The following updates are examinable from 15 November 2022



Updates to Corporate Governance:

Principles of Good Corporate Governance

  • The Corporate Governance Code gives SEHK’s views on the principles of good corporate governance, covering:
    • Corporate purpose, strategy and governance
    • Board composition and nomination
    • Directors’ responsibilities, delegation and board proceedings
    • Audit, internal control and risk management
    • Remuneration; and
    • Shareholders engagement
  • Where an issuer deviates from any of the Code provisions, it must give considered reasons for the deviation in its interim and annual reports and explain how good corporate governance was achieved (comply or explain)
  • Issuers are encouraged to adopt recommended best practices, however it is not mandatory to explain deviations from those best practices
  • Important code provisions include:
    • The board and its directors should ensure the issuer’s culture is aligned with the its purpose, values and strategy
    • Regular board meetings should be held, at least four times per year approximately quarterly
    • Any material conflict of interest should be dealt with at a board meeting in the presence of independent non-executive directors
    • Roles of Chairman and Chief Executive should be conducted by different people
    • There should be a mechanism that ensures independent views are available to the board
    • The re-appointment of an INED who has served more than nine years should be subject to a separate shareholders resolution based on reasoning as to why the person is still independent
    • An explanation should be given to shareholders as to how a proposed new INED with 7 or more listed company directorships will be able to devote sufficient time to the board
    • Newly appointed directors should receive comprehensive, formal and tailored inductions
    • Remuneration committee should consult Chairman/CE about remuneration proposals for executive directors
    • Effectiveness of internal controls should be reviewed annually by directors and reported to shareholders in the Corporate Governance Report
    • Full minutes of audit committee meetings should be kept
  • Recommended best practices include:
    • Executive directors’ remuneration should be significantly linked to corporate and individual performance
    • Remuneration of directors and senior management should be disclosed in annual reports on an individual and named basis
    • The board should evaluate its performance regularly
    • If relevant, the board should state reasons why it considers a particular director as being independent
    • Management’s confirmation on the effectiveness of the issuer’s risk management and internal control systems can be disclosed in the Corporate Governance Report
    • There should be a whistleblowing policy that allows employees and others to raise concerns with the audit committee about possible improprieties in any matter related to the issuer
    • The issuer should establish policies and systems that promote and address anti-corruption laws and regulations

Environmental, Social and Governance Reporting Guide (ESG)

  • The ESG Guide sets out “comply or explain” provisions that allow flexibility to issuers along with mandatory disclosure requirements
  • ESG reflects developments internationally including Mainland China, UK, US, Singapore and Australia
  • Two subjects that need to be reported on:


  • Emissions
  • Use of resources
  • Policies on minimising environmental and natural resources
  • Climate change


  • Labour issues, including employment laws, health and safety and development and training
  • Supply chain management
  • Product responsibility
  • Anti-corruption measures
  • Community engagement
  • Issuer will need to report ESG information on both the issuer’s website and the HKEx’s website. It may also choose to report the information in its annual report
  • Where the issuer elects not to include the ESG report in the annual report, it is encouraged to publish the ESG report at the same time as the publication of the annual report
  • The issuer should inform any intended recipient of how to access the report on its website
  • The information reported should be based around four reporting principles:
    • Based on the materiality of the issue to investors and other stakeholders
    • Based on quantitative assessment of the KPIs
    • Presents a balanced and unbiased picture of the issuer’s performance
    • Use of consistent methodologies to facilitate meaningful comparisons over time
  • Issuer may also consider whether to obtain independent assurance to strengthen the credibility of the disclosed ESG information

HKEX Guide

  • HKEX has issued the Corporate Governance Guide for Boards and Directors
  • The document does not override the Listing Rules, however it provides helpful guidance on how the Corporate Governance Code principles can be applied and reported on



New material for Issuers’ Roles and Responsibilities:

Overall Coordinators

  • An overall coordinator is a Capital Market Intermediary (CMI) that, either solely or jointly, undertakes any of the following activities:
    • Overall management of the offering, coordinating bookbuilding or placing activities and making allocation recommendations to the listing applicant
    • Advising the listing applicant on the offer price and being a party to the price determination agreement with the listing applicant; and/or
    • Exercising discretion in relation to allocation between the placing and public subscription tranches, reducing the number of offer shares or exercising an upsize option or overallotment option
  • A main board listing involving bookbuilding/placing will require the listing applicant to observe the “sponsor coupling” requirement
  • Each independent sponsor appointed by the listing applicant must be appointed as an overall coordinator, or an overall coordinator appointed from the same group of companies as the independent sponsor
  • Code of Conduct requires each sponsor to confirm, prior to accepting an appointment, that an overall coordinator has been appointed
  • Sponsors that are not independent will need written confirmation that the listing applicant has already appointed a sponsor that satisfies the coupling requirement
  • There is no coupling requirement for GEM listing applications
  • Where more than one overall coordinator is appointed, all are jointly and severally liable
  • After the issue of the listing document, but before dealing commences, each overall coordinator must submit the Sponsor’s/Overall Coordinator’s Declaration to the SEHK
  • If an overall coordinator is terminated after a main board listing application is made, resulting in the sponsor coupling requirement no longer being satisfied, a new listing application will have to be filed not less than two months from the date of a new appointment that satisfies the sponsor coupling requirement

Nomination Committee

  • An issuer must establish a nomination committee that is chaired by the chairman of the board or an INED and comprised of a majority of INEDs
  • Primary function is to make recommendations of persons suitable to act as directors of the board
  • The committee’s policy on board diversity should be summarised in the corporate governance report

New material for Listing Procedures for Equity Securities:

Special Purpose Acquisition Companies (SPACs)

  • A SPAC is a company established to raise funds that it will use to acquire a business
  • The listing rules for SPACs are different from those for listing applicants with operating track records
  • As with other listing applications, a SPAC must appoint at least one sponsor to assist with the listing application
  • A SPAC is admitted to listing subject to a pre-defined time period, typically 24 months, within which it must acquire a suitable business, known as a “De-SPAC Transaction”. If no De-SPAC transaction takes place within that period, the SPAC may be liquidated
  • Following a successful De-SPAC transaction, the SPAC is then referred to as the “Successor Company
  • The De-SPAC Transaction must be completed within 36 months of the date of listing. An extension of up to 36 months may be granted by the SEHK, subject to shareholder approval
  • The SEHK must be satisfied that the SPAC promoters have the character, experience, integrity and competence to undertake the role
  • At least one SPAC promoter must be a licensed corporation and at least two SPAC directors must be either Type 6 or Type 9 licensed
  • A SPAC will typically issue three types of securities:
    • Shares issued to SPAC Promoters (Promoter Shares)
    • Warrants issued to either SPAC Promoters (Promoter Warrants) or non-SPAC Promoters (SPAC Warrants)
    • Shares issued in connection with the listing (SPAC Shares)
  • Gross funds raised in a SPAC initial offering must not be less than HK$1 billion
  • SPAC securities cannot be marketed to or traded by the public in Hong Kong who are not professional investors (PIs)
  • All funds raised from a SPAC issue of shares must be held in cash or cash-equivalents in a ring-fenced escrow account domiciled in Hong Kong
  • The Successor Company must meet the same listing requirements as any new listing application, including the appointment of at least one sponsor
  • A De-SPAC transaction is required to involve:
    • A minimum investment of between 7.5% and 25% of the negotiated De-SPAC value from one or more independent third-party investors, each of whom must be a PI
  • A SPAC needs to apply to the Executive (SFC Corporate Finance Division) for a waiver for the change of control that will occur when the De-SPAC Transaction completes
  • Upon completion of a De-SPAC Transaction, the SPAC Promoters may not dispose of their beneficial interests in the Successor Company for a period of 12 months
  • Where a De-SPAC Transaction is not completed prior to the deadline applicable to it, its securities may be suspended



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