Jurisdiction - Hong Kong
Reports and Analysis
Hong Kong – The Introduction Of New Rules On “Connected Transactions” Effective July 1, 2014.

22 September, 2014

 

 
Following a consultation process conducted during 2013, amendments to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (Listing Rules) came into effect on 1 July 2014. The principal changes implemented include:

 

  • An exemption from the independent shareholder approval requirement for all connected transactions between a company listed on the HKEx or any of its subsidiaries, on the one hand, and a person who is connected solely at the level of a subsidiary (e.g., a CEO, director or 10% shareholder of a subsidiary) on the other hand. However, such transactions would remain subject to the approval of the board of the company and confirmation from the independent non-executive directors of the company that the terms of the transactions are normal commercial terms that are fair and reasonable and in the interests of the company and its shareholders as a whole;
  • The exclusion from the definition of “connected persons” any persons who are only connected with an “insignificant subsidiary”. An “insignificant subsidiary” is a subsidiary whose total assets, profits and revenue represent less than (i) 10% of those of the listed company in latest three financial years; or (ii) 5% under the percentage ratios for the latest financial year;
  • Clarifying that trustees of any scheme of which a CEO, director or 10% shareholder is a beneficiary will not be treated as a connected person, provided that the collective interest of connected persons in the scheme do not exceed 30%; 
  • The monetary limit for “de minimis” connected transactions exempt from all requirements under the connected transactions rules was raised from HKD 1m to HKD 3m; 
  • The 1% cap on the exemption available for transactions with a connected person involving the provision or receipt of consumer goods on normal commercial terms was removed; and
  • An additional exemption from the connected transactions requirements related to the granting of an indemnity to a director against liabilities incurred in the course of the performance of his/her duties was implement, subject to the indemnity being consistent with Hong Kong law (or the laws governing director indemnities in the place of incorporation).

 

Skadden

 

For further information, please contact:

 

Christopher Betts, Partner, Skadden
christopher.betts@skadden.com


Edward Lam, Partner, Skadden

edward.lam@skadden.com


Alec Tracy, Partner, Skadden

alec.tracy@skadden.com


Will Cai, Partner, Skadden

will.cai@skadden.com

 

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