PN17 Sufficiency of Operations and Delisting Procedures

The Stock Exchange of Hong Kong Limited

Practice Note 17

to the Rules Governing the Listing of Securities (the "Exchange Listing Rules")

Issued pursuant to rule 1.06 of the Exchange Listing Rules


(This practice note applies only to suspended listed issuer subject to this note immediately before the effective date of rule 6.01A(1))

1. Definitions

Terms used in this Practice Note which are defined or interpreted in the Exchange Listing Rules shall have the same meaning as in the Exchange Listing Rules.
2. Introduction
2.1 Rule 13.24 requires an issuer to carry out a sufficient level of operations or have tangible assets of sufficient value or intangible assets for which a sufficient potential value can be demonstrated to warrant the continued listing of the issuer's securities on the Exchange.
2.2 Characteristics of issuers which are unable to comply with rule 13.24 include :
•   financial difficulties to an extent which seriously impairs an issuer's ability to continue its business or which has led to the suspension of some or all of its operations; and/or
•   issuers which have net liabilities as at their balance sheet date i.e. issuers whose liabilities exceed their assets.
2.3 Issuers that are unable to comply with rule 13.24 may be suspended — either at the request of the issuer or at the direction of the Exchange. Resumption of trading in the securities of these issuers will only be permitted where they are able to demonstrate that they comply with rule 13.24. In many cases it will be necessary for there to be some restructuring of these issuers' operations prior to resumption.
2.4 Paragraph 6.04 of the Exchange Listing Rules provides that "... the continuation of a suspension for a prolonged period without the issuer taking adequate action to obtain restoration of listing may lead to the Exchange cancelling the listing." Purpose of this Practice Note is to clarify the procedures it will adopt in allowing such issuers to present resumption proposals or, where no such proposals are received, the procedures that will be taken to cancel the listing of an issuer's securities.
3. Delisting Procedures
3.1 The Exchange will follow a four-stage procedure as set out below.
•   During the initial period of six months following the suspension, the Exchange will monitor developments. The issuer must make periodic announcements of developments under rule 13.24A. At the end of this six month period, the Exchange will determine whether it is appropriate to extend this initial period or to proceed to the second stage.
•   The second stage would involve the Exchange in writing to the issuer, drawing attention to its continued failure to meet rule 13.24 and requiring it to submit resumption proposals within the next six months. During this period, the Exchange will continue to monitor developments of the issuer and will require from its directors monthly progress reports. At the end of this period, the Exchange will consider the issuer's proposals and determine whether it is appropriate to proceed to the third stage.
•   Where the Exchange determines to proceed to the third stage, it will announce that the issuer does not have sufficient assets or operations for listing, and impose a deadline (generally six months) for submitting resumption proposals. During the third stage, the issuer would again be required to provide monthly progress reports to the Exchange.
•   At the end of the third stage, if no resumption proposals have been received, the listing will be cancelled. Both the Exchange and the issuer concerned would announce this.
4. This Practice Note takes effect from 1st February, 1998

Hong Kong 26th January, 1998

Revised on 31st March, 2004

Revised on 1st January, 2013