HKEX cuts paper use, document requirements in revamped listing regime

Despite eliminating signatures, the streamlined listing process imposes new legal advice requirements for accountability and integrity in submissions.

Contending with a lengthy and paper-heavy listing process will soon be a thing of the past for companies in Hong Kong, now that the local bourse moves to require electronic document submissions.

Apart from listing documents, the expanded paperless listing regime also requires issuers to disseminate corporate communications by electronic means starting 31 December 2023, said Pan Tsang, partner at Robertsons Solicitors.

“Issuers should review and amend their constitutional documents where necessary to facilitate their compliance with the new requirements before the end of the transitional period,” advised Tsang.

Listing applicants would also benefit from streamlined documentary submission requirements under the new regime as many forms and documents will be removed or codified in the Listing Rules, said Tsang.

Under the regime, HKEX will remove the requirement to submit Form M104 where companies list details of their top five customers and suppliers. HKEX will instead update its Guidance Letter GL86-16 to require disclosure of the information required by Form M104, according to Hong Kong law firm, Charltons.

Other documents that companies are no longer required include forms M105 or a completed checklist on basic qualifications for new listing under the HKEX Listing Rules, M106 (completed checklist on basic requirements for contents of listing documents under the HKEX Listing Rules and the Companies Ordinance), M107 (completed checklist on HKEX Listing Rules on the valuation of and information on properties), and M108 (completed checklist on HKEX Listing Rules on Accountants’ Reports).

Another leading firm, Stevenson, Wong & Co, said the removal of these forms raised concerns from some parties.

“Some believe that forms M105, M106, M107 and M108 checklists are ‘useful tools’ for the sponsors and advisers to conduct compliance checks before the submission of listing applications,” it said. “In response, HKEX maintains their view that these documents are unnecessary, and the removal of these documents will not absolve the professional parties of their obligations.”

For Charles Wu, counsel at Clyde & Co, the changes brought about by the expanded regime will “undoubtedly lower costs and increase efficiency” of listing in Hong Kong.

“The paperless regime may streamline the listings process and corporate communications, thereby saving time for issuers and underwriters alike,” Wu said.

Additional requirement for directors

Wu, however, said that whilst the new paperless regime provides the added convenience of electronic submissions and communications, “it does not materially change the role of directors and senior management in the listing process.”

In fact, directors will have an additional requirement since they will no longer have to sign various forms under the regime.

According to Charltons, HKEX will remove the signature and certification requirements for submission documents if they serve only as evidence of the sponsors’ approval of the contents or certify that the submissions are true copies of their originals.

Amongst the forms from which the signature requirements had been removed by the HKEX is Form M111 on the market comparable analysis.

“Whilst directors will no longer have to sign various forms, they will be subject to the new requirement of obtaining legal advice on their obligations under the Hong Kong listing rules. Satisfying this requirement may reduce the amount of time saved from no longer having to sign various forms,” Wu said.

“They are still required to ensure that all information in the listing application is true, accurate, and complete,” Wu added.

Directors must obtain legal advice from qualified Hong Kong solicitors.

“The prospectus must reveal when the director obtained such legal advice and confirm that the director understood and confirmed his/her obligations thereunder,” Wu added.

Should there be a data breach from one participant in the transmission of documents electronically, which led to the submission of an inaccurate or incomplete application, the directors and sponsors may still be liable, warned Wu.

Wu added that companies must not assume that the paperless regime will make the “substantive aspects of a listing application any easier than before.”

“While electronic submissions and communications remove administrative hassle, they do not lessen the obligation of directors and sponsors to ensure that the listing application is true, accurate, and complete,” Wu said.

“The discharge of this basic duty means that the actual substantive process of the listing, such as due diligence, audits, and legal opinions, may only change on the margins or not at all,” he said.