Note to subscribers for the amendments to the rules governing the listing of securities on the GEM (the "GEM Listing Rules")
Update No. 55
Amendments to the GEM Listing Rules
We enclose reprinted pages of the GEM Listing Rules and filing instructions. The reprinted pages incorporate amendments to implement the proposals of the "Consultation Conclusions on the Capital Raisings by Listed Issuers" published on 4 May 2018.
We have amended the GEM Listing Rules to include:
(i) Highly dilutive capital raisings:
- disallow rights issues, open offers and specific mandate placings, individually or when aggregated within a rolling 12-month period, that would result in a material value dilution (25% or more on a cumulative basis), unless there are exceptional circumstances e.g. the issuer is in financial difficulties;
(ii) Rights issues and open offers:
- require minority shareholders' approval for all open offers, unless the new shares are to be issued under the authority of an existing general mandate;
- remove the connected transaction exemption currently available to connected persons acting as underwriters of rights issues or open offers;
- require issuers to adopt either excess application arrangements or compensatory arrangements for the disposal of unsubscribed shares in rights issues or open offers;
- where an issuer engages an underwriter in a rights issue or open offer, require it to be licensed under the Securities and Futures Ordinance and independent from the issuer and its connected persons, with the exception that a controlling shareholder or substantial shareholder may act as an underwriter if compensatory arrangements are made available for the unsubscribed offer shares and the connected transaction Rules are complied with;
- require issuers to disregard any excess applications made by the controlling shareholders and their associates in excess of the offer size minus their pro-rata entitlements;
(iii) Placing of warrants or convertible securities under general mandate:
- disallow the use of general mandate for placing of warrants;
- restrict the use of general mandate for placing of convertible securities with an initial conversion price that is not less than the market price of the shares at the time of placing;
(iv) There are also other Rule amendments to enhance disclosure of the use of proceeds from equity fundraisings, and to impose an additional requirement for subdivisions and bonus issues of shares to ensure an orderly market.
Coming into effect
The amendment will come into effect on 3 July 2018.
Please click HEREHERE to see the amendments to the GEM Listing Rules.
For and on behalf of
The Stock Exchange of Hong Kong Limited
Chief Regulatory Officer and Head of Listing