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Disclosure of interests under the Securities and Futures Ordinance

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Disclosure of interests under the Securities and Futures Ordinance

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6. CALCULATION OF A PERSON’S INTEREST

Long Positions in Hong Kong-listed shares

The percentage figure of an interest in shares should be determined using the following formula:

nominal value of shares in which a person is interested *

x 100

nominal value of the issued shares of the listed company of the same class

Short Positions in Hong Kong-listed shares

To calculate whether a short position constitutes 1% or more, a similar formula can be used:

nominal value of shares in which a person has a short position * x 100

nominal value of the issued shares of the listed company of the same class

* Note that this will include all issued shares and shares underlying equity derivatives whether issued or unissued.

The forms require the percentage figure to be rounded to 2 decimal places. To find the percentage level of the interest the percentage figure is rounded down to the next whole number.

The date for calculating the relevant percentage is the date of occurrence of the relevant event and the number of shares in which a person is interested and the total number of issued shares should be determined on that day.

7. NOTIFICATION OF CHANGES IN THE NATURE OF INTERESTS

Any change in the nature of an interest already notified is required to be disclosed under Section 313(d). The situations in which there is considered to be such a change are extensive and include a change in the nature of a person’s title to shares, any of the person’s interest whether legal or equitable or any of the person’s interest in the underlying shares of equity derivatives on the exercise of rights thereunder (whether by or against him).

Common situations requiring notification of a change in interest will include:

  1. the exercise of rights (by or against a person) under options and other derivatives;
  2. the lending of shares under a securities borrowing and lending agreement (unless the Securities Borrowing and Lending Exemption applies – see paragraph 12.9 below); and
  3. the giving of shares as security to another person.

There is not considered to be a change in the nature of an interest under Section 313(13) and Section 5 of the Securities and Futures (Disclosure of Interests – Exclusions) Regulation:

  1. where a purchaser takes delivery of shares, if he has previously disclosed his equitable interest arising on contracting to buy the shares;
  2. where a vendor of shares enters into a contract for sale, if the sale is required to be completed within 4 days on which the Stock Exchange is open for business;
  3. where there is a change in the terms on which rights under equity derivatives may be exercised which results from a change in the number of underlying shares in issue;
  4. on the exercise of rights to subscribe for or on delivery of shares under a rights issue;
  5. where a “qualified lender” comes to have a security interest in a person’s shares (see paragraph 12.4 below); and
  6. where the person is a holding company and the transfer is of shares from one wholly owned subsidiary to another (see paragraph 12.5 below).

8. WHAT CONSTITUTES AN INTEREST IN SHARES?

The definition of an “interest in shares” is extremely broad and includes the situations set out in Schedule 1 hereto.

8.1. Buying and Selling Shares

A buyer of shares acquires an interest in shares at the time when he contracts to buy and therefore is required to give notification within 3 business days of the contract. No further notice is required when the buyer takes delivery of the shares.

A seller of shares will normally only cease to have an interest when he actually transfers the shares to the buyer and is therefore required to notify the cessation of his interest within 3 business days after the settlement date (i.e. the date of the actual transfer). If the contract for sale of the shares provides for settlement within 4 days on which the Stock Exchange is open for business, notification by the seller is not required on the entering into of the contract.

If in fact a seller ceases to be interested in the shares on the date of the contract for sale (e.g. due to the operation of the clearing system), then notice should be filed within 3 business days of the contract for sale.

If a contract for sale specifies a settlement date which is 5 or more days on which the Stock Exchange is open for business after the date of the contract, then 2 notices are required: first, a notice of change in nature of the interest which must be filed within 3 business days of the contract and second, a notice of cessation of interest to be filed within 3 business days of delivery of the shares.

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Posted on

2015-01-23