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Listing Prc Companies on the Hong Kong Stock Exchange

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Listing Prc Companies on the Hong Kong Stock Exchange _________________________________________________________ LISTING PRC COMPANIES ON THE HONG KONG STOCK EXCHANGE _________________________________________________________ Hong Kong Shanghai Beijing Yangon www.charltonslaw.com Contents I. INTRODUCTION ................................................................................................................. 1 1. General ................................................................................................................................... 1 2. Benefits of Listing ................................................................................................................... 1 3. Stock Connect ........................................................................................................................ 2 4. Main Board vs GEM Market .................................................................................................. 2 5. Applicable Hong Kong Laws and Non-statutory Codes ...................................................... 2 6. PRC Regulatory Requirements for H Share Issuers........................................................... 3 7. Conversion of B shares to H shares ..................................................................................... 4 8. Regulation of Red Chip Listings ........................................................................................... 5 9. VIE structures ......................................................................................................................... 6 10. Exchange’s Approach to Listing VIE Structures: Listing Decision 43-3........................... 11 II. QUALIFICATIONS FOR MAIN BOARD LISTING OF H SHARE COMPANIES ......... 15 (a) Incorporation ......................................................................................................................... 15 (b) Suitability for Listing (Rule 8.04) ......................................................................................... 15 (c) Operating History and Management .................................................................................. 15 (d) Financial Tests ...................................................................................................................... 16 (e) Shares in Public Hands (Rule 8.08) ................................................................................... 17 (f) Minimum Number of Shareholders at Time of Listing ....................................................... 18 (g) Market Capitalisation ........................................................................................................... 18 (h) Working Capital Sufficiency (Rule 8.21A) .......................................................................... 19 (i) Competing Businesses ........................................................................................................ 19 (j) Accountants’ Report and Accounting Standards ............................................................... 20 (k) Directors and Supervisors ................................................................................................... 20 (l) Independent Non-Executive Directors (“INEDs”) .............................................................. 20 (m) Audit Committee and Remuneration Committee ............................................................... 21 (n) Sponsor ................................................................................................................................. 21 (o) Compliance Adviser ............................................................................................................. 21 (p) Mandatory Provisions for Articles of Association ............................................................... 22 (q) Arbitration (Rule 19A.01(3)) ................................................................................................ 22 (r) Service Agent (Rule 19A.13(2)) .......................................................................................... 23 (s) Receiving Agent (Rule 19A.51) ........................................................................................... 23 (t) Share Register ..................................................................................................................... 23 (u) Management Presence ....................................................................................................... 23 (v) Authorised Representatives ................................................................................................ 23 (w) Company Secretary (Rule 3.28) ......................................................................................... 24 (x) Communication .................................................................................................................... 24 III. QUALIFICATIONS FOR GEM LISTING ......................................................................... 25 (a) Incorporation ......................................................................................................................... 26 (b) Suitability for Listing ............................................................................................................. 26 (c) Cash Flow Requirement ...................................................................................................... 26 (d) Statement of Business Objectives (Rule 14.19) ................................................................ 26 (e) Operating History and Management .................................................................................. 26 (f) Market Capitalisation ........................................................................................................... 27 (g) Public Float ........................................................................................................................... 27 (h) Minimum Number of shareholders ..................................................................................... 27 (i) Accountants’ Report ............................................................................................................. 27 (j) Directors and Supervisors ................................................................................................... 28 (k) Independent Non-executive Directors ................................................................................ 28 (l) Audit Committee and Remuneration Committee ............................................................... 28 (m) Sponsor ................................................................................................................................. 28 (n) Compliance Adviser ............................................................................................................. 29 (o) Compliance Officer .............................................................................................................. 29 (p) Mandatory Provisions for Articles of Association ............................................................... 29 (q) Competing Businesses ........................................................................................................ 29 (r) Arbitration ............................................................................................................................. 30 (s) Service Agent ....................................................................................................................... 30 (t) Receiving Agent ................................................................................................................... 30 (u) Register of Shareholders ..................................................................................................... 30 (v) Authorised Representatives ................................................................................................ 30 (w) Company Secretary ............................................................................................................. 31 IV. RESTRICTIONS FOLLOWING LISTING ........................................................................ 31 V. CONTINUING OBLIGATIONS OF LISTED COMPANIES ............................................ 32 1. Disclosure of Inside Information ......................................................................................... 32 2. Obligation to Respond to Exchange Enquiry ..................................................................... 35 3. Announcements ................................................................................................................... 35 4. Disclosure of Financial Information .................................................................................... 36 5. Notifiable Transactions ........................................................................................................ 38 6. Connected Transactions ...................................................................................................... 42 7. The Corporate Governance Code ...................................................................................... 48 8. The Model Code for Securities Transactions by Directors and Supervisors of Listed Companies (“Model Code”) ................................................................................. 48 9. The Environmental, Social and Governance Reporting Guide ........................................ 49 I. INTRODUCTION 1. General With the rapid development and further opening up of the Chinese economy, listing on overseas stock exchanges became an important means for PRC companies to access
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