SFC Guidance Note on Uncertificated Securities Market (USM) for HKEX-listed Issuers

Jun 11, 2026 | Hong Kong Law

On 29 May 2026, the Securities and Futures Commission (SFC) published a Guidance Note for Issuers on Participating in the Uncertificated Securities Market Regime (the SFC USM Guidance Note), aimed at assisting Hong Kong-listed issuers in understanding and meeting their obligations under Hong Kong’s uncertificated securities market (USM) regime due to be implemented on 16 November 2026. In parallel, the Stock Exchange of Hong Kong Limited (HKEX) released a Guide on the Uncertificated Securities Market (the HKEX USM Guide), addressing issuers’ obligations under the HKEX Listing Rules.

HKEX-listed issuers should review and, where necessary, amend their terms of issue (including their articles of association or other constitutional documents) to ensure they are consistent with the USM regime. To assist them in this process, the SFC USM Guidance Note identifies key areas that require attention and includes sample amendments to articles for consideration. The deadline for listed issuers to update their articles or other constitutional documents is the later of 16 November 2027 (the first anniversary of USM launch) and the date of the issuer’s first annual general meeting (AGM) following launch.

This newsletter summarises the key aspects of the SFC’s USM Guidance Note including the sample article amendments they suggest and the steps that listed issuers should be taking now.

What is the Hong Kong USM Regime?

The USM regime is designed to enable investors to hold and transfer legal title to prescribed securities in their own names without the use of paper documents. The regime is established under Part IIIAA of the Securities and Futures Ordinance (Cap 571) (SFO) and supported by subsidiary legislation, including the Securities and Futures (Uncertificated Securities Market) Rules (Cap 571AS) (USM Rules), the Securities and Futures (Approved Securities Registrars) Rules (Cap 571AT) (ASR Rules), and the Code of Conduct for Approved Securities Registrars (ASR Code).

The term “prescribed securities” covers six classes of HKEX-listed securities:

shares (other than shares constituting interests in an authorised collective investment scheme (CIS));
depositary receipts;
stapled securities;
interests in an authorised CIS that may be withdrawn from CCASS;
subscription warrants entitling the holder to subscribe for any of the above; and
rights under a rights issue entitling the holder to subscribe for any of the above.

The initial focus of the USM regime is on prescribed securities constituted under the laws of four specified jurisdictions: Bermuda, the Cayman Islands, the Chinese Mainland and Hong Kong (the Specified Jurisdictions). As at end-December 2025, these accounted for just over 98% of all prescribed securities by number and approximately 93% by market capitalisation. All such securities must become ‘participating securities’ within five years of the USM implementation date (i.e., by November 2031 at the latest).

Requirement to Appoint an Approved Securities Registrar (ASR) in Hong Kong

All issuers of prescribed securities are required to appoint an approved securities registrar (ASR) to maintain their register of holders in Hong Kong. This obligation applies regardless of whether the securities are constituted under the laws of a Specified Jurisdiction and regardless of whether they have yet become participating securities. The appointment must be in place from the time the securities are first listed (or from the USM implementation date if already listed) until the securities cease to be listed.

Failure to appoint an ASR will result in the rejection of a listing application in the case of new listings, or the suspension of trading in the case of securities already listed.

Changing Your ASR: Notification Requirements and Penalties

Where an issuer intends to change its ASR, it must notify both the SFC and the HKEX in writing. Notification must be given at least three months before the change takes effect, or as soon as reasonably practicable after the issuer becomes aware of the change, whichever is later. Failure to comply without reasonable excuse is a criminal offence attracting a fine at level 5 (HK$50,000).

To date, six companies have applied to become ASRs. These are: Boardroom Share Registrars (HK) Limited, Computershare Hong Kong Investor Services Limited, Computershare Investor Services Limited, Hongkong Managers and Secretaries Limited, Tricor Investor Services Limited and Union Registrars Limited.¹

The information that must be included when notifying the SFC of a change in ASR is set out at Appendix 1 to the USM Guidance Note.

When Must HKEX-listed Securities Become Participating Securities under Hong Kong’s USM Regime?

Securities Already Listed on the SEHK at the USM Implementation Date

Prescribed securities constituted under the laws of a Specified Jurisdiction that are already listed when the USM regime takes effect must become participating securities by their respective ‘specified dates’. These dates will fall within the five-year window commencing on the USM implementation date. Issuers will be notified in writing of their Specified Date at least three months in advance.

IPOs and New HKEX Listings after 16 November 2026: USM Requirements from Day One

Prescribed securities constituted under the laws of a Specified Jurisdiction and first listed after the USM implementation date must be participating securities from their listing date. This means that they must be issued in uncertificated form from the outset.

Subscription Warrants and Rights Issues: When Do USM Rules Apply?

These instruments will only need to become participating securities if they are issued after their underlying prescribed securities have already become participating securities. Where this is the case, they must be participating securities from the time of listing. If issued before the underlying securities become participating securities, they are not required to become participating securities at all.

Penalties for Failing to Comply with Hong Kong USM Participation Deadlines

Failure to ensure that prescribed securities become participating securities by the applicable deadline is a criminal offence carrying a level 4 fine (HK$25,000) and a continuing daily fine of HK$700. Non-compliance may also call into question the suitability of the securities to be or remain listed on the HKEX.

How to Prepare for USM Participation: Key Steps for Issuers

Issuers should commence preparations without delay. The USM Guidance Note identifies four key preparatory steps:

Reviewing and Amending Your Terms of Issue (Articles of Association / Bye-Laws)

Issuers must review and, where necessary, amend their terms of issue (including their articles of association or bye-laws, and any other documents governing the creation and transfer of the relevant securities) to ensure consistency with the USM regime. In particular, the terms of issue must accommodate:

the holding, evidencing, and transfer of legal title through a UNSRT system operated by an ASR in Hong Kong, without paper instruments. For these purposes, a UNSRT system is a computer-based system, its procedures and other facilities, that enables title to prescribed securities to be evidenced and transferred without a paper instrument, and facilitates supplementary and incidental matters;
dematerialisation of securities (i.e., the conversion of securities from paper to paperless form), whether at the issuer’s initiative or at the holder’s request;
a prohibition on the issuance of new title instruments (e.g. share certificates) once securities become participating securities;
maintenance, inspection, copying and closure of the register of holders in accordance with the USM Rules;
written confirmation to holders of any changes to register entries relating to them; and
the use of authenticated electronic messages for communications between the issuer and holders, including corporate communications, corporate action instructions and proxy appointments and revocations.

Where existing provisions conflict with the USM regime, or are silent on matters it addresses, amendments should be made to remove any inconsistency or ambiguity. Issuers have until the later of: (i) 16 November 2027 (the first anniversary of the USM implementation date); and (ii) the date of their first AGM following implementation, to complete the amendment exercise. Given the time required to obtain shareholder approval, issuers are strongly encouraged to begin this process immediately.

The USM Guidance Note includes a detailed Appendix 2, which sets out key areas of focus and sample provisions for consideration, based on the model articles for public companies under the Companies Ordinance (Cap 622). Issuers should treat these as reference only and seek independent legal advice on the appropriate amendments for their particular circumstances. Issuers incorporated outside Hong Kong must also verify that the laws and regulations of their home jurisdiction are compatible with the USM regime.

Appointing an ASR with an Approved UNSRT System

Before prescribed securities can become participating securities, the issuer must ensure that it has appointed an ASR which is approved to provide and operate a UNSRT system (the computer-based system through which legal title to securities is evidenced and transferred electronically). The issuer must also confirm that all onboarding processes have been completed and that the UNSRT system is ready to operate in respect of the relevant securities.

An issuer that has not yet commenced the participation process may retain an existing ASR that does not operate a UNSRT system for the time being. However, it will need to transition to an ASR with that capability before its prescribed securities can become participating securities.

Obtaining Written Confirmation of Readiness from Your ASR

HKEX-listed issuers must obtain written confirmation from their ASR that the UNSRT system is ready to facilitate participation and that a date has been agreed from which the system may be used to evidence and effect transfers of legal title without paper instruments.

USM Disclosure Obligations: Announcements Required Under the HKEX Listing Rules

Issuers, including listing applicants, are required to make various announcements and disclosures under the HKEX Listing Rules and the HKEX USM Guide, both before and after their prescribed securities become participating securities. These include:

announcement of the specified date after receiving notice under USM Rule 28(4) and the participation date (paragraphs 7, 8 and 10 of Appendix G1 to the Main Board Listing Rules and Appendix F1 to the GEM Listing Rules);
announcements/disclosures of any change to the specified date or participation date (paragraph 9 of Appendix G1 to the Main Board Listing Rules and Appendix F1 to the GEM Listing Rules and paragraphs 5.7 to 5.9, 11.7 and 11.8 of the HKEX’s USM Guide); and
announcements/disclosures relating to corporate action events occurring after the participation date (paragraph 13 of Appendix G1 to the Main Board Listing Rules and Appendix F1 to the GEM Listing Rules and paragraph 13.3 of the HKEX’s USM Guide).

USM Transition Timetable: How the Sequencing Arrangement Works

As at end-2025, there were over 2,600 issuers with prescribed securities constituted under the laws of a Specified Jurisdiction, with over 14.63 million title instruments in circulation (approximately 5 million of which were held within CCASS). Given this volume, a ‘sequencing arrangement’ has been established under which the transition of different securities to the USM regime will be co-ordinated and queued over the five-year period.

The sequencing arrangement is agreed among ASRs, HKSCC and the HKEX. Factors taken into account in setting specified dates include: the number of title instruments in circulation and the number of registered holders; any upcoming corporate actions; and any views or concerns expressed by the issuer via its ASR.

While issuers may provide input through their ASRs, it may not always be possible to accommodate their preferences. Issuers are encouraged to raise any concerns with their ASRs as early as possible.

HKEX will publish a quarterly list of prescribed securities scheduled to become participating securities in the forthcoming three months, together with their respective specified and participation dates. A separate list of securities that have already become participating securities will also be maintained and updated quarterly.

Applying to Defer a USM Specified Date or Participation Date

Deferral of specified date for securities listed after the USM implementation date

Once the USM is in force, companies incorporated in the Specified Jurisdictions which list on the HKEX will have to issue their prescribed securities in uncertificated form from their date of listing. The HKEX will have the power to allow prescribed securities to become participating securities from a date after the listing date subject to two limitations: the deferral power may only be exercised within the first 12 months following the USM implementation date and only in exceptional circumstances (for example, where a listing applicant had originally intended to list before the implementation date but was ultimately unable to do so, and requiring the securities to be in uncertificated form from listing would unreasonably disrupt the listing timetable); and any deferred date must still fall within five years of the USM implementation date.

A listing applicant seeking such a deferral should submit a written application to the HKEX’s Listing Division, setting out the grounds for the request, a proposed revised date and confirmation that no further deferral is expected.

Deferral of participation date for securities listed before the USM implementation date

Listed issuers incorporated in Specified Jurisdictions will have to ensure that their prescribed securities participate in the USM by their specified dates. A specified date notified to an issuer will not ordinarily be changed. The following circumstances will not justify a deferral:

the issuer’s failure to amend its terms of issue promptly;
the inability of the issuer’s ASR to operate a UNSRT system by the specified date; or
a change of ASR (otherwise than for reasons beyond the issuer’s control) and the consequent inability of the incoming ASR to complete the necessary processes in time.

Where genuine difficulty arises from circumstances beyond the issuer’s or its ASR’s control, a deferral application may be submitted. An application must be made in writing to the issuer’s ASR, HKSCC and the HKEX at least 30 business days before the specified date, and must explain the reasons for the deferral, propose an alternative date and confirm that no further deferral is anticipated. All parties must agree to the deferral and if they cannot agree, the matter will be determined by the SFC.

In practice, the specified date and participation date for listed issuers will be the same. As for the specified date, it will not generally be possible for an issuer to change its participation date. That said, there is limited scope for flexibility. Where compelling grounds exist for bringing forward or deferring a participation date, the issuer’s ASR, HKSCC and the HKEX may agree to do so, provided they are satisfied that the change can be accommodated without prejudicing the transition timetable for other prescribed securities. An issuer wishing to request such a change should approach its ASR as early as possible, and in any event no later than 30 business days before the proposed participation date; the ASR will then liaise with HKSCC and the HKEX as necessary. Where the change sought is a deferral, a corresponding deferral of the specified date will also be required, and a formal application must be submitted to the ASR, HKSCC and the HKEX in accordance with the process described above, given that the participation date cannot fall later than the specified date.

Issuer Obligations after Securities become USM Participating Securities

No New Share Certificates: All New Issues must be in Uncertificated Form

Once prescribed securities become participating securities, any new units issued on or after the participation date (including bonus securities, scrip dividends and units issued pursuant to subscription warrants or rights) must be in uncertificated form. New title instruments may not be issued. Breach of this obligation is a criminal offence.

Dematerialisation of Existing Share Certificates under the USM Regime

Units of participating securities held within CCASS at the participation date must be dematerialised within six months, though in practice the process is expected to be completed within a matter of weeks. Holders of securities in certificated form may also request dematerialisation during this period.

Where no title instrument was previously issued in respect of securities (for example, because the terms of issue did not require one), the issuer must still take steps to convert those securities into uncertificated form by having them recorded in the register of holders as such.

Issuers may initiate dematerialisation at their own initiative without waiting for a request from the holder, for example where they have received a valid title instrument in connection with a transfer, consolidation or replacement request. A dematerialisation fee may still be charged by the ASR in these cases.

Maintaining the Register of Holders: USM Rules on Entries, Notification and Book Closure

Once securities become participating securities:

the register of holders must specifically record which securities are held in uncertificated form;
written confirmation must be sent to a holder whenever any entry in the register relating to that holder or their uncertificated holdings is changed; and
the register may not be closed for more than two consecutive business days at a time (subject to any period during which trading is suspended).

Additionally, with effect from the USM implementation date and irrespective of whether securities have yet become participating securities, issuers must allow existing and past registered holders to inspect and copy register entries relating to them, and must provide copies of those entries on request and payment of the applicable fee.

Rematerialisation of Participating Securities: When Is It Permitted?

Once securities have been dematerialised, they should not be rematerialised unless: (i) the securities are to be delisted from the HKEX (in which case the issuer must follow the rematerialisation process set out in the USM Rules); or (ii) the SFC has granted an exemption permitting the issue of new units in certificated form or the issue of new title instruments.

Corporate Action Moratorium around the USM Participation Date

To ensure the smooth transition to participating status and the dematerialisation of CCASS holdings, issuers are strongly advised to avoid conducting corporate actions in the 13 business days immediately before and the 10 business days immediately following the participation date. Where a corporate action is unavoidable during this period, issuers should at a minimum ensure that key dates relating to it do not fall within this window. Full details are set out in section 15 of the HKEX’s USM Guide.

Amending Articles of Association and Bye-Laws for USM Compliance

The SFC USM Guidance Note’s Appendix 2 provides detailed guidance and sample provisions for amending constitutional documents. The sample provisions are based on the model articles included in the Hong Kong Companies Ordinance (Cap 622) and may therefore require modification for use by issuers incorporated outside Hong Kong. The non-exhaustive list of areas identified by the SFC as likely to require revision are summarised below.

1. Definitions

The SFC USM Guidance Note sets out the following suggested definitions:

In these [articles], unless the context otherwise requires:

the following terms bear the meanings given, or descriptions set out, under the SFO:
- ASR / approved securities registrar - see section 1 of Part 1 of Schedule 1 to the SFO;
- certificated form - see section 1AB of Part 1 of Schedule 1 to the SFO;
- prescribed securities - see section 101AA of the SFO;²
- uncertificated form — see section 1AB of Part 1 of Schedule 1 to the SFO;
- UNSRT system — see section 101AAB of the SFO.
the following terms bear the meanings given under the USM Rules:
- dematerialisation request - see rule 2(1) of the USM Rules;
- in the process of delisting - see rule 2(2) of the USM Rules;
- participating securities - see rule 2(1) of the USM Rules;³
- specified request - see rule 2(1) of the USM Rules;
- system-member - see rule 2(1) of the USM Rules;
ASR Code means the Code of Conduct for Approved Securities Registrars issued by the Securities and Futures Commission, as amended from time to time;
ASR Rules mean the Securities and Futures (Approved Securities Registrars) Rules, Cap 571AT, as amended from time to time;
dematerialisation means conversion from certificated form to uncertificated form (and dematerialise is to be construed accordingly);
HKSCC means Hong Kong Securities Clearing Company Limited;
operating rules of [the company’s] ASR mean such ASR’s operating rules (by whatever name called) for using any facilities provided by it, including in particular any facilities for evidencing and transferring legal title to [shares] in [the company] or for sending and receiving authenticated messages;
[register of [members] means the [branch] register of [members] holding [shares] in [the company] that is kept in Hong Kong]]; ⁴
rematerialisation means conversion from uncertificated form to certificated form (rematerialise shall be construed accordingly);
SEHK means the Stock Exchange of Hong Kong Limited;
SFO means the Securities and Futures Ordinance, Cap 571, as amended from time to time;
USM Rules mean the Securities and Futures (Uncertificated Securities Market) Rules, Cap 571AS, as amended from time to time.

2. Form of Shares

Provisions requiring the issue of share certificates or issuers’ shares to take a particular form (e.g., share certificates) must be amended or qualified to disapply them in respect of participating securities. In particular, issuers should consider providing expressly that no share certificates will be issued:

for so long as their shares remain participating securities;
except where the USM Rules otherwise permit or require (for example, where an exemption from rule 30 has been granted under rule 32).

For the avoidance of doubt, it may be helpful to spell out specific instances where this prohibition applies, such as following an allotment or transfer of shares. Issuers should also clarify that any certificates already in circulation and not yet cancelled will remain valid.

Sample Provisions on Form of Shares/ Issues and Allotments (Based on articles 64 and 66 of the Schedule 1 Model Articles)

The SFC USM Guidance suggests adding:

the following qualification at the end of article 64 (or any equivalent article or bye-law that requires the issue of share certificates in certain situations e.g., following an allotment, transfer, etc.
64. Certificates to be issued except in certain cases

…

This [article] applies subject to [articles 66A and 67E66].
the following qualification to article 66 (or any equivalent article or bye-law dealing with the consolidation or subdivision of existing share certificates).
66. Consolidated share certificates

…

This [article] applies subject to [article 66A].
the following new article after article 66 (or at the end of the section in the articles/bye-laws that deals with the issue of share certificates for whatever reason, or if there is no such section, then in a suitable place).
[66A] No obligation to issue certificates in respect of participating securities

(1) This [article] applies:
1. to [shares]⁵ in [the company] for so long as⁶ they are participating securities and not in the process of delisting; and
2. save as otherwise permitted or required under the USM Rules.
(2) With effect from (and including) the day on which [shares] in [the company] become participating securities (participation date) no [certificate] will be issued in respect of any such [shares].

(3) For the avoidance of doubt, paragraph (2) applies (without limitation) in the following circumstances:
1. following any issue, allotment, transfer, transmission, consolidation or subdivision of [shares] in [the company], if the issue, allotment, transfer, transmission, consolidation or subdivision is registered in the [register of members] on or after the participation date; or
2. where, for whatever reason,⁷ the holder of a [share] requests to replace an existing [certificate] for the [share], and the replacement [certificate] is not issued before the participation date.
(4) Nothing in this [article] affects the validity of any [certificate] issued by [the company] in respect of a [share] prior to the participation date, and not cancelled.⁸

3. Transfer and Transmission

Articles must be amended to permit transfers by way of specified electronic requests (as well as by instruments of transfer where necessary), and to reflect the prohibition on issuing new share certificates following a transfer.

Listed issuers should consider clarifying that:

so long as their shares remain participating securities; and
save as otherwise permitted or required under the USM Rules:
1. transfers may be effected using either an instrument of transfer or a specified request, with some clarification as to which is generally expected to be used, and when; and
2. no share certificate will be issued following the transfer. Depending on how the articles/bye-laws are drafted, this point may need to be addressed in the provisions dealing with transfers, or the provisions dealing with share certificates, or both. In the context of the Schedule 1 Model Articles, the removal of the need to issue share certificates is covered under the provisions dealing with share certificates and hence the necessary amendments are dealt with there (see sample article 66A above, and related sample amendment to article 64) rather than in the sample provisions on transfer.

Issuers should also ensure that any provision relating to the payment of a fee for handling or registering any transfer of their shares does not allow for the payment of a fee that exceeds the upper limits prescribed on fees charged by ASRs (including fees for processing requests for registering transfers of prescribed securities) under Schedule 1 to the ASR Code. This applies to all shares that are prescribed securities, irrespective of whether they are participating securities or not.

Sample Provisions on Transfers

The SFC USM Guidance suggests:

adding the following qualification at the end of article 80⁹ (or any equivalent article(s)/bye-law(s) that sets out specific requirements for effecting transfers and/or the payment of a fee for registering transfers).
80. Transfer of shares

…

This [article] applies subject to [article 80A]¹⁰
adding the following new article after article 80 (or any equivalent article or bye-law that sets out specific requirements for effecting transfers):
[80A.] Transfer of prescribed securities

(1) This [article] applies:
1. to [shares] in [the company] for so long as¹¹ they are prescribed securities¹² and not in the process of delisting; and
2. save as otherwise permitted or required under the USM Rules.
(2) With effect from (and including) the day on which [shares] in [the company] become participating securities, they may be transferred as follows:¹³
1. if the [shares] are held by the transferor in certificated form — by means of an instrument of transfer that complies with [article 80(1)¹⁴] and the USM Rules;¹⁵ and
2. if the [shares] are held by the transferor in uncertificated form — by means of a specified request from the transferor and transferee that complies with the USM Rules.¹⁶
(3) Notwithstanding paragraph (2)(b), [shares] in [the company] held by the transferor in uncertificated form may be transferred by means of an instrument of transfer if [the directors] are satisfied that it is not reasonably practicable to transfer them by means of a specified request.¹⁷

(4) A reasonable fee (not exceeding any applicable limits prescribed under the ASR Code) may be charged by [the company’s] ASR for registering any instrument of transfer, specified request or other document relating to or affecting the title to any [share].
adding the following qualification at the end of article 81¹⁸ (or any equivalent article(s)/bye-law(s) that deals with the company’s/directors’ right to refuse transfers of shares and the company’s/directors’ obligations following such refusal).
81. Power of directors to refuse transfer of shares

…

This [article] applies subject to [article 81A].
adding the following new article after article 81 (or after any equivalent article(s)/bye-law(s) that deals with the company’s/directors’ right to refuse transfers of shares and the company’s/directors’ obligations following such refusal).
[81A.] Additional matters relating to power of [directors] to refuse transfer of [shares]

(1) [Without prejudice to [article 81¹⁹],²⁰ [the directors] may refuse to register the transfer of a [share]:
1. if the [share] is in certificated form, and a specified request is sent;
2. if the [share] is in uncertificated form, and:
  1. the specified request is not sent in accordance with the operating rules of [the company’s] ASR; or
  2. subject to [article 80A(3)], an instrument of transfer is lodged;²¹
3. if [the directors] are entitled to do so by virtue of article 86A;²² or
4. on any other ground provided under the USM Rules.
(2) Where [article 80A] applies, and [the directors] refuse to register the transfer of a [share], a notice of refusal must be sent to the transferor and transferee within such period as indicated in the ASR Code.²³

Sample Provision on Transmissions (Based on article 85 of the Schedule 1 Model Articles)

The SFC USM Guidance suggests amending article 85(5) (or any equivalent article(s)/bye-law(s) that requires a transmittee to execute an instrument of transfer when transferring shares to another person) to allow for the possibility that a specified request may be used instead.

85. Exercise of transmittee’s rights

…

(5) If the transmittee chooses to have the [share] transferred to another person, the transmittee must:

execute an instrument of transfer in respect of it; or
if [article 80A] applies and so permits, send a specified request in respect of it.

[( )] All the limitations, restrictions and other provisions of these articles relating to the right to transfer and the registration of transfer of [shares] apply to the transfer under paragraph [(5)], as if the transmission had not occurred and the transfer were a transfer made by the holder of the [share] before the transmission.²⁴

Use of Specified Requests Wherever Possible

The SFC considers that the use of specified requests should be supported, and the use of instruments of transfer limited, to facilitate the market’s timely transition to the USM regime. Accordingly, it expects issuers to require that transfers of participating securities in uncertificated form will:

be effected by means of specified requests; and
permit the use of instruments of transfer only in exceptional circumstances and having exhausted all reasonable efforts to facilitate the use of a specified request.

One situation in which the use of an instrument of transfer may be unavoidable is where the shares are being transferred in response to a general offer, and the offeror has appointed someone other than the company’s ASR to be its receiving agent for collecting acceptances and transfer instructions. In this case, the receiving agent will not be in a position to receive transfer instructions by way of a specified request because it does not operate the UNSRT system through which title to those shares may be evidenced and transferred electronically.

Issuers should therefore seek to understand from their respective share registrars/ASRs: (i) the circumstances that may exceptionally justify recourse to an instrument of transfer; and (ii) the arrangements to be put in place to facilitate the use of a specified request wherever possible (for example, arrangements for assisting elderly or non-digitally proficient persons to effect transfers by means of specified requests).

4. Lost or Damaged Share Certificates

The articles or bye-laws may contain provisions obliging the issuer to issue replacement share certificates where existing ones have been lost or damaged. These provisions may also stipulate certain procedures and preconditions that must be satisfied before replacement certificates are issued, for example, producing satisfactory evidence of the loss or damage, publishing the relevant notices and providing an indemnity.

These provisions will need to be appropriately amended or qualified to ensure consistency with the USM regime. In particular, issuers should consider making it explicit that: (i) for so long as their shares remain participating securities; and (ii) except as otherwise permitted or required under the USM Rules:

no replacement certificates will be issued;
the shares to which any lost or damaged share certificate relates may instead be dematerialised in accordance with the USM Rules, and recorded in the register of members as being held in uncertificated form; and
the existing procedures and preconditions applicable to the replacement of lost or damaged share certificates must nonetheless still be completed.

It is insufficient for any existing provisions concerning the replacement of lost or damaged certificates to be made subject to sample article 66A since that approach would fail to address the matters referred to in paragraphs (b) and (c) above, which it is important for the articles or bye-laws to address expressly.

Sample Provisions on Lost or Damaged Instruments (based on Article 67 of the Schedule 1 Model Articles

The SFC USM Guidance Note suggests adding the following:

a qualification at the end of article 67²⁵ (or any equivalent article(s)/bye-law(s) that deals with the replacement of lost or damaged share certificates).
67. Replacement [share] [certificates]

…

This article applies subject to [article 67A]
The following new article could then be added after article 67 (or after any equivalent article(s)/bye-law(s) that deals with the replacement of lost or damaged share certificates).
[67A.] No obligation to issue [replacement certificates] in respect of participating securities

(1) This [article] applies:
1. to [shares] in [the company] for so long as²⁶ they are participating securities and not in the process of delisting; and
2. save as otherwise permitted or required under the USM Rules.
(2) If a [certificate] issued in respect of a [member’s] [shares] is defaced, damaged, lost or destroyed, and no [replacement certificate] is issued prior to the day on which [shares] in [the company] become participating securities:
1. the [member] is not entitled to be issued with a [replacement certificate] in respect of the same [shares]; and
2. subject to paragraph (3), the [shares] may instead be dematerialised in accordance with the USM Rules.²⁷
(3) [Shares] of a [member] that are covered by a [certificate] that is defaced, damaged, lost or destroyed may not be dematerialised unless the [member] has complied with [the conditions as to evidence, indemnity and the payment of a reasonable fee that [the directors] decide²⁸].

5. New issues, Dematerialisation and Rematerialisation

New provisions will need to be introduced to address the issue of shares in uncertificated form, the dematerialisation and rematerialisation process, and the circumstances in which ASRs may charge fees. The key clarifications to incorporate are that, for so long as the company’s shares remain participating securities and subject to the USM Rules: (i) new shares must be issued in uncertificated form only; (ii) existing shares may be dematerialised or rematerialised in accordance with the USM Rules; (iii) a dematerialisation fee may be charged, subject to the limits set out under the ASR Code; and (iv) that fee may be levied regardless of whether dematerialisation was initiated by the company or requested by the holder.

Rematerialisation Provisions

Rule 27 of the USM Rules sets out certain steps that must be taken following rematerialisation of participating securities. In the case of shares, one of those steps - the issuance of share certificates to members - is only triggered where the articles or bye-laws so require. Issuers should therefore consider whether to include provisions addressing: (i) whether certificates will be issued following rematerialisation; and (ii) if so, the applicable timeframe.

On the question of whether certificates should be issued, issuers are guided by internal consistency: if the existing articles provide for certificates in other circumstances (such as following an allotment or transfer prior to the shares becoming participating securities), it would be logical to extend that treatment to rematerialisation as well. Conversely, where no provision for certificates currently exists, it would equally be logical to provide that none will be issued following rematerialisation. As for timing, one practical approach would be to align the post-rematerialisation issuance period with that already applicable to other certificate-issuance events.

Issuers should also consider the practical circumstances in which rematerialisation may be necessary, most commonly, upon delisting, and whether they will be in a position to issue certificates at that time, including whether their ASR will still be available to assist. Issuers are encouraged to discuss these considerations with their share registrars and ASRs.

Placement of Provisions

Issuers should consider where best within their articles or bye-laws to locate the new provisions relating to uncertificated issuance, dematerialisation and rematerialisation. A natural location, at least in the context of the Schedule 1 Model Articles, would be a new Division 3A inserted after Division 3 (Share Certificates) of Part 4 (Shares and Distributions).

Sample Provisions on New Issues in Uncertificated Form, Dematerialisation and Rematerialisation

The SFC USM Guidance Note suggests adding the following new articles in a suitable position, such as after the provisions dealing with issuing share certificates.

(a) [67B.] Scope of articles

Articles [67C and 67D] apply:
1. to [shares] in [the company] for so long as they are participating securities and not in the process of delisting; and
2. save as otherwise permitted or required under the USM Rules.

[67C.] New [shares] to be in uncertificated form

Any [share] issued on or after the day on which [shares] in [the company] become participating securities will be issued in uncertificated form and no [certificate] will be issued in respect of it.

[67D.] Dematerialisation of [shares]

With effect from (and including) the day on which [shares] in [the company] become participating securities, [shares] which are in certificated form may be dematerialised in accordance with the USM Rules.
A reasonable dematerialisation fee (not exceeding any applicable limits prescribed under the ASR Code) may be charged by [the company’s] ASR to the holder and/or transferee of a [share] in connection with the dematerialisation of the [share]. Such fee may be charged irrespective of whether the dematerialisation is initiated by [the company] or requested by the holder or transferee.

[67E.] Rematerialisation of [shares] in limited circumstances

This [article] applies to [shares] in [the company] if they are participating securities.
[Shares] in [the company] which are in uncertificated form may be rematerialised in accordance with the USM Rules.²⁹
[As soon as reasonably practicable after / Within [ ] months after]³⁰ any rematerialisation, [the company] must issue, free of charge, to each [member] whose [shares] are rematerialised, such number of [certificates] in respect of those [shares] as is required under the USM Rules.
If more than one person holds a [share], only one [certificate] may be issued in respect of it.]³¹

Refusing Transfers and Transmissions

To facilitate the market’s transition to full dematerialisation, the USM Rules are designed to discourage reliance on paper-based processes. Rules 25 and 26 enable issuers to initiate dematerialisation themselves and to issue new shares directly in uncertificated form. However, a difficulty arises where a holder has not yet completed the process of becoming a system-member of the UNSRT system operated by the issuer’s ASR. In this case, the holder will have neither a share certificate nor the ability to manage their holding electronically.

To address this, issuers may wish to refuse instructions to transfer or transmit shares where the shares are participating securities and: (i) the relevant holder or transferee has not yet completed system-membership registration; or (ii) applicable dematerialisation fees remain unpaid. The USM Rules expressly permit this approach. Where adopted, the relevant refusal grounds should be reflected in the articles or bye-laws and, where applicable, in relevant listing documents.

Placement of Provision

The provision may be incorporated by amending article 81 of the Schedule 1 Model Articles (which deals with directors’ power to refuse transfers) and relying on article 84(2) to extend its application to transmittees, or by adding a standalone provision at the end of Division 5 of Part 4 to address both transfers and transmissions. The sample below takes the latter approach.

Sample Provision on Refusing Certain Instructions

The guidance suggests adding the following new article after article 86 of the Schedule 1 Model Articles, e.g., after the provisions that deal with transfers and transmissions.

[86A.] Refusal of transfers and transmissions in certain circumstances

(1) This article applies:

to [shares] in [the company] for so long as³² they are participating securities and not in the process of delisting; and
save as otherwise permitted or required under the USM Rules.

(2) [The directors] may refuse to register the transfer or transmission of a [share] if:³³

the [share] is in certificated form and a dematerialisation request in respect of that [share] and any other [share] covered by the same [certificate] as that [share]:
1. is not received; or
2. is refused under the USM Rules;
the [share] is in uncertificated form as a result of [the company] having initiated its dematerialisation, and the dematerialisation fee payable in respect of the dematerialisation remains unpaid; or
the transferor,³⁴ transferee or transmittee (as applicable) of the [share] is not a system-member of the UNSRT system operated by [the company’s] ASR.

5. Register of Members

Most articles or bye-laws will already contain provisions touching on the register of members, though these tend to be distributed across various sections dealing with transfers, transmissions, forfeitures, book closure, communications and the like. Issuers will need to review these provisions and make appropriate amendments to ensure consistency with the USM regime. In particular, the articles or bye-laws should be updated to clarify that, for so long as the relevant shares remain prescribed securities and subject to the USM Rules: (a) the register of members will be maintained and updated in accordance with the USM Rules and will contain all matters required by those rules; (b) where shares are in uncertificated form, that fact will be recorded in the register; (c) such a record will, absent evidence to the contrary, constitute proof of the holder’s title to those shares; (d) persons will be entitled to inspect and copy the register in accordance with the USM Rules; and (e) the register may not be closed except as the USM Rules permit.

Non-Hong Kong incorporated companies

Issuers incorporated outside Hong Kong should note that the laws of their place of incorporation may impose different requirements regarding how registers of members are to be kept, made available for inspection, and what evidential weight their entries carry. This may mean that not all of the above amendments can be adopted in their entirety. These issuers should take the applicable laws of their jurisdiction of incorporation into account when determining how best to update their constitutional documents.

Placement of provisions

In the context of the Schedule 1 Model Articles, provisions relating to closure of the register of members could conveniently be incorporated into article 82, with the remaining matters addressed under a new Part 4A.

Sample Provision on Closure of the Register of Members (Based on article 82 of the Schedule 1 Model Articles)

The SFC USM Guidance Note suggests adding the following qualification at the end of article 82 (or any equivalent article(s)/bye-law(s) that empowers directors to suspend the registration of transfers or close the register of members for a specified period of time).

82. Power of directors to suspend registration of transfer of shares

…

For so long as [shares] in [the company] are participating securities], this article applies subject to the USM Rules.

Sample Provision on other Matters relating to the Register of Members

The guidance suggests adding the following new articles in a suitable place (e.g., under a separate section that follows the section dealing with shares, distributions and entitlements).

[Part 4A Register of Members]

[99A.] Application of Part 4A

This Part applies:

to [shares] in [the company] for so long as they are prescribed securities; and
in respect of that portion of the [register of members] relating to such [shares]].

[99B.] Keeping of [register of members]

[The company] will keep a [register of its members] in accordance with the USM Rules, and include in it such matters as are required by those rules to be included in it.
Where any [share] is issued in uncertificated form, or is dematerialised:
1. the [share] will be recorded in the [register of members] as being in uncertificated form; and
2. such record will not be amended or removed except in accordance with the USM Rules.

[99C.] Effect of and changes to entries in the [register of members]

Entries in the [register of members] will have such evidential value and other effect as provided in the USM Rules.
Changes to any entry in the [register of members] relating to the holder of a [share] will be notified to the holder in accordance with the USM Rules and the ASR Code.

[99D.] Inspection and copying

A person may, in accordance with the USM Rules, inspect, make copies of, and request to be provided with copies of, entries in the [register of members].

Additional considerations for non-Hong Kong companies

Non-Hong Kong incorporated issuers should also review any provisions in their articles or bye-laws that restrict access to the company’s books and records more broadly. For instance, article 103 of the Schedule 1 Model Articles limits the right to inspect the company’s accounts and other records — a category that may encompass the register of members — save where inspection is permitted under an enactment. However, depending on how that term is construed, it may extend only to domestic legislation. If the articles or bye-laws of a non-Hong Kong company contain a provision in similar terms, there is a risk of conflict with the inspection and copying rights conferred under the USM Rules, and amendment may therefore be required.

6. Communications Using Authenticated Messages

Articles or bye-laws commonly contain provisions governing communications to and by the company, and may already address whether electronic communications are permitted and on what conditions. However, depending on how those provisions are framed, they may not extend to the use of “authenticated messages” as contemplated by the USM Rules.

The USM Rules only mandate the use of authenticated messages for one specific purpose: effecting transfers of participating securities electronically. That said, given the practical convenience of authenticated messages and the protections afforded to them under rules 18 to 21 of the USM Rules, issuers may wish to go further and permit their use for communications more broadly. In doing so, issuers should consider two key questions: first, whether authenticated messages should be available to all registered holders and transferees regardless of whether their securities are held in uncertificated or certificated form; and second, whether their use should extend to all prescribed securities, including those that are not yet participating securities or are not in uncertificated form.

There are arguments on both sides of each of these questions, and issuers should also bear in mind that their ASRs may have operational constraints that limit what is achievable in practice. These factors should be reflected in the relevant provisions through appropriate qualifications. A further drafting point to note is that the term “authenticated message” is defined under the USM Rules by reference to participating securities only. If an issuer wishes to permit the use of authenticated messages in connection with prescribed securities more broadly (including those that are not yet participating securities), a wider definition will need to be included in the articles or bye-laws.

The sample provision below is drafted on the basis that authenticated messages may be used for all communications with holders and transferees of prescribed securities, subject to any limitations that the ASR may impose. A correspondingly broader definition of “authenticated message” is also included. The sample does not address fees, that is, whether charges may be levied for paper communications or for communications made otherwise than by authenticated message. Issuers should discuss this with their share registrars and ASRs, and consider whether and how to address fees in the articles or bye-laws, taking into account any applicable laws and regulations that may restrict the charging of such fees.

Sample Provision on Electronic Communications (Based on article 100 of the Schedule 1 Model Articles)

The SFC USM Guidance Note suggests adding the following supplement to article 100(1) (or to any equivalent article(s)/bye-law(s) that provides for whether and how electronic communications may be sent).

100. Means of communication to be used

…

[(1A)] [Without limiting [paragraph (1)], but] subject to any limitations imposed by [the company’s] ASR:

anything sent or supplied by [the company] to any holder or transferee of [shares] in [the company]; and
anything sent or supplied by any holder or transferee of [shares] in [the company] to [the company],
may be sent or supplied by means of an authenticated message.

[(1B)] The provisions of the USM Rules relating to the effect of an authenticated message apply if, in accordance with the USM Rules:

the message is attributable to the person sending or supplying it; and
the person receiving the message is the addressee of the message.

[(1C)] For the purposes of paragraphs [(1A) and (1B)], “authenticated message” bears the meaning given under the USM Rules [except that such message may relate to all [shares] in [the company] that are prescribed securities, and not only those that are participating securities].

…

Proxy Appointments and Revocations

Issuers may also wish to consider extending the use of authenticated messages to proxy appointments and revocations. As with electronic communications generally, any operational limitations on the part of the issuer’s share registrar or ASR will need to be taken into account. The sample provisions below are based on articles 53 and 55 of the Schedule 1 Model Articles and are written on the basis that authenticated messages may be used for both the appointment and revocation of proxies, subject to ASR limitations.

Sample Provisions on Proxy Appointments and Revocations (Based on articles 53 and 55 of the Schedule 1 Model Articles)

The guidance suggests:

adding the following expansion to article 53(1)(c) (or to any equivalent article(s)/bye-law(s) that provides for how proxy appointments may be executed).
53. Content of proxy notices

(1) A proxy may only validly be appointed by a notice in writing (proxy notice) that:

…

(c) is authenticated, or is signed on behalf of the member appointing the proxy, or (subject to any limitations imposed by [the company’s] ASR) is an authenticated message (as defined in article 100(1C)) [that is attributable and addressed as described in [article 100(1B)]]; and

…
adding the following expansion to article 55(2) (or to any equivalent article(s)/bye-law(s) that provides for how proxy appointments may be revoked).
55. Delivery of proxy notice and notice revoking appointment of proxy

…

(3) An appointment under a proxy notice may be revoked by delivering to the company a notice in writing given by or on behalf of the person by whom or on whose behalf the proxy notice was given. Subject to any limitations imposed by the [company’s] ASR, such notice may be sent by means of an authenticated message (as defined in article 100(1C)) [that is attributable and addressed as described in [article 100(1B)]].

…

Non-Hong Kong incorporated companies

Issuers incorporated outside Hong Kong face additional considerations in this area. The laws of their place of incorporation may impose their own requirements governing the delivery and receipt of electronic communications, which could be inconsistent with the use of authenticated messages or may impose supplementary requirements that make their use impracticable — for example, a requirement that a proxy appointment by a corporate holder be accompanied by a board resolution. Whether and on what terms such requirements can be disapplied will depend on the applicable law and may itself be subject to pre-conditions, such as an express statement of disapplication in the articles or bye-laws. Issuers in this position should take these matters into account when considering whether and how to provide for authenticated messages in their constitutional documents, both for general communications and for proxy-related purposes.

7. Miscellaneous Matters: Class of Shares, Entitlements, Special Cases and Other Amendments

Class of Shares

During the transitional period under the USM regime, a company’s shares may simultaneously be held partly in certificated and partly in uncertificated form, with the register of members reflecting this split. Notwithstanding the difference in form, the shares will remain a single class: uncertificated and certificated shares are not intended to constitute separate classes. Issuers may wish to make this explicit in their articles or bye-laws to remove any doubt. In the context of the Schedule 1 Model Articles, such a clarification could be added to article 61.

Sample Provision Relating to Class of Shares (Based on article 61 of the Schedule 1 Model Articles)

The SFC USM Guidance suggests adding the following clarification at the end of article 61 (or any equivalent article(s)/bye-law(s) that provides for the issue of different classes of shares).

61. Powers to issue different classes of shares

…

For the avoidance of doubt, [shares] in [the company] do not constitute a separate class solely by virtue of being in certificated form or uncertificated form.

Calculation of Entitlements

Under the USM regime, holders are not obliged to dematerialise their shares even after those shares become participating securities. A single holder may therefore hold some shares in certificated form and others in uncertificated form. In certain circumstances, this may create practical difficulties in calculating the distributions or entitlements due to that holder, making it necessary to calculate entitlements separately by reference to the certificated and uncertificated portions. The SFC USM Guidance Note indicates that these difficulties are most likely to arise in the context of a share consolidation or sub-division exercise, rather than in connection with dividend or bonus distributions. Issuers may nonetheless wish to amend their articles or bye-laws to accommodate this possibility.

Sample Provision on Calculation of Entitlements (Based on article 99 of the Schedule 1 Model Articles)

The SFC suggests adding the following to article 99 (or to any equivalent article(s)/bye-law(s) that provides for the adjustment of rights among members/holders where necessary).

99. Capitalisation of profits

…

To the extent necessary, [the directors] may make arrangements to calculate a [member’s] rights separately in respect of the portion of [shares] held by the [member] in certificated form and the portion held in uncertificated form where it is impracticable to do otherwise.

Companies that do not currently issue share certificates

Some companies already operate under articles or bye-laws that provide for no share certificates to be issued. Such companies are not exempt from the need to amend their constitutional documents. Their articles or bye-laws will still need to be updated to clarify that, for so long as the shares remain participating securities and subject to the USM Rules, existing shares may be dematerialised in accordance with the USM Rules and recorded in the register of members as being in uncertificated form, and that new shares issued after the participation date will be in uncertificated form only. This is required because the mere absence of a share certificate does not, of itself, mean that the share is in uncertificated form - it must also be so recorded in the register of members.

Companies Dual Listed on the HKEX

Where shares in a dual listed company are participating securities and a holder wishes to move their shares from the non-Hong Kong register to the Hong Kong register, dematerialisation of those shares may be required as part of that process. This is because the existing share certificate, which reflects the shares as registered on the non-Hong Kong register, may no longer be valid, and the issuance of new certificates is no longer permissible under the USM regime. Dual listed companies should therefore consider including in their articles or bye-laws a provision permitting the refusal of such a transfer on similar grounds to those set out in sample article 86A, for example, where a dematerialisation request has not been received, the relevant fee remains unpaid, or the holder is not yet a system-member of the UNSRT system operated by the company’s ASR.

Virtual and Hybrid Meetings of HKEX-Listed Companies

In keeping with the objectives of the USM regime and the requirements of the HKEX Listing Rules, issuers must ensure that their articles or bye-laws permit virtual or hybrid meetings and allow shareholders to speak and vote electronically. Division 1 of Part 3 of the Schedule 1 Model Articles already contains provisions to this effect, to which issuers may wish to refer.

Limitation on Number of Proxies

Amendments to the Companies Ordinance introduced by the USM Amendment Ordinance limit individual shareholders to appointing no more than two proxies, unless the articles otherwise provide. A corresponding amendment to the notice of meeting requirements has also been made. Given that this restriction was introduced to address potential abuse, issuers may wish to reflect it in their articles or bye-laws. Where they do so, and where the articles contain provisions specifying what must be included in notices of general meetings concerning proxy appointments, issuers may also wish to clarify that the two-proxy limit will be stated in the notice. In the context of the Schedule 1 Model Articles, amendments to articles 39(4)(g) and 50 would be appropriate.

Sample Provisions on Number of Proxies (Based on articles 39(4)(g) and 50 of the Schedule 1 Model Articles)

The SFC USM Guidance Note suggests:

amending article 39(4)(g) (or any equivalent article(s)/bye-law(s) that provides for a member’s right to appoint a proxy to be set out in the notice of general meetings).
39. Notice of general meetings

…

(4) The notice must—

…

(g) contain a statement specifying a member’s right to appoint a proxy …. and any limit on the number of proxies to be appointed as imposed under [article 50(2)].

…
adding the following supplement to article 50(2) (or any equivalent article(s)/bye-law(s) that provides for or permits (whether expressly or impliedly) the appointment of more than one proxy).
50. Number of votes a member has

…

(2) If a member appoints more than one proxy, the proxies so appointed are not entitled to vote on the resolution on a show of hands. The number of proxies appointed by a [member] who is an individual may not in any event exceed 2.

…

Review of terminology

Issuers should also review their articles or bye-laws for provisions that use terms such as “certificate”, “title instrument”, “instrument of transfer” and “transfer” (where that term is used to mean an instrument of transfer), and consider whether these need to be updated for consistency with the USM regime. The following sample amendments to the Schedule 1 Model Articles illustrate the types of adjustments that may be needed.

Sample Provisions Relating to Miscellaneous Matters (Based on articles 69, 77, 78 and 99 of the Schedule 1 Model Articles)

The SFC USM Guidance Note suggests adding suitable qualifications to article(s)/bye-law(s) that require the delivery of a share certificate, i.e., so as to allow for the possibility that no certificate may have been issued (e.g., in respect of shares that are in uncertificated form).
69. Enforcement of company’s lien

…

(5) The net proceeds of the sale (after payment of the costs of sale and any other costs of enforcing the lien) must be applied:
1. first, in payment of so much of the sum for which the lien exists as was payable at the date of the lien enforcement notice;
2. second, to the person entitled to the shares at the date of the sale.
(6) Paragraph (5)(b) applies:
1. only after any certificate issued in respect of the shares sold has been surrendered to the company for cancellation or a suitable indemnity has been given for any lost certificates; and
2. subject to a lien equivalent to the company’s lien on the shares before the sale for any money payable in respect of the shares after the date of the lien enforcement notice.
…

77. Effect of forfeiture

…

(2) If a person’s shares have been forfeited:

…

(c) that person must surrender any certificate issued in respect of the shares forfeited to the company for cancellation;

…
adding suitable amendments to article(s)/bye-law(s) that require or envisage the use of an instrument of transfer, i.e., so as to allow for the possibility that a specified request may be used instead (e.g., in respect of transfers of shares that are in uncertificated form).
78. Procedure following forfeiture

(1) If a forfeited share is to be disposed of by being transferred, the company may receive the consideration for the transfer and the directors may authorise any person to execute the instrument of transfer or send the specified request.

…
the Guidance Note also suggests adding a suitable qualification to article(s)/bye-law(s) that provide for the issuing of share certificates, i.e., so as to cater for the prohibition on issuing share certificates in respect of shares that are participating securities.
99. Capitalisation of profits

…

(3) To the extent necessary to adjust the rights of the members among themselves if shares or debentures become issuable in fractions, the directors may make any arrangements they think fit, including (subject to [article 66A]) the issuing of fractional certificates or the making of cash payments or adopting a rounding policy.

…

Overarching provision

As an additional safeguard, issuers may wish to include a general overarching provision confirming that the USM regime prevails over any conflicting or inconsistent provision in the articles or bye-laws, and that where the articles or bye-laws are silent on a matter addressed by the USM regime, that matter shall be treated as required or permitted accordingly. The overarching provision should apply both to mandatory and enabling provisions of the USM regime. That said, issuers need to be cautious about relying on such a provision as a substitute for making specific amendments: doing so risks creating ambiguity as to the rights and obligations of relevant parties and may give rise to disputes between issuers and holders.

Sample Overarching Provision

The SFC USM Guidance suggests adding the following new article/bye-law in a suitable place. One option might be to add it under the interpretation section of the articles/bye-laws.

[ ]. Overarching effect of [USM regime]

If any provision of these [articles] conflicts or is inconsistent with any provision of the USM regime (and irrespective of whether the provision is mandatory or enabling in nature), the latter will prevail to the extent of the conflict or inconsistency.
If these [articles] are silent in respect of any matter provided for under any provision of the USM regime (and irrespective of whether the matter is required or permitted under such provision), the matter will be regarded as required or permitted (as the case may be) under these [articles].
For the purposes of paragraphs (1) and (2), the provisions of the USM regime refers to all laws, rules or regulations governing the evidencing, transfer, dematerialisation, rematerialisation, or registration of prescribed securities, and includes the following:
1. the SFO;
2. any rules made under the SFO, including the USM Rules and the ASR Rules;
3. the ASR Code;
4. any rules made by the SEHK pursuant to section 23 of the SFO[, including the Rules Governing the Listing of Securities on the SEHK, and the Rules Governing the Listing of Securities on the Growth Enterprise Market of the SEHK];
5. any rules made by HKSCC pursuant to section 40 of the SFO[, including the General Rules of HKSCC and Operational Procedures of HKSCC]; and
6. the operating rules of [the company’s] ASR.

8. Subscription Warrants and Rights under a Rights Issue

The terms of issue of subscription warrants and rights under a rights issue are ordinarily set out separately from the constitutional documents of the issuing company, and will not typically appear in the articles or bye-laws. However, where the articles or bye-laws do contain provisions in this regard, these should be reviewed and updated as necessary to align with the USM regime.

As regards the terms of issue more broadly, subscription warrants and rights under a rights issue are only required to become participating securities if they are issued after their underlying prescribed securities have already become participating securities. Where this is the case, issuers should ensure the terms of issue address the following:

the warrants or rights will be in uncertificated form and no certificates or other title instruments will be issued in respect of them;
any transfer must be effected by means of a specified request, save in exceptional circumstances justifying the use of an instrument of transfer;
transfer or exercise instructions may be refused where the holder has not completed the system-membership process with the issuer’s ASR;
any rematerialisation of warrants must be carried out in accordance with the USM Rules; and
the register of holders will be kept, made available for inspection and copying, and carry such evidential weight as the USM Rules require.

On the question of dematerialisation and rematerialisation, the SFC USM Guidance Note clarifies the position as follows. Warrants or rights issued before the underlying prescribed securities become participating securities may remain in paper form until exercise or expiry and may be transferred in paper form — there is no dematerialisation requirement. Warrants or rights issued after the participation date will be in uncertificated form from the outset, so the question of dematerialisation does not arise. As for rematerialisation, the short duration of rights under a rights issue — typically around two weeks — means there is unlikely to be any practical need for rematerialisation provisions in that context. Subscription warrants, which may have a term of one to five years, present a more meaningful case for considering rematerialisation.

9. Action Checklist: What HKEX-listed Issuers should do now to Comply with the USM

Given the planned implementation of the USM on 16 November 2026, Hong Kong-listed issuers should consider taking the following steps:

Contact your share registrar or ASR to understand timelines, the sequencing arrangement, and the steps required to bring your securities into compliance.
Start a review of your constitutional documents (articles of association, bye-laws, trust deeds, and other relevant documentation) to identify amendments required for consistency with the USM regime.
Plan for shareholder approval of the necessary amendments, with a view to completing the process well ahead of the deadline (the later of 16 November 2027 or the first annual general meeting after USM implementation).
Seek independent legal advice on the appropriate drafting of amendments to your terms of issue, having regard to your particular corporate structure, jurisdiction of incorporation and any dual-listing arrangements.
Ensure that your ASR is, or will be, approved to provide and operate a UNSRT system by your participation date.
Notify the SFC and the HKEX promptly if you intend to change your ASR.
If you believe exceptional circumstances may prevent timely compliance, engage with your ASR, the HKSCC and the HKEX at the earliest opportunity to explore deferral, and contact the SFC’s Supervision of Markets Division if an exemption may be required.

See the SFC’s website at https://www.sfc.hk/en/Rules-and-standards/Uncertificated-Securities-Market/Approved-Securities-Registrars
In the case of prescribed securities that are listed on both the SEHK and another market outside Hong Kong, the definition of “prescribed securities” may need to be cast more specifically (e.g., so that it refers only to those securities that fall within the definition under section 101AA of the SFO and are registered in the Hong Kong register of members)
In the case of participating securities that are listed on both the SEHK and another market outside Hong Kong, the definition of “participating securities” may need to be cast more specifically (e.g., so that it refers only to those securities that fall within the definition under rule 2(1) of the USM Rules and are registered in the Hong Kong register of members.
This definition is only needed in respect of companies that maintain more than one register of members (e.g., non-Hong Kong companies that maintain a principal register of members in their home jurisdiction and a branch register of members in Hong Kong). The precise language of this definition will depend on how the register in Hong Kong is described under the company’s home laws and existing terms of issue.
The suggested reference to ‘shares’ assumes that the company has issued only one class or type of shares, and all shares of that class or type are prescribed securities that will become participating securities. If the company has issued more than one class or type of shares, and not all classes or types will become participating securities, then the description here will need to more specifically describe the particular class or type of shares that will become participating securities (e.g., ‘Class A shares’). In the case of companies incorporated in the Chinese Mainland, a simple option may be to refer to ‘H-shares’ instead of just ‘shares’.
The reference here to ‘for so long as’ is to limit the application of this sample article 66A so that it does not apply during any period when the shares: (i) have not yet become participating securities; or (ii) have ceased to be participating securities. This means that any existing provisions in the articles/bye-laws that do provide for the issue of certificates can automatically apply at these times, i.e., without the need for the articles/bye-laws to be amended further.
These reasons may include: (i) the holder wanting to replace one certificate with two (or vice versa); (ii) the holder having changed his name and requesting a replacement certificate with his new name, etc.
This paragraph (4) seeks to safeguard the validity of existing share certificates.
One option would be to add the qualification as a new paragraph (5) under article 80.
If the original provision on transfers of shares includes a requirement to issue certificates following a transfer, then the proviso added here will need to include a reference to sample article 66A as well. In the context of the Schedule 1 Model Articles, since article 80(1) does not include such a requirement, the proviso only refers to sample article 80A and does not refer to sample article 66A as well.
This means that article 80A will not apply at any time when the shares are not prescribed securities when the existing provisions of the articles or byelaws dealing with share transfers can apply instead without any further amendment.
The reference here is to ‘prescribed securities’ rather than ‘participating securities’ because the sample provision also deals with the matter of any transfer fee that may be payable (see paragraph (4) of sample article 80A), and such fee is expected to be the same irrespective of whether the shares are participating securities or not. Nevertheless, in so far as the provision deals with the use of specified requests to effect transfers, it will necessarily apply only to participating securities. This is because the use of specified requests is limited to securities that are in uncertificated form and only participating securities can be in uncertificated form.
Paragraph (2) seeks to echo section 150 of the CO and section 36 of the SDO (as amended by the USM Amendment Ordinance), both of which require either an instrument of transfer or a specified request to be delivered in order to register a transfer. There is no similar requirement under the USM Rules.
The reference here should be to the provision in the articles/bye-laws that sets out requirements relating to the use of an instrument of transfer. In the context of the Schedule 1 Model Articles, the relevant provision is article 80(1).
Note in particular USM Rule 12, which deals with the registration of transfers using an instrument of transfer.
See in particular USM Rule 13, which deals with the registration of transfers using a specified request.
Together, paragraphs (2)(b) and (3) seek to clarify that, as far as possible, specified requests should be used to effect transfers of shares that are in uncertificated form, and instruments of transfer should be used in exceptional circumstances only. (See paragraph 4.3 of the Appendix for more information on this.)
One option would be to add the qualification as a new paragraph (5) under article 81.
The reference here should be to the article/bye-law that deals with the power of directors (or other relevant person or body, as applicable under the relevant articles/bye-laws) to refuse to register transfers. In the context of the Schedule 1 Model Articles, the relevant provision is article 81.
The words in brackets may be unnecessary, or need modification, depending on: (i) whether the articles/bye-laws include a provision equivalent to article 81 of the Schedule 1 Model Articles; and (ii) if so, how it is written.
Paragraphs (1)(a) and (b) seek to echo paragraphs (2) and (3) of sample article 80A by confirming the directors’ ability to compel the use of specified requests to effect transfers of shares that are in uncertificated form, save only in exceptional circumstances. (See paragraph 4.3 of the Appendix for more information on this).
Sample article 86A (see below) deals with the issuer’s ability to refuse certain requests (including requests to register a transfer of shares) in certain circumstances.
Relevant timeframes are currently indicated under section 2.1 of Schedule 2 to the ASR Code.
This additional paragraph seeks to make clear that provisions relating to transfers, including in particular sample article 80A and 81A, apply in respect of transfers by transmittees also. The paragraph largely replicates article 85(6) of the Schedule 1 Model Articles. Accordingly, issuers whose articles/bye-laws already include a provision equivalent to article 85(6) do not need to add this further paragraph.
One option would be to add the qualification as a new paragraph (3) under article 67.
This limits the application of sample article 67A so that it does not apply when the shares are not yet (or are no longer) participating securities, and any existing provisions in the articles/bye-laws dealing with the replacement of lot or damaged certificates cap apply instead without further amendment.
The language of paragraph (b), i.e., ‘may instead be dematerialised’ is intended to cover both dematerialisation at the member’s request and dematerialisation at the company’s initiative.
With respect to the words in square brackets here (i.e., “the conditions as to … [the directors] decide”), the language used is expected to track relevant language in the original provision on the handling of lost or damaged share certificates. Accordingly, the sample provision here tracks the language in article 67(2)(c) of the Schedule 1 Model Articles.
Under the USM Rules, shares (and other participating securities) may be rematerialised under two circumstances, ie: (i) if they are in the process of delisting; or (ii) if they are the subject of an exemption (under rule 32) that permits title instruments to be issued in respect of them. For (i), the rematerialisation will be governed by rule 27 of the USM Rules. For (ii), the rematerialisation will be governed by the conditions of the exemption.
The reference to “As soon as reasonably practicable” tracks the language in rule 27 of the USM Rules. Issuers may consider providing for a different period taking into account other provisions in their articles/bye-laws (e.g., provisions dealing with the issue of certificates following an allotment of shares that are not participating securities) and other relevant factors.
Paragraphs (3) and (4) are necessary only if the company intends to issue share certificates following rematerialisation.
The reference here to “for so long as” is to limit the application of this sample article 86A so that it does not apply during any period when the shares are not yet (or are no longer) participating securities. As a result, the sample article will simply have no effect during such periods, and further amendment is unnecessary.
Paragraphs (2)(a) and (b) focus on having to complete the dematerialisation process, while paragraph (c) focuses on completing the process for becoming a system-member. The former are therefore relevant to existing shares only, while the latter is relevant to both existing shares and new issues.
The directors may also require the transferor to be a system-member in certain cases, e.g., where the certificate covering the shares to be transferred also cover other shares that are not the subject of the transfer.

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