The connected transaction must be conditional on shareholders' approval at a general meeting held by the listed issuer. Any shareholder who has a material interest in the transaction must abstain from voting on the resolution.
The Exchange may waive the general meeting requirement and accept a written shareholders' approval, subject to the conditions that:(1) no shareholder of the listed issuer is required to abstain from voting if a general meeting is held to approve the transaction; and(2) the approval is given by a shareholder or a closely allied group of shareholders who (together) hold more than 50% of the voting rights in the general meeting.
If the listed issuer discloses inside information to any shareholder in confidence to solicit the written approval, it must ensure that the shareholder is aware that he must not deal in the securities before the information has been made available to the public.
If the connected transaction requires shareholders' approval, the listed issuer must (1) set up an independent board committee; and (2) appoint an independent financial adviser.
Independent board committee (20.38-20.41)
The independent board committee must, taking into account the recommendation of an independent financial adviser, advise the listed issuer's shareholders:(1) whether the terms of the connected transaction are fair and reasonable;(2) whether the connected transaction is on normal commercial terms or better and in the ordinary and usual course of business of the listed issuer's group;(3) whether the connected transaction is in the interests of the listed issuer and its shareholders as a whole; and(4) how to vote on the connected transaction.
The independent board committee must consist only of independent non-executive directors who do not have a material interest in the transaction.
If all the independent non-executive directors have a material interest in the transaction, an independent board committee will not be formed.
If an independent board committee is formed, the circular must include a letter from the independent board committee containing its opinion on the matters in rule 20.38 and its recommendation.
Independent financial adviser (20.42-20.43)
The listed issuer must appoint an independent financial adviser acceptable to the Exchange to make recommendations to the independent board committee and shareholders on the matters in rules 20.43(1) to (4). The independent financial adviser will give its opinion based on the written agreement for the transaction.
The circular must include a letter from the independent financial adviser containing its opinion and recommendation. The independent financial adviser's letter must also set out the reasons for its opinion, the key assumptions made, the factors that it has taken into consideration in forming the opinion, and a statement whether:(1) the terms of the connected transaction are fair and reasonable;(2) the connected transaction is on normal commercial terms or better and in the ordinary and usual course of business of the listed issuer's group;(3) the connected transaction is in the interests of the listed issuer and its shareholders as a whole; and(4) the shareholders should vote in favour of the connected transaction.