RESTRICTIONS FOLLOWING A NEW LISTING
(a) Moratorium on Disposal of Shares by Controlling Shareholders
The Listing Rules contain restrictions on the disposal of securities by controlling shareholders following a company’s new listing. Any person shown to be a controlling shareholder by the company’s listing document must not:
- dispose of, or enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of, any of the shares which the listing document shows to be beneficially owned by him during 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 6 months from the date on which dealings in the applicant’s securities commence on the Exchange; or
- dispose of, or enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of, any of the shares which the listing document shows to be beneficially owned by him if, such disposal or the exercise or enforcement of such options, rights, interests or encumbrances, would result in him ceasing to be a controlling shareholder in the period of 6 months commencing on the date on which the period referred to in (i) above expires.
Offers for sale contained in a listing document are not subject to the above restrictions.
A controlling shareholder is allowed to purchase additional shares and to dispose of such shares during the relevant periods, provided that the minimum public shareholding requirement with respect to the issuer’s shares can be met.
(b) No further Issues of Shares within 6 Months of Listing
The Listing Rules prohibit further issues of shares or securities convertible into shares of a listed issuer or the entering into of any agreement for such an issue within 6 months from the date on which dealings in the issuer’s shares commence on the Exchange (whether or not such issue of shares or securities will be completed within 6 months from the commencement of dealings). There are exceptions for:
- the issue of shares pursuant to a share option scheme under Chapter 17 of the Listing Rules;
- the exercise of conversion rights attaching to warrants issued as part of the IPO;
- any capitalisation issue, capital reduction or consolidation or sub-division of shares; and
- 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.
(c) Restriction on Fundamental Change in the Nature of Business
In the 12 months following listing, an issuer may not effect any acquisition, disposal or other transaction or arrangement (or series thereof) which would result in a fundamental change in the principal business activities of the listed issuer as described in its listing document. The Exchange may however grant a waiver from this restriction if the circumstances are exceptional and the transaction is approved by a resolution of the issuer’s independent shareholders (any controlling shareholder, or if none any chief executive or directors, and their associates must abstain from voting in favour).
THE LISTING PROCESS
(a) Appointment of a Sponsor
A company applying to list on the Exchange must appoint one or more sponsors to assist it. Only corporate finance advisers licensed by the SFC to conduct sponsor work are permitted to act as sponsors. The sponsor must also be independent of the applicant from the date of submission of the listing application until the date of listing and must comply strictly with the Listing Rules relating to sponsors.
The sponsor is responsible for preparing the issuer for listing, the submission of the application for listing and for dealing with the Exchange on all matters concerning the application.
Additionally, the sponsor must be satisfied that the new issuer is suitable to be listed, that the information contained in the prospectus is complete and accurate in all material respects and that the issuer’s directors will be able to honour their obligations under the Listing Rules post-listing.
(b) Applying to List
The sponsor will submit to the Exchange the listing application form (Form A1), a draft of the listing document which is substantially complete except in relation to information which can only be incorporated at a later date (the Application Proof), all supporting documents and the listing application fee. A listing application must be submitted at least two months after the signing of the sponsor engagement letter, and if there is more than one sponsor, two months after the date the last sponsor to be appointed signed the engagement letter.
On applying to list, the Application Proof of the listing document is required to be published on the website of the Exchange. The information contained in the Application Proof, the Form A1 and other documents submitted with Form A1 is required to be substantially complete, except for information that, by its nature, can only be finalised and included at a later date. If the Exchange does not consider the information to be substantially complete, it will return the listing application and all other documents to the sponsor. If an application is returned, the Exchange will publish on its website the names of the listing applicant and its sponsor(s) and the date of its decision to return the listing application (Return Decision). It will also refund the initial listing fee unless it returns the listing application after issuing its first comment letter, in which case the initial listing fee will be forfeited. The applicant can resubmit the Form A1 and a new Application Proof, but cannot do so until 8 weeks after the date of the Return Decision.
The requirement for the Application Proof to be substantially complete when it is submitted to the Exchange with the listing application means that the sponsor’s due diligence process has to be front loaded, in that it should be completed before the submission of the listing application. The directors of the listing applicant are responsible for ensuring that the information in the Application Proof (and the final form listing document) is accurate and complete in all material respects and is not misleading or deceptive.