Jurisdiction - Hong Kong
Hong Kong – Listing Decision Issued By The HKEx Regarding Whether A Shareholder Falling Below 30 Percent At IPO Would Be Subject To A Post-IPO Lock-Up.

16 March, 2015


This decision states that the controlling shareholder (the controlling shareholder) of a listed company (company A) is required to be subject to a 12-month lockup of its shares after company A’s listing under Listing Rule 10.07(1) (i.e. maintaining at least the same number of shares as stated in company A’s listing document for 12 months after its listing), even though the controlling shareholder has ceased to be an owner of 30 percent or more of the voting rights in company A after listing due to exercise of the over-allotment option.

In the case discussed in the Listing Decision, company B was one of company A’s controlling shareholders interested in more than 30 percent of company A’s shares on the issue date of company A’s listing document. Company B was established for estate planning purposes by company A’s founder, who also was an executive director and actively involved in the management of company A, although company B was owned by his son. An over-allotment option was granted to the global coordinator of company A’s IPO. Upon full exercise of the over-allotment option after company A’s listing, company B’s interest in company A was diluted to less than 30 percent and company A ceased to be a controlling shareholder of company A as defined under the listing rules.

The HKEx determined that company B, despite ceasing to be company A’s controlling shareholder shortly after listing, was required to be subject to a 12-month lockup of its shares after company A’s listing under Listing Rule 10.07(1). Listing Rule 10.07(1) requires any person or group of persons, being a controlling shareholder or group of controlling shareholders shown by the listing document issued at the time of the company’s application for listing, to demonstrate its commitment to a new applicant and to protect investors by preventing a material change in the shareholding structure to the extent that a controlling shareholder no longer controls the applicant during the first year of the applicant’s listing. In this case, company B was, as of the date of company A’s listing document, its controlling shareholder, and as such, Listing Rule 10.07 (1) would apply to company B.


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