The revised Hong Kong Listing Rules and related guidance implementing the expanded paperless listing regime will come into effect on 31 December 2023. Hong Kong Stock Exchange (HKEX) published its first frequently asked questions (FAQs) on the subject on 27 October 2023, which was updated on 13 December. This LawFlash details practical tips and reminders for listed issuers about mandatory electronic dissemination of corporate communications under the new paperless listing regime.
WHAT ARE THE KEY CHANGES?
- Listed issuers must disseminate corporate communications to their securities holders electronically if this is permitted by their applicable laws and regulations and their constitutional documents.
- The existing consent mechanism will be removed and listed issuers (to the extent permitted by the laws and regulations applicable to them, e.g., applicable to issuers incorporated in the Cayman Islands, Bermuda, PRC, or Singapore) can rely on implied consent for electronic dissemination of corporate communications without the need to seek consent from each holder individually and send separate notifications to holders each time a new corporate communication (other than Actionable Corporate Communications) is published.
- Issuers must send Actionable Corporate Communications to securities holders individually in electronic form indicating that they would not be able to satisfy Rule requirements by publishing Actionable Corporate Communications solely on their website and the HKEX’s website.
PRACTICAL TIPS
Below are some practical tips for listed issuers in response to the new regime for mandatory electronic dissemination of corporate communications.
Amendment of Constitutional Documents
Existing listed issuers must ascertain whether their constitutional documents contain any provision that may prohibit them from disseminating corporate communications to their securities holders electronically in accordance with the relevant Listing Rules.
Listed issuers will be required to amend their constitutional documents only if their constitutional documents mandates hard copy dissemination as the only means of dissemination of corporate communications with their securities holders. If this is the case, the listed issuer should ensure that the amendments are made no later than the issuer’s first annual general meeting after 31 December 2023.
However, if such restriction exists due to any requirement under the applicable laws and regulations that the listed issuer (e.g., Hong Kong incorporated issuer) is subject to, while the listed issuer may not then be able to amend its constitutional documents, it will be required to do so if and when the relevant restriction is removed from the applicable laws and regulations.
Listed issuers are reminded to consult their legal advisers before 31 December 2023 to ascertain whether constitutional documents are required to be amended.
It is a common practice for listed issuers to dispatch documents for annual general meetings (AGM) (which may include documents relating to amendments of constitutional documents) along with their annual reports. Hence, in planning for any potential amendments to their constitutional documents, it will be useful for listed issuers to observe the applicable annual report due date as set out in the table below.
For example, if Company A’s financial year end is 31 August and legal advisers recommend that amendments be made to the constitutional documents to comply with the new regime for electronic dissemination of corporate communications, then Company A should consider 31 December 2023 as the deadline for sending out a shareholder’s circular that contains the relevant proposed amendments to the shareholders.
Updates to Listed Issuer’s Websites
All listed issuers must disclose on their websites (e.g., in the investor relations section), on an ongoing basis, the relevant arrangements for the electronic dissemination of their corporate communications (including the arrangements by which holders can make hardcopy requests). This will enable new securities holders (who only become securities holders of the issuer after the implementation of any new arrangements and have not received the one-time notification below) to understand the relevant arrangements in place.
To the extent permitted under all applicable laws and regulations, listed issuers must make available any corporate communication by
- sending or otherwise making available the corporate communication to the relevant holders of its securities using electronic means; or
- making the corporate communication available on its website and the HKEX’s website.
The listed issuer must set out on its website the manner in which (i) and/or (ii) above are adopted for the dissemination of its corporate communications.
A listed issuer will only send corporate communications in printed form to a securities holder upon request. The issuer must specify the relevant arrangements for holders to make a hard copy request on its website.
Listed issuers are reminded to update their websites to comply with the new requirements above (1) before 31 December 2023 (if amendments of constitutional documents are not required) or (2) when the new arrangement is adopted upon amendments of constitutional documents.
Notification of the New Arrangements
Before a listed issuer adopts any new arrangements on dissemination of corporate communications (e.g., transitioning from physical copy to electronic dissemination, or adopting a different consent mechanism for electronic dissemination), it should send a one-time notification to its securities holders individually, in hard copy or electronically, to: (1) inform them of the new arrangements (including how securities holders may make requests for hard copy corporate communications under the new arrangements) and (2) solicit their electronic contact details.
Such one-time notification should be sent (1) before 31 December 2023 (if amendments of constitutional documents are not required) or (2) when the new arrangement is adopted upon amendments of constitutional documents to both (a) registered securities holders and (b) non-registered securities holders which have notified a listed issuer, through Hong Kong Securities Clearing Company Limited (HKSCC), that they wish to receive corporate communications.
In particular, listed issuers should ensure that the one-time notification
- clearly inform securities holders of the purpose of obtaining their electronic contact details when soliciting them from the holders (e.g., that the issuer will be using the electronic contact details to send Actionable Corporate Communications); and
- draw the securities holders' attention to the consequence of providing non-functional electronic contact details.
Listed issuers should use best efforts to follow up on the solicitation of electronic contact details by, for example, sending periodic reminders to securities holders asking them to provide their electronic contact details if they have not done so.
Actionable Corporate Communications
HKEX has defined Actionable Corporate Communications as “any corporate communication that seeks instructions from an issuer's securities holders on how they wish to exercise their rights or make an election as the issuer's securities holders.”
It is worth noting that notices of general meetings and proxy forms are not considered Actionable Corporate Communications because these documents only serve to inform securities holders of an upcoming general meeting and securities holders are not required to respond to such notices with their instructions per the above definition.
Listed issuers must send Actionable Corporate Communications to securities holders individually in electronic form, such as by email (with weblinks to the relevant Actionable Corporate Communications on their website), to the extent permitted by the laws and regulations applicable to them and their own constitutional documents. They would not be able to satisfy Rule requirements by publishing Actionable Corporate Communications solely on their website and the HKEX’s website only.
If a listed issuer is unable to do so because it does not have functional electronic contact details of a securities holder, the issuer must send the Actionable Corporate Communications in hard copy form. The hard copy must include a request for the electronic contact details of the securities holder to enable electronic dissemination of Actionable Corporate Communications in the long term.
Issuers are reminded to consult legal advisers and share registrar to prepare the documentation required in relation to the above arrangements for Actionable Corporate Communications. It is advisable to take actions as early as possible to send out the one-time notification to securities holders individually to solicit for electronic contact details, minimizing the amount of hard copy forms required for Actionable Corporate Communications in the future.
CONCLUSION
Due to the extensive nature of these changes and other changes as a result of the paperless listing regime, corresponding adjustments from listed issuers regarding their compliance practices are required. Listed issuers are advised to consult with legal experts to fully understand the compliance implications and to make the necessary amendments. This step is vital for issuers to navigate the new regulatory landscape effectively and avoid potential non-compliance issues.
[View source.]
