According to the HKEx Information Paper, to participate in USM, issuers will need to enable their Prescribed Securities to be evidenced and transferred without an instrument. The constitutional documents of the issuers and/or the terms of issue of the relevant securities must accommodate these processes.
Prescribed Securities mean the following securities: (a) shares, other than shares that constitute interests in a collective investment schemes authorized by the Hong Kong Securities and Futures Commission (“CIS”); (b) depositary receipts; (c) stapled securities; (d) interests in an authorized CIS which, under the terms of issue of the authorized CIS, may be withdrawn from a clearing and settlement system operated by, or on behalf of, the Hong Kong Securities Clearing Company Limited; (e) warrants, that is, subscription warrants issued for capital fund raising purposes that entitle the holder to subscribe for securities (whether issued or unissued) that fall within a class or description of securities specified in sub-paragraphs (a), (b), (c) or (d) above; or (f) rights, that is, rights under a rights issue to subscribe for securities that fall within a class or description of securities specified in sub-paragraphs (a), (b), (c) or (d) above; and that are listed or to be listed on the Exchange.
For the above purpose, the USM rule amendments require an issuer of Prescribed Securities to amend the provisions in its constitutional documents (and/or the terms of the Prescribed Securities) to ensure that they do not conflict with laws and regulations related to its Prescribed Securities becoming participating securities. This includes provisions and terms regarding the holding of or transfer of title to the Prescribed Securities. Such amendments are required as long as doing so does not violate or create conflict with any laws in the jurisdiction which the issuer is incorporated or the laws of the jurisdiction governing the relevant securities.
Since most HKEx-listed companies are incorporated in the Cayman Islands and Bermuda, they must take the following actions related to USM implementation. For new applicants, they should amend their constitutional documents (and/or terms of issue of the relevant securities) to align with applicable USM legal and regulatory requirements prior to their date of listing, if that date falls after the date on which section 7 of the Securities and Futures and Companies Legislation (Amendment) Ordinance 2021 comes into operation (“USM Implementation Date”). For listed issuers, they should amend their constitutional documents (and/or terms of issue of the relevant securities) to align with applicable USM legal and regulatory requirements within one year of USM Implementation Date. We recommend that listed issuers and new listing applicants consult their legal advisers to ensure that such amendments to their constitutional documents comply with the laws in their respective jurisdiction of incorporation.
Appleby’s Hong Kong Capital Markets team is highly regarded for its extensive expertise in supporting offshore companies with IPOs, introductions, placements and listings of both equity and debt securities on the Hong Kong, US, Singapore and many other internationally recognised stock exchanges. We will continue to monitor the latest announcements from the HKEx and will keep you updated on the latest developments regarding the implementation of USM in Hong Kong.
