On 12 April 2024, The Stock Exchange of Hong Kong Limited (the “Exchange“) published the consultation conclusions on Proposed Amendments to Listing Rules Relating to Treasury Shares (“Consultation Paper“). Receiving support from the market, the proposals set out in the Consultation Paper will be implemented with only minor modifications. Please see below for a summary of the major changes to The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules“).

1. Removal of the requirement to cancel repurchased shares

The requirement to cancel repurchased shares will be removed and issuers may hold these shares in treasury, subject to the laws of their places of incorporation and their constitutional documents.

The Exchange further clarifies that whether treasury shares may be held by an issuer’s subsidiary or an agent or nominee on behalf of the issuer or its subsidiary would also be subject to the laws of the issuer’s place of incorporation and its constitutional documents. For example, shares repurchased by an issuer incorporated in Bermuda and the Cayman Islands have to be held in its own name to be classified as treasury shares under the relevant laws, while there is no similar requirement in the PRC laws for treasury H shares.

2. Application of the current requirements for issue of new shares to resale of treasury shares

The Listing Rules will be amended such that certain requirements that currently apply to issue of new shares will apply to resale of treasury shares as well, for example:-

(i). similar pre-emption requirement under Rule 13.36, where a resale of treasury shares shall be offered to all shareholders on a pro-rata basis, or alternatively, approved by shareholders under a specific mandate or a general mandate;

(ii). requirements under Chapter 17 in relation to share schemes funded by treasury shares to be treated as the same funded by new shares;

(iii). connected transaction requirements under Chapter 14A;

(iv). disclosure requirements for resale of treasury shares and movement in the number of treasury shares under Chapters 11 and 13 and Appendix D2; and

(v). documentary requirements under Chapter 9.

3. Imposition of moratorium period

A 30-day moratorium period will be imposed on:-

(i). a resale of treasury shares (whether on-market or off-market) after a share repurchase; and

(ii). any share repurchase on the Exchange subsequent to a resale of treasury shares on the Exchange.

Note, however, that in relation to (i) above, the moratorium period does not apply to (a) capitalisation issues and (b) grants of share awards or options under a share scheme that complies with Chapter 17 or a new issue of shares or a transfer of treasury shares upon vesting or exercise of share awards or options under the share scheme.

4. Dealing restrictions for resale of treasury shares on the Exchange

Resale of treasury shares on the Exchange is prohibited in the following circumstances:-

(i) where there exists undisclosed inside information;

(ii) during the 30-day period preceding any results announcement; and

(iii) where it is knowingly made with a core connected person (but note that on-market resale of treasury shares to a connected person without knowledge is fully exempt).

The amendments to the Listing Rules will come into effect on 11 June 2024. Issuers are advised to review these amendments in detail, seek legal advice and amend their constitutional documents where necessary.