HKEx - Continuing Obligations and Fees

Once listed, a listed issuer and its directors will face various continuing obligations. The Listing Rules cover such
obligations the major ones of which are set out below.
Continuing Our Listing Rules set out certain of the continuing obligations which an issuer is required to
Obligations observe once its securities have been listed on our Exchange. Major areas covered include:
1. General obligations of disclosure including those relating to the disclosure of information
necessary to avoid a false market in the issuer’s securities and inside information under
Part XIVA of the Securities and Futures Ordinance (see "Disclosure to Avoid False Market"
below).
2. Response to enquiries made of the issuer by the Exchange concerning unusual
movements in the price or trading volume of its listed securities, the possible
development of a false market in its securities, or any other matters.
3. Compliance with the prescribed minimum percentage of listed securities in public hands
at all times.
4. Pre-emptive rights, being circumstances under which the directors of the listed issuer
must obtain the consent of shareholders in general meeting prior to allotting, issuing or
granting securities.
5. Arrangements for annual general meetings and board meetings.
6. Disclosure of financial information (see "Financial Disclosure" below).
7. Notification to the Exchange of changes with regard to a listed issuer's memorandum or
articles of association or equivalent documents, its directorate or supervisory committee,
rights attaching to any class of listed securities, auditors or financial year end, its
secretary or registered address.
8. Submission to the Exchange of draft circulars and other documents for review, as
required under Main Board Rules 13.52(1) and (2) and GEM Rules 17.53(1) and (2).
9. Trading and settlement arrangements.
10. Directors' dealings, service contracts, nomination and contact information.
Corporate Our Exchange advocates the adoption of high corporate governance standards and encourages
Governance and/or requires listed issuers to ensure they have adequate and effective systems of internal
control covering financial and compliance matters.
1. Independent Non-Executive Directors
a. Issuers are required to appoint at least three independent non-executive directors. At
least one-third of the issuer’s board must be independent non-executive directors.
b. At least one of the independent non-executive directors must have appropriate
professional qualifications or accounting or related financial management expertise.
2. Audit Committee
a. Issuers must establish an audit committee comprising non-executive directors only.
b. The audit committee must have a minimum of three members, at least one of whom is an
independent non-executive director with appropriate professional qualifications or
accounting or related financial management expertise.
c. The majority must be independent non-executive directors and chaired by an independent
non-executive director.
3. Remuneration Committee
a. Issuers must establish a remuneration committee comprising a majority of independent non-
executive directors.
b. The remuneration committee must be chaired by an independent non-executive director.
4. Corporate Governance Code
The Listing Rules set out the principles of good corporate governance and two levels of
recommendations: (a) code provisions; and (b) recommended best practices.
Compliance No provisions in the Main Board Listing Rules
Officer
Disclosure of Main Board issuers are required to disclose in their annual report how they have applied the
Use of proceeds raised in the share offering.
Proceeds
Disclosure to Listed issuers are required to keep investors and the public fully informed of material factors
Avoid False which might affect their interests.
Market Where in the view of the Exchange there is or there is likely to be a false market in an issuer’s
securities, the issuer must, as soon as reasonably practicable after consultation with the
Exchange, announce the information necessary to avoid a false market in its securities.
The issuer must respond promptly to the Exchange’s enquiries concerning unusual movements in
the price or trading volume of its listed securities, or the possible development of a false market
in its securities.
For details, please see presentation materials on Issuers’ Continuing Obligation to Disclose Inside
Information.
Financial Timing
Disclosure In order to protect investors and to promote higher standards of financial reporting so that
investors are able to make informed investment decisions, listed issuers are required to publish
their financial results on a timely basis.
Main Board issuers must publish:
a. annual reports not later than 4 months; and
b. half-yearly reports not later than 3 months
after the date upon which the financial period ended.
Content
The Listing Rules set out the minimum financial information that a listed issuer shall include in its
preliminary announcement of results, interim reports, annual reports, listing documents and
circulars in relation to equity securities.
Restrictions on The Exchange imposes certain restrictions on the disposal of shares by Controlling Shareholders
Disposal of following a company's new listing. Essentially, any person regarded as a Controlling Shareholder
Shares at the time of listing shall not:
a. dispose of his shares in the listed issuer in the period commencing on the date by reference
to which disclosure of the shareholding of the Controlling Shareholder is made in the listing
document and ending on the date which is six months from the date on which dealings in the
securities of a new applicant commence on the Exchange; or
b. dispose of his interest in the issuer if such disposal would result in him ceasing to be a
Controlling Shareholder in the period of six months commencing on the date on which the
period referred to above expires.
Controlling Shareholder(s) of a new applicant must undertake to the issuer and the Exchange to
disclose any pledge/charge of any securities beneficially owned by him/them in favour of an
authorised institution that was made within the period commencing on the date by reference to
which disclosure of the shareholding of the Controlling Shareholder(s) is made in the listing
document and ending on the date which is 12 months from the date on which dealings in the
securities of a new applicant commence on the Exchange.
Issue of New The Exchange does not permit further issues of shares or securities convertible into equity
Shares securities of a listed issuer within 6 months of listing except for:
1. the issue of shares pursuant to a share option scheme under Chapter 17 of the Main Board
Listing Rules and Chapter 23 of the GEM Listing Rules;
2. the exercise of conversion rights attaching to warrants issued as part of the initial public
offering;
3. any capitalisation issue, capital reduction or consolidation or sub-division of shares;
4. the issue of shares or securities pursuant to an agreement entered into before the
commencement of dealing and disclosed in the issuer's listing document; and
5. the issue of shares or securities to be traded on the Main Board by a listed issuer that has
successfully transferred its listing from GEM to the Main Board under Chapter 9A.
6. for GEM issuers, the issue, among other things:
a. for the purpose of an acquisition of assets which would complement the listed issuer's
business and the acquisition does not constitute a major (or above) transaction; and
 b. does not result in a controlling shareholder of the listed issuer ceasing to be a
controlling shareholder after the issue.
Notifiable Our Listing Rules set out various categories of notifiable transactions, the classification of which is
Transactions determined by comparing the size of a transaction with the size of the issuer proposing to enter
into the transaction. The thresholds for categorising notifiable transactions under the percentage
ratios are summarised as follows:
Transaction Type Assets Consideration Profits Revenue Equity capital
ratio ratio ratio ratio ratio(Note 1)
Share transaction Less than 5%
Discloseable transaction 5% or more but less than 25%
Major transaction(disposal) 25% or more but less than 75% N/A
Major transaction 25% or more but less than 100%
(acquisition)
Very substantial disposal 75% or more N/A
Very substantial 100% or more
acquisition
Note 1: The equity capital ratio relates only to an acquisition (and not a disposal) by a
listed issuer issuing new equity capital.
Note 2: In the case of a transaction involving both an acquisition and a disposal, the
transaction will be classified by reference to the larger of the acquisition or
disposal.
The table below summarises the notification, publication and shareholders' approval
requirements which will generally apply to each category of notifiable transaction:
Notification Announcem Circular to Shareholder Accountants
to the ent Shareholder s' Approval ' Report
Exchange s
Share transaction Yes Yes No No (# 1) No
Discloseable Yes Yes No No No
transaction
Major transaction Yes Yes Yes Yes (# 2) Yes(# 3)
Very substantial Yes Yes Yes Yes (# 2) No (# 5)
disposal
Very substantial Yes Yes Yes Yes (# 2) Yes (# 4)
acquisition
Reverse takeover Yes Yes Yes Yes (#s 2&6) Yes (# 4)
Note 1: No shareholders' approval is necessary if the consideration shares are issued under a
general mandate.
Note 2: Any shareholder and his close associates must abstain from voting if such shareholder
has a material interest in the transaction.
Note 3: For acquisitions of businesses and/or companies only. The accountants' report is for
the 3 preceding financial years on the business, company or companies being
acquired.
Note 4: An accountants' report for the 3 preceding financial years on any business, company
or companies being acquired is required.
Note 5: A listed issuer may at its option include an accountants’ report (see note 1 to Main
Board Listing Rule 14.68(2)(a)(i), and GEM Listing Rule 19.68(2)(a)(i)).
Note 6: Approval of the Exchange is necessary.
Reverse Main Board Rule 14.06(6) / GEM Rule 19.06(6) defines a RTO to be an acquisition (or series of
Takeover acquisitions) which constitute, in the opinion of the Exchange, an attempt to achieve a listing of
the assets to be acquired and a means to circumvent the requirements for new applicants. This is
a principle based test.
 Main Board Rules 14.06(6)(a) and (b) / GEM Rule 19.06(6)(a) and (b) also set out two specific
forms of RTO, and refers to: (a) an acquisition (or series of acquisitions) which constitute a very
substantial acquisition where there is or which will result in a change in control of the issuer (as
defined in the Takeovers Code); or (b) an acquisition (or acquisitions) from the incoming
shareholder or his associate(s) within 24 months of the incoming shareholder gaining control,
which individually or together constitute a very substantial acquisition. These are the bright line
tests and refer to specific forms of reverse takeovers involving a change of control of the issuer.
The Exchange will treat a listed issuer proposing a reverse takeover as if it were a new applicant.
The enlarged group or the assets to be acquired must be able to meet the requirements of Main
Board Listing Rule 8.05 or GEM Listing Rule 11.12A and the enlarged group must be able to meet
the basic conditions for listing.
Connected Connected Transactions (as defined in Main Board Listing Rules 14A.25, 14A.26 and 14A.28/ GEM
Transactions Listing Rules 20.23, 20.24 and 20.26) are subject to the same percentage ratios (although the
profit ratio does not apply to connected transactions) as those used to classify notifiable
transactions. Our Listing Rules set out the following de minimis thresholds for connected
transactions which are exempt from the requirements of reporting, announcement and/or
independent shareholders' approval:
Based on the percentage ratios used for classifying
notifiable transactions
De minimis threshold for exemption A connected transaction on normal commercial terms
from reporting, announcement and where each of the percentage ratios (except the profits
independent shareholders' approval ratio) is:
requirement 1. less than 0.1%; or
2. less than 1% for transactions with persons
connected only at the subsidiary level; or
3. less than 5% and the consideration is less than HK$3
million.
De minimis threshold for exemption A connected transaction on normal commercial terms
from independent shareholders' where each of the percentage ratios (except the profits
approval requirement ratio) is:
1. less than 5%; or
2. less than 25% and the consideration is less than
HK$10 million.
Exemptions from the connected transaction requirements are also available for, among others,
transactions with persons connected with an issuer’s insignificant subsidiaries (Main Board Listing
Rule 14A.09 / GEM Listing Rule 20.08) and connected persons at the subsidiary level (Main Board
Listing Rule 14A.101 / GEM Listing Rule 20.99).
Securities The Listing Rules set a required standard against which directors of listed issuers must measure
Transactions by their conduct regarding securities dealings. Absolute prohibitions include, but are not limited to,
Directors the following provisions:
1. A director must not deal in any of the securities of the listed issuer at any time when he is in
possession of inside information in the relation to those securities.
2. A director must not deal in the securities of a listed issuer when, by virtue of his position as a
director of another listed issuer, he is in possession of inside information in the relation to
those securities.
3. A director must not deal in any of the securities of the listed issuer (unless the circumstances
are exceptional) on any day on which its financial results are published; and
(a) during the period of 60 days immediately preceding the publication date of the annual
results or, if shorter, the period from the end of the financial year up to the publication
of the results; and
(b) during the period of 30 days immediately preceding the publication date of quarterly
results (if any) and half-year results or, if shorter, the period from the end of the
relevant quarterly or half-year period up to the publication date of the results.