China: HKEX Consultation Following CSRC New Filing Rules

1.

Class meeting requirement

In order to change or abrogate the rights of a class of shareholders (including an increase or decrease in the number of shares of one particular class), PRC issuers must obtain special resolutions via (1) a shareholder meeting and (2) separate class meetings of holders of domestic shares and of H shares.

The class meeting requirement relating to the issuance and repurchase of shares is repealed¹.

2.

Amendments to shareholders' mandates for the issuance of shares

Mandate limits

PRC issuers may seek prior approvals from their shareholders to:

(1) issue securities of up to 20% of each of its issued domestic shares and H shares (the "General Mandate"); and

(2) issue securities in respect of options and awards granted under share schemes within the meaning under Chapter 17 of the Listing Rules of up to 10% of each of its issued domestic shares and H shares (the "Scheme Mandate").

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 shares².

Issue price limit

The price for new share issuance for cash under the General Mandate and the exercise price of share options under a share option scheme are benchmarked to the market price of H shares³.

For PRC issuers whose H shares and domestic shares are dually listed on HKEX and a stock exchange in Mainland China ("A+H issuers"), the CSRC has promulgated rules that impose price limits on issuances of A shares benchmarked to the market price of A shares.

HKEX will retain the rules to benchmark the issue price limits to the H share market price and the current practice of considering waivers from strict compliance with the exercise price requirements on a case-by-case basis.

3.

Rule amendments relating to articles of association of PRC issuers

Appendix 13D (section 1) requires PRC issuers' articles of association to include the Mandatory Provisions and the ancillary provisions.

Appendix 13D (section 2) provides a list of matters to be included in listing documents which is applicable to both PRC issuers and overseas issuers.

Appendix 13D (section 1) will be repealed and the list of matters under Appendix 13D (section 2) will be moved to Appendix 1A (which governs disclosure in listing documents).

Transitional arrangements:

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, until they amend their articles of association. They should also comply with the Listing Rules (or the amended Listing Rules after the effective date of the Listing Rule amendments) at all times.

New listing applicants established in the PRC are expected to follow the Guidelines for the Articles of Association of Listed Companies issued by the CSRC in preparing their articles of association. HKEX will allow applicants to comply with the Listing Rules taking into account the consequential amendments if they are listed on HKEX during the period from the repeal of the Mandatory Provisions to the effective date of the Listing Rule amendments.

4.

Timing for dispatching the circular and the listing document

PRC issuers are required to dispatch (1) the circular and (2) the listing document on or before the deadline for giving notice of the general meeting under the Company Law of the PRC.

The timing for PRC issuers to dispatch the circular and the listing document will be aligned with that applicable to other issuers (i.e. at the same time as (or before) the notice of the general meeting is given)⁴.

5.

Requirements relating to the submission of a notification issued by the CSRC confirming the completion of filing procedures by new listing applicants to HKEX

A PRC new listing applicant is required to submit a copy of the CSRC's approval of its listing on HKEX at least 4 clear business days before the expected hearing date.

HKEX will remove the requirement concerning submission of a copy of the CSRC's approval and add a new Listing Rule to require new applicants (regardless of being established in the PRC or other jurisdictions) to submit, at least four clear business days before the expected hearing date, a notification issued by the CSRC confirming the completion of the filing procedures if the new applicant's application for listing on HKEX is required to be filed with the CSRC.