Jurisdiction - Hong Kong
Reports and Analysis
Hong Kong – The Decision By The Takeovers Panel On SouthGobi Resources Limited.

22 September, 2014



On 30 June 2014 the Hong Kong Takeovers and Mergers Panel (Panel) issued a ruling that SouthGobi Resources Limited (SouthGobi) should be considered a “public company” for the purposes of the Codes on Takeovers and Mergers and Share Buy-backs (Codes). SouthGobi was listed on the HKEx on 29 December 2010 via a secondary listing of its shares, with its primarily listing remaining on the Toronto Stock Exchange. Consistent with other secondary listing applicants, at the time of its listing on the HKEx SouthGobi had applied for a confirmation from the SFC that it would not be treated as a public company under the Codes; which meant that if a takeover offer was made for its shares the Codes would not apply (and, instead, only the laws, regulations and rules applicable to companies incorporated in British Columbia, Canada and listed on the Toronto Stock Exchange, would apply). The Panel noted that at the time the initial confirmation was given, it was made clear to SouthGobi that if there were any material changes to the information provided or representations made by SouthGobi that its status under the Codes may be reconsidered.

In deciding that SouthGobi should be considered a public company for the purposes of the Codes, the Panel stated that the primary factors to be taken into account are the number of Hong Kong shareholders (or security holders) and the extent of trading in Hong Kong. At the time of its initial application, SouthGobi estimated that approximately 6.8% of its shares would be held in Hong Kong and that trading volume would not exceed that in Canada. However, by the time of the Panel’s decision over 30% of SouthGobi’s shares were held in Hong Kong and over half of the overall trade in SouthGobi’s shares took place on the HKEx. In reaching its conclusion, the Panel also noted that there had been a significant shift in management from Canada to Asia since SouthGobi’s listing on the HKEx, with the CFO, COO and company secretary all spending a considerable proportion of their time in Hong Kong. Although SouthGobi remained a Canadian tax resident, substantially all of its assets were located in Mongolia, and the shareholder protections in British Columbia and Canadian had not experienced any material change, the Panel did not consider these to be factors of any material bearing in reaching its decision.




For further information, please contact:


Christopher Betts, Partner, Skadden
[email protected]

Edward Lam, Partner, Skadden

[email protected]

Alec Tracy, Partner, Skadden

[email protected]

Will Cai, Partner, Skadden

[email protected]


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