Jurisdiction - Hong Kong
Reports and Analysis
Hong Kong – Major Publications And Decisions.

16 May, 2013


Chain principle offer triggered

In February 2013, the Takeovers and Mergers Panel (“Panel”) ruled that an obligation under the Takeovers Code to make a chain principle offer for Hong Kong-listed Greenheart Holdings Limited (“Greenheart”) would be triggered if Sino-Forest Corporation (“Sino-Forest”) proceeded with the transfer of substantially all its assets, including an indirect shareholding of 63.6% of Greenheart, to a new company wholly owned by SinoForest’s creditors. The Panel also decided that no waiver of such mandatory offer obligation would be available.

The matter arose as a result of a proposed restructuring of Sino-Forest which is in severe financial difficulty. The Panel said the chain principle does not differentiate among transactions on the basis of the circumstances that caused them to be entered into. Hence, the principle applies equally to a debt restructuring as to any other commercial arrangement which comes within its scope.

The Panel reaffirmed that the focus of the chain principle is quite narrow, namely any transaction, whether it is an element of a larger one or not, in which statutory control of one company results in the acquisition or consolidation of control (as defined in the Takeovers Code) of a second company.

The case is a good reminder that the transfer of an indirect controlling interest in a Hong Kong-listed company always falls within the provisions of the Takeovers Code, so the Takeovers Executive should always be consulted before parties finalize such an arrangement. 

Please follow this link for a copy of the Panel’s decision: 


Exchange’s review of disclosure in annual reports In March 2013, the Exchange published its first report on findings and recommendations from a review of all listed issuers’ annual reports. The key recommendations were for listed issuers to provide enhanced disclosure as summarized below:


Impairment of Intangible Assets arising from Material Acquisitions Give details on the impairment of intangible assets, including the underlying circumstances and relevant information about the assets’ valuation.
Performance Guarantees on Acquisitions Disclose material developments such as the outcome of guarantees received on the performance of acquired businesses (including performance of the acquired business; whether the performance 
guarantee was met; and if not, whether and how the guarantor fulfilled its obligations).
Connected Transactions Specify whether related party transactions disclosed were connected transactions, and whether the listed issuer complied with the relevant Listing Rules; and disclose the results of the annual review by the independent directors and auditors for continuing connected transactions.
Significant Changes in 
Financial Position
Explain significant changes in major items of the financial statements, such as trade receivables, effective tax rates and tax balances, and key performance indicators, in the “management discussion and analysis” section of the annual 
Newly Listed Issuers Disclose any changes in the intended use of IPO proceeds.
Chapter 18 Mineral Companies Provide updates on exploration, development and mining production activities.
Chapter 21 Investment 
Comply with requirements of Chapter 21 on providing 
information about the investments held, including analyses of the individual investments and their 


Please follow this link for a copy of the report: http://www.hkex.com.hk/eng/rulesreg/listrules/listguid/Documents/rdiar-2012.pdf

Listing Committee Report 2012: upcoming issues

In March 2013, the Listing Committee published the Listing Committee Report 2012. In addition to highlighting developments that arose during 2012, the report listed matters that the Listing Committee plans to consider during 2013 and 
beyond, and we summarise those matters below: 


Prospectuses and listing process

•     Amendments to Rules and procedures to complement SFC’s reform of the sponsor regime
•     Prospectus simplification
•     Streamlining of listing application procedures and review of associated publication requirements
•     Review of settlement process and timing
•     Review of content of accountants’ reports
•     Review of placing guidelines


Listing matters

•     Review of listings by overseas companies and secondary listings
•     Review of listed structured products regime
•     Review of new structured products classes
•     Review of the definition of “subsidiary”
•     Review of listing of investment vehicles


Ongoing obligations and other related matters

•     Review of connected transaction rules
•     Development of XBRL taxonomy (facilitating exchange of information through an “eXtensible Business Reporting Language”)
•     Update on quarterly reporting
•     Review of accounting provisions in the Listing Rules
•     Review of disclosure of material contracts


Please follow this link for a copy of the Listing Committee Report 2012: 




For further information, please contact:


John Moore, Partner, Morrison Foerster

Stephen Birkett, Morrison Foerster

[email protected]


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