HKEX Issues Conclusions on Proposed Expansion of Paperless Listing Regime

The Hong Kong Stock Exchange concluded its consultation on the proposed expansion to the paperless listing regime. All of the proposals are adopted with minor modifications and clarifications.

Summarized below are the key proposals adopted by the Hong Kong Stock Exchange (HKEx) in connection with the proposed expansion to the paperless listing regime.

1. Electronic Instructions from Securities Holders to Issuers

Issuers will be required to put in place mechanisms and provide securities holders with an option to send instructions electronically (collectively, Requested Communications), namely:

• Instructions regarding a meeting of securities holders, including an indication as to attendance at such meeting and proxy-related instructions (Meeting Instructions); and
• Instructions made in response to actionable corporate communications (Non-Meeting Instructions)

If securities holders choose to send Requested Communications by electric means, issuers are expected to verify the authenticity under their own choice of authentication mechanisms.

This requirement is applicable to issuers of equity securities to receive both Meeting Instructions and Non-Meeting Instructions. For public debt issuers, the requirement is applicable with respect to Meeting Instructions. For issuers of structured products, the requirement is applicable with respect to Non-Meeting Instructions.

Issuers will have a one-year transition period, and a five-year transitional period, from the date when the uncertificated securities market (USM) regime is implemented, to comply with the requirement in respect of “Standardised Requested Communications” and “Non-Standardised Requested Communications.” The USM regime is currently expected to be effective at the end of 2025.

2. Real-Time Electronic Payment of Corporate Action Proceeds

Issuers will be required to provide securities holders with an option to receive proceeds in connection with its corporate actions, including the distribution of dividends and other entitlements; refunds in respect of applications for, and/or (where applicable) excess applications in connection with, rights issues; open offers and offers made to a specified group of such holders on a preferential basis; and payment in connection with takeovers and privatizations (Corporate Action Proceeds) electronically, and issuers are allowed to provide securities holders with an payment options of the issuer’s choice.

Issuers will have a one-year transition period from the date when the USM is implemented to comply with this requirement.

3. Electronic Subscription Monies

Issuers will be required to provide securities holders with an option to pay subscription monies via electronic means for offers made to their existing securities. While there is no prescribed electronic payment option that issuers must provide for their securities holders, issuers are required to disclose to the securities holders how they may pay subscription monies. Issuers would still be required to accept payments by paper checks or cashier orders at the choice of securities holders. Securities holders would continue to bear any charges incurred when paying subscription monies electronically.

Issuers will have a one-year transition period from the date when the USM is implemented to comply with this requirement.

4. Abolition of Mixed Media Offers

Mixed Media Offers (MMOs) will be abolished. There will no longer be an option to issue paper application forms for a public offer of equity securities, a collective investment scheme (CIS), and debt securities. Subscriptions for a public offer of equity securities and by a CIS shall be made through online electronic channels only, while subscriptions for public offerings of debt securities will continue to be conducted through their well-established channels, including through placing banks and/or Hong Kong Securities Clearing Company Limited.

The implementation date for this proposal is yet to be confirmed, but the HKEX indicated that MMOs will be abolished on the date when the Companies Ordinance (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice (Chapter 32L of the laws of Hong Kong) permitting MMOs is repealed and there will not be any transitional period in this regard.

5. Hybrid General Meeting and E-Voting

Issuers must ensure that their constitutional documents enable them to hold hybrid general meetings and allow e-voting to the extent permitted by the laws and regulations applicable to them. That being said, it will not be mandatory to hold hybrid general meetings or adopt e-voting.

Issuers will have a transitional period until their first annual general meeting held after July 1, 2025 to amend their constitutional documents, if necessary.

6. Web Accessibility of Issuers’ Corporate Communications

The HKEX previously proposed that the HKEX should incorporate the conformance of corporate communications with web accessibility guidelines into the Listing Rules or Corporate Governance Code. Acknowledging the concerns expressed by respondents to the consultations, the HKEX decided not to incorporate web accessibility guidelines at this time and will keep this area under review.

CONCLUSION

The latest amendments related to the paperless reform complement the continuous efforts by the HKEX to modernize its listing regime. The relevant amendments to the listing rules and other housekeeping amendments come into effect on February 10, 2025.