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Listing Russian companies in Hong Kong

Listing Russian companies in Hong Kong


The particular advantage of qualifying as a Mineral Company for a company seeking a Main Board listing is the opportunity to obtain a waiver from the requirement to meet the financial tests of Main Board Rule 8.05. A Mineral Company is a company whose Major Activities (whether directly or through a subsidiary company) include exploration for, and/or extraction of, natural resources such as minerals or petroleum. A Major Activity is one representing 25% or more of the total assets, gross revenue or operating expenses of the applicant and its subsidiaries.

As mentioned above, a Mineral Company will qualify for a waiver of the financial test requirements if it establishes to the Exchange’s satisfaction that its directors and senior management, taken together, have a minimum of 5 years’ experience relevant to the exploration and/or extraction activity that the Mineral Company is pursuing (Main Board Rule 18.04). Details of such experience must be included in the applicant’s listing document. Other key requirements that must be satisfied by a new applicant Mineral Company are set out below.

Portfolio of Indicated Resources or Contingent Resources Requirement

A new applicant Mineral Company is required to have at least a portfolio of Indicated Resources (in the case of minerals) or Contingent Resources (in the case of petroleum) that are identifiable under one of the accepted reporting standards and substantiated in the report of an independent expert (a Competent Person). The definition of Indicated Resources is based on the one in the 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code). The definition of Contingent Resources is based on the one in the Petroleum Resources Management System of September 2007 (PRMS). The portfolio is also required to be meaningful and of sufficient substance to justify a listing. We have been told informally that this requirement will be satisfied in the case of a Main Board listing applicant if the HK$200 million market capitalisation requirement will be met at the time of listing. Early stage exploration companies are thus not eligible for listing.

Rights of Active Participation

A new applicant Mineral Company must also be able to demonstrate that it has the right to actively participate in the exploration for and/or extraction of resources either through:

  • control over a majority (by value) of the assets in which it has invested together with adequate rights over the exploration for and/or extraction of resources. This will normally be interpreted as an interest of more than 50%. Companies must also disclose full details of their exploration and/or extraction rights; or
  • adequate rights arising under arrangements acceptable to the Exchange, which give it sufficient influence in decisions over the exploration for and/or extraction of the resources. Arrangements which may be acceptable include joint ventures, production sharing contracts or specific government mandates. The Exchange has stated that it will adopt a purposive approach to determining what is appropriate in specific circumstances and places the onus on applicants to demonstrate the adequacy of their rights and sufficiency of influence.


The Country Guide contemplates Russian companies seeking a secondary listing in Hong Kong and states that they will be entitled to certain automatic waivers from the Listing Rules subject to meeting the conditions set out in paragraph 88 of the Joint Policy Statement. Those conditions are that the secondary listing applicant: (i) has a market capitalisation of US$400 million or more; (ii) has been listed on its primary market for 5 years or more (unless its market capitalisation is significantly greater than US$400 million); (iii) has a good record of compliance with the rules and regulations of its home jurisdiction and primary market; and (iv) its primary listing is on a recognised exchange as listed in paragraph 91 of the Joint Policy Statement. However, the Moscow Stock Exchange is not currently included in the list of recognised exchanges and thus it is not clear whether the Exchange would be prepared to grant the full set of automatic waivers on a secondary listing of a Russian company.

Companies that are already primary listed on certain stock markets recognised by the Exchange can apply for a secondary listing by way of introduction on Hong Kong’s Main Board. Brazilian Vale SA’s Hong Kong listing is an example of a secondary listing by introduction of DRs. The Exchange’s key criteria for accepting a company for secondary listing is that the company is primarily listed on an exchange where the standards of shareholder protection are equivalent to those available in Hong Kong.


The framework for listing DRs was introduced in July 2008 as part of the Exchange’s initiative to encourage the listing of more foreign companies on the Exchange. Prior to 2008, the Listing Rules required companies to list in the form of ordinary shares and to maintain a share register or a branch of their share register in Hong Kong. These requirements effectively barred the listing of companies from jurisdictions which prohibit the issue of shares overseas or the maintenance of an overseas share register. The DR regime was therefore introduced as a solution to this problem and was aimed in particular at encouraging the listing of companies from Russia, India, Taiwan, Kazakhstan, Mongolia and Vietnam.

However, to date, only three companies have listed DRs on the Exchange and these were all secondary listings. These are: (i) Brazilian mining company, Vale which listed in Hong Kong in December 2010 – it is also listed on the stock exchanges of São Paulo, New York, Paris, and Madrid; (ii) American luxury handbag and accessories brand, Coach Inc. which listed in Hong Kong in December 2011 – its primary listing is on the New York Stock Exchange; and (iii) Japanese retail clothing business, Fast Retail-DRS whose primary listing is on the Tokyo Stock Exchange and which listed in Hong Kong in March 2014.

Listing Requirements for DR Issuers

The listing requirements for DR issuers are essentially the same as for issuers of shares – i.e. they must satisfy the listing criteria set out in Chapter 8 of the Listing Rules. Additional requirements specific to DRs must also be complied with and these are set out in Chapter 19B of the Main Board Listing Rules. The additional requirements that must be met by DR issuers are as follows:

(a) DR Requirements

The DRs must be freely transferable and the securities which the DRs represent must be fully paid and free from all liens and restriction on the right of transfer to the depositary. DRs may be issued in respect of newly issued shares and/or in respect of shares placed with a depositary by existing shareholders provided that the issuer applies to be the issuer of such depositary receipts and assumes the obligations and duties imposed on an issuer by the Listing Rules.

(b) Register of DRs

An approved share registrar is required to maintain in Hong Kong a register of DR holders and the transfers of the DRs. Only DRs registered in Hong Kong are permitted to be traded on the Exchange.

(c) Depositary

The depositary must: (a) be duly incorporated and operate in conformity with its constitutional documents; (b) be a suitably authorised and regulated financial institution acceptable to the Exchange; and (c) have adequate experience in issuing and managing DR programmes in Hong Kong or overseas. Depositaries do not require a depositary licence.

(d) Deposit Agreement

Issuers are required to enter into a Deposit Agreement with the depositary, which acts as the agent of the issuer for the benefit of the DR holders. The Deposit Agreement is required to stipulate the rights, duties and obligations of the depositary, issuer, DR holders, and custodian and to set out the fee structure of the depositary.

The Deposit Agreement must also define the procedures for the replacement or removal of the depositary and/or the custodian and should specify the procedures for amending the agreement. The governing law of the Deposit Agreement is required to be Hong Kong law or any other law that is generally used in accordance with international practice.

(e) Number of Authorised DRs

DRs seeking to list on the Main Board can represent any number of shares. To allow for future conversions of the underlying shares into DRs, the issuer may apply to list a greater number of DRs than will be issued for capital raising (i.e. it may apply for “headroom”). Any combination of DRs issued for capital raising or issued as a result of conversion of underlying shares will be permitted and listing approvals will be given for specific purposes and amounts.

No further application for listing DRs is required for the creation of listed DRs resulting from the conversion of shares into DRs. Similarly, no further listing of DRs is needed for any further issue of shares, provided that the original amount of listed DRs is not exceeded. The depositary will monitor the level of outstanding DRs on a day-to-day basis and will not permit shares to be converted into DRs if this would cause the number of authorised DRs to be exceeded. Listing must be sought for all further issues of DRs in excess of the amount of DRs already listed.

(f) Rights of DR Holders

The rights of DR holders are broadly equivalent, but not identical, to those of the underlying shareholders. The rights of DR holders are contractual and arise from the deposit agreement, whereas the rights of shareholders are reinforced by statute in the issuer’s jurisdiction of incorporation. The local laws may prohibit foreign investors from holding shares directly: no such restriction will however apply to the DRs. Subject to compliance with local laws and regulations, DR holders who want to enforce their rights as shareholders may choose to convert their DRs into shares of the issuer.

As regards voting rights, the depositary will send information on resolutions and voting procedures to the DR holders and will pass the DR holders’ voting instructions back to the issuer.



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