’s total issued shares (instead of referencing to each of domestic shares and H shares);

(b) remove the requirements for directors, officers and supervisors of PRC issuers to provide undertakings to the issuers and their shareholders to comply with the Company Law of the PRC and the articles of association;

(c) move the followings requirements from Chapter 19A (for PRC issuers) to Chapter 3A (for all issuers): (i) requirements for issuers to provide access to their compliance advisers at all times, and (ii) requirements for the compliance advisers to inform the issuers on a timely basis of any amendment to the Listing Rules and applicable laws and regulations in Hong Kong;

(d) remove other requirements in Chapter 19A relating to the role of sponsors and compliance advisers and their termination and replacement;

(e) remove other requirements in Chapter 19A relating to (i) online display or physical inspection of documents, and (ii) disclosure of material differences in laws and regulations between the PRC and Hong Kong in the listing documents of PRC new applicants; and

(f) remove provisions in Chapter 19A which duplicate other Listing Rules or are outdated.

IV. Summary on the Major Amendments to the Listing Rules

 

Subject	Proposed Amendments
Definitions of “domestic shares” and “H shares” and references to “classes” of shares	Definitions of “domestic shares” (being shares issued by a PRC issuer in Renminbi), “foreign shares” (being shares issued by a PRC issuer in a currency other than Renminbi) and “overseas listed foreign shares” under Rules 1.01 and 19A.04 are removed. Definition of H shares under Rule 19A.04 is amended to refer to shares of a PRC issuer which are listed on the Exchange.
Class meeting requirement	Rules 19A.25 and 19A.38 (and the related references in Rule 13.36(1)) and Paragraphs 56 and 65(a) of Rule 19A.42 are amended such that: the class meeting requirement is removed; issuance and repurchase of shares by PRC issuers will no longer require a special resolution in general meeting; shareholders’ approval requirement for pre-emptive issuance of shares is exempted; and the exemption for issuance of shares under a PRC issuer’s plan adopted at the time of its establishment and implemented within 15 months from the date of the approval by the CSRC is removed. Rule 19A.12 is retained such that approval of holders of H shares is required for a withdrawal of listing on the Exchange under Rules 6.11, 6.12, 6.15 and 6.16.
Qualifications for listing	Rule 19A.13A is added to amend Rule 8.08 of the Listing Rules t to require a PRC issuer having shares apart from the H shares for which listing is sought (e.g. A and H shares) should have a public float of at least 25% of the issuer’s total number of issued shares, and that the issuer’s H shares to be listed must represent at least 15% of its total number of issued shares, having an expected market capitalisation at the time of listing of not less than HK$125 million.   Rule 19A.17 is retained and specifies that Rules 8.19(1), 8.20 and 13.26(1) should only apply to H shares of a PRC issuer. In particular, a PRC issuer should obtain the Exchange’s listing approval for trading H shares on the Exchange.
Documentary requirements for new listing applications in Chapters 9 and 19A to reflect the New Filing Requirements	Current requirements on compliance with Mandatory Provisions and Special Regulations are removed. Rule 9.11(23b) is added to require new applicants (including those incorporated in the PRC or other jurisdictions) to submit, at least four (4) clear business days before the expected hearing date, a notification issued by the CSRC confirming their completion of the PRC filing procedures, where the new applicant’s application for listing on the Exchange is required to be filed with the CSRC.
Timing requirement on despatches of circulars and listing documents	Rules 19A.39A and 19A.39B are repealed such that the PRC issuers are only required to despatch circulars and listing documents as with other issuers, i.e. at the same time as (or before) the notice of the general meeting is given. Since 2019, the notice period for special general meetings of PRC issuers has been shortened from 45 days to 15 days.
Articles of association	Rules 9.11(20) and 13.51(1) are amended to remove the references to Appendix 13, and that Appendix 13D contains the requirements that PRC issuers’ articles of association should include the Mandatory Provisions and the ancillary provisions are repealed.
Calculation of market capitalisation for notifiable transactions	Rule 19A.38A is amended to revise the applicability of Rule 14.07(4) for PRC issuers as follows: non-H shares of a PRC issuer listed on a PRC stock exchange shall be determined based on the average closing price of those shares for the five (5) business days immediately preceding the transaction for calculation of the market capitalisation; and where a PRC issuer has issued unlisted shares (instead of referring to domestic shares specifically), the market capitalisation of its unlisted shares is calculated by reference to the average closing price of its H shares for the five (5) business days preceding the transaction.
Mandate limits on share issuance	Given the removal of the class distinction between domestic shares and H shares and the corresponding class meeting requirement, Rule 19A.38 is amended such that the general mandate and the scheme mandate would be subject to an overall cap of 20% and 10% respectively, of a PRC issuer’s total issued shares instead of a separate mandate limit for domestic and H shares respectively.
Arbitration	Removed Rules 19A.52(2), 19A.54(3) and 19A.55(3) and Paragraph 65(e) of Rule 19A.42 relating to arbitration requirements, such that it will align with the Listing Rules applicable to overseas issuers which do not provide similar arbitration requirements.

V. Analysis and Takeaways

We would like to highlight that PRC issuers, as well as Hong Kong and overseas-incorporated issuers with their principal operations in the PRC, such as red chip and companies with VIE structure, will be required to submit filing materials to the CSRC for its overseas listing in accordance with the New Filing Requirements. Accordingly, the CSRC notification confirming the completion of the said filing procedures becomes essential for issuers with their principal operations in the PRC.

The New PRC Regulations provide a timely opportunity for the Exchange to reflect and review the Listing Rules applicable to PRC issuers while maintaining the same level of protection offered to shareholders of all issuers regardless of the issuer’s place of incorporation. As such, we generally welcome the Exchange’s proposals and the proposed Listing Rules that will give effects to the proposals.

Please contact our Mr. Rodney Teoh (Partner) for any enquiries or further information.

This news update 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 arising from or in connection with any decision made, action or inaction taken in reliance on the information set out herein.

The Issuer is a state-owned enterprise 90%-owned by the Shuanglong Management Committee and 10%-owned by Guizhou Financial Holding Group Co., Ltd (Guizhou Guimin Investment Group Co., Ltd.). It is the major infrastructure construction, land development, trading, investment, financing, asset and project management platform in the Shuanglong Airport Economic Zone.

Dingxin (Securities) Limited, Shenwan Hongyuan (H.K.) Limited, CEB International Capital Corporation Limited acted as the joint global coordinators, joint bookrunners and joint lead managers. China Zheshang Bank Co., Ltd. (Hong Kong Branch) acted as the joint bookrunners and joint lead managers.

Our team was led by our Partner Mr. Rodney Teoh, supported by team members including Associates Ms. Angela Lau, Mr. Calvin KW Lo and Trainee Solicitor Mr. Austin Kot.

Please contact our partner Mr. Rodney Teoh for any enquiries or further information.

Key Regulatory requirements

A. Key proposed regulatory requirements for licensed VA Trading Platforms

Upon the commencement of the AMLO VASP regime, it is proposed that VA Trading Platforms licensed by the SFC shall comply with the Guidelines for Virtual Asset Trading Platform Operators (“VATP Guidelines”). Such VATP Guidelines will be based on the existing regulatory requirements applicable to SFO-licensed platform operators (“LPOs”), and particularly, the Terms and Conditions for VA Trading Platform Operators (VATP Terms and Conditions).

The proposed regulatory requirements under VATP Guidelines cover various aspects and areas, such as fit and proper requirement, compliance with the general principles, financial soundness, operations, prevention of market manipulative and abusive activities, dealing with clients, custody of client assets, management, supervision and internal control, cybersecurity, conflict of interests, record keeping, auditors, ongoing report obligations.¹ The SFC also emphasise the “same business, same risks, same rules” approach, which requires VA providers of the same risk level to be subjected to the same obligations but adapted to address the specific risks of virtual assets (“VA(s)”), aiming to provide investors with more protection under the backdrop of the collapse of the Luna token and Terra stablecoin.² After the AMLO VASP regime comes into effect, the VATP Terms and Conditions will be superseded. All platform operators, whether licensed under the SFO and/or the Anti-money Laundering Ordinance (“AMLO”), will be subject to the VATP Guidelines.

B. Dual Licences

Upon the commencement of the AMLO VASP regime, the SFC will regulate the trading of security tokens by VA Trading Platforms under the existing SFO regime and regulate the trading of non-security tokens by VA Trading Platforms under the AMLO VASP regime.

Given that a VA may evolve from a non-security token to a security token (or vice versa), VA Trading Platforms (together with their proposed responsible officers and licensed representatives) should apply for approvals under both the existing SFO regime and the AMLO VASP regime and become dually licensed and approved.

C. Proposal to allow retail access to licensed VA Trading Platforms³

When the existing SFO regime was introduced in 2018, it was more prudent to restrict SFO-licensed VA Trading Platforms to serve professional investors only. In this regard, the SFC notes the public’s diverse views on whether retail investors should be allowed access to the services of licensed VA Trading Platforms.

In January 2022, the SFC allowed for the first-time retail investors to access a limited suite of regulated virtual asset-related derivative products traded on conventional exchanges. Later in October 2022, the SFC put in place a regime for authorising virtual asset futures exchange-traded funds. Retail investors, thus, since then have indirect access to Vas through regulated products in Hong Kong (see our news update for details).

Since more global financial institutions and service providers have entered the market, the SFC proposes to allow all types of investors, including retail investors, to access trading services of “Eligible large-cap VAs” offered by LPOs, provided that the VAs are included in at least two “acceptable indices” issued by at least two independent index providers. LPOs should also take into account other general token admission criteria including the market capitalization, trading volume, security of protocols, and internal compliance of the VAs before admitting them for trading.⁴

D. Consultations Questions⁵

Some of the key questions set out by the SFC for industry and public feedback, together with their corresponding views, are extracted as follows:

 

No.	Key Consultations Questions	Views of the SFC
1.	Do you agree that LPOs should be allowed to provide their services to retail investors, subject to the robust investor protection measures proposed?	Propose to implement robust measures to provide additional safeguards for retail investors including requiring the LPOs to (a) assess the client’s risk tolerance level and risk profile; and (b) set a limit for each client to ensure the individual client’s exposure to VAs is reasonable when providing services. Propose that LPOs should set up a token admission and review committee which should be mainly responsible for (a) establishing and enforcing the criteria for a VA to be admitted for trading and for halting, suspending and withdrawing the same; and (b) regularly reviewing the criteria abovementioned to ensure they remain appropriate as well as the VAs admitted so that they continue to satisfy the token admission criteria
2.	Do you have any comments on the proposals regarding the general token admission criteria and specific token admission criteria?	General non-exhaustive token admission criteria include, such as, (a) the background of a VA; (b) the regulatory status of a VA in each jurisdiction in which the LPO provides services and whether its regulatory status would affect the obligations of the LPO; and (c) the technical aspects of a VA, including the security infrastructure of its blockchain protocol, the size of the blockchain and network and how resistant it is to common attacks.6 Specific token admission criteria which are necessary but not sufficient conditions include (a) “Eligible large-cap virtual assets” referring to VAs which are included in at least two independent index providers and (b) an “acceptable index” which is an index clearly defined to measure the performance of the largest VAs.7 LPOs, whether licensed under the existing SFO regime or the AMLO VASP regime, should not offer a virtual asset that falls within the definition of “securities” under the SFO to the Hong Kong public if such an offer may breach the offers of investments regime or the prospectus regime under the securities laws of Hong Kong.
3.	What other requirements do you think should be implemented from an investor protection perspective if the SFC is minded to allow retail access to license VA trading platforms?	Reasonable due diligence to be carried out before admitting any VAs for trading.8 Disclosure obligations to be imposed on the LPOs as in the following non-exhaustive matters: (a) price and trading volume of the VAs; (b) background information about the VAs; and (c) brief description of the terms and features of the VAs.9
4.	Do you have any comments on the proposals to allow a combination of third-party insurance and funds set aside by the LPO or a corporation within its same group of companies? Do you propose other options?	Proposed requirements for insurance/compensation arrangement including (a) LPOs should have in place compensation arrangements approved by the SFC to provide appropriate levels of coverage for risks; (b) LPOs should monitor on a daily basis the total value of client VAs under their custody; and (c) where a LPO sets aside its own funds or the funds of a corporation within its same group of companies to satisfy the requirements, it should ensure that the funds are held on trust for specific purpose.

Key measures of the transitional arrangements and implementation details for the AMLO VASP regime

E. Eligibility for the transitional arrangements

To be eligible for the transitional arrangements, a VA Trading Platform must be pre-existing, i.e., in operation in Hong Kong prior to 1 June 2023 and with meaningful and substantial presence. To determine the same, the SFC will take to account the following non-exhaustive factors including (a) whether it is incorporated in Hong Kong; (b) whether it has a physical office in Hong Kong; and (c) whether its Hong Kong staffs have central management and control over the VA Trading Platform.¹⁰

F. Key dates and implementation details of the transitional arrangements

For pre-existing VA Trading Platform which intends to apply for a licence, it must submit a fully completed licence applicable online under the AMLO VASP regime between 1 June 2023 and 29 February 2024. It will be asked to confirm and demonstrate that it has been operating a VA Trading Platform in Hong Kong immediately before 1 June 2023 and it will comply with the applicable regulatory requirements.

For pre-existing VA Trading Platform that does not intend to apply for a licence, it should start preparing to close down its business in Hong Kong in an orderly manner. While the strict deadline for these platforms to close down is 31 May 2024, the SFC expects them to cease any active marketing of their services in Hong Kong.

By 1 June 2024, all VA Trading Platforms in Hong Kong must have been either deemed to be licensed or granted a licence by the SFC. The SFC will take immediate action against any unlicensed VA Trading Platforms.

Analysis and takeaways

Subsequent to the Government’s Policy Statement on its plan and approach for the VASP regime (see our news update), this Consultation Paper is a timely attempt to translate visions into practices and denotes a significant milestone in the global regulatory regime over VAs. SFC is committed to taking the forefront role in expanding the retail market for VAs in Hong Kong by implementing legal safeguards for different stakeholders. It helps retail investors acclimate to the volatile market and enables retail investors’ access to regulated trading platform under a protective and effective system. This Consultation Paper, together with the previously unveiled regulations, foster a new wave of market opportunities and capital investments while modernising Hong Kong’s financial market, which aligns with the global trajectory of further utilising VAs.

As such, we welcome the SFC’s proposals and would be happy our perspectives on the Consultation Paper for facilitating local VA services. We would also like to take the opportunity to encourage you to have discussion with us and share your views on this topic.

Please contact our Partner Mr. Rodney Teoh for any enquiries or further information.

This news update 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 arising from or in connection with any decision made, action or inaction taken in reliance on the information set out herein.

¹ Please see p.10-11 of the Consultation Paper for the full list and corresponding explanation of the existing regulatory requirements.
² P.7 of the Consultation Paper.
³ P.12 of the Consultation Paper.
⁴ P.16 of the Consultation Paper.
⁵ P.12-23 of the Consultation Paper.
⁶ Please see p.15 of the Consultation Paper for the full list of general non-exhaustive token admission criteria suggested by the SFC.
⁷ Please see p.16 of the Consultation Paper for the specific token admission criteria, particularly on requirements for an “acceptable index”.
⁸ Please see p.17 of the Consultation Paper for the specific areas of due diligence required.
⁹ Please see p.17-18 of the Consultation Paper for the non-exhaustive list of disclosure obligations.
¹⁰ Please see p.24 of the Consultation Paper for full list of non-exhaustive factors in determining whether the firm has a meaningful and substantial presence.

ALB spotlights the most prominent litigators in Hong Kong, Japan, and Korea and assess candidates by their major cases and achievements in the past 12 months, innovative strategies, client recommendations, and lawyers’ feedback to select the top 15 lawyers who have a strong influence in the Litigation practice.

	Heidi Chui | Partner Head of Banking and Finance and Litigation and Dispute Resolution
“It is an honour to be recognised by ALB as one of the “Top 15 North Asia Litigators 2023”. Thank you, ALB, for the recommendation and our team members for their dedication, especially the long-term trust and support of our clients. I look forward to having closer collaborations with our clients and providing them with innovative and pragmatic solutions.”

For any inquiries, please contact our Partners, Heidi Chui, or visit “ALB Top 15 North Asia Litigators 2023” here .