In 2018, two Australian-incorporated companies successfully delisted from the Australian Securities Exchange (ASX) and listed on the Main Board of The Stock Exchange of Hong Kong Limited (HKEX). These are the only two transactions of this type in the market to date, namely:
- In October 2018, OPUS Group Limited (OPUS) moved from the ASX through a first-of-its-kind scheme of arrangement (Scheme of Arrangement) and listed on the Main Board of the HKEX through its newly incorporated Bermudan holding entity, Left Field Printing Group Limited (Left Field, HKEX Stock Code: 1540)
- In November 2018, Dragon Mining Limited (Dragon Mining, HKEX Stock Code: 1712) delisted its shares from the ASX and listed on the Main Board of the HKEX under Chapter 18 of the Rules Governing the Listing of Securities on the HKEX (Listing Rules)
In this article, our Hong Kong and Australian team draw on their experience in advising on both listings to share the learnings from these transactions and to provide guidance for Australian-incorporated companies looking to list in Hong Kong.
Listing of overseas companies on the HKEX
The Listing Rules recognise Hong Kong, the People’s Republic of China (PRC), the Cayman Islands and Bermuda for the purpose of eligibility for listing (Recognised Jurisdictions). To facilitate the listing of companies from other jurisdictions, the Securities and Futures Commission of Hong Kong (SFC) and the HKEX jointly issued the Joint Policy Statement Regarding the Listing of Overseas Companies in March 2007 which was last updated in April 2018 (JPS) which sets out guidance for overseas companies seeking to list on the HKEX.
The JPS notes the following considerations which the HKEX will take into account when assessing whether an overseas jurisdiction is eligible for listing on the HKEX:
- Shareholder protection standards – The HKEX recognises that no two jurisdictions have identical shareholder protection standards. The Listing Rules require an overseas company to demonstrate that its jurisdiction of incorporation has shareholder protection standards at least equivalent to those of Hong Kong. If this is not possible, overseas companies can achieve equivalent standards by varying their constitutional documents to provide the relevant protections. The JPS clarifies this requirement by identifying particular important shareholder protection standards. However, the matters requiring shareholder approval set out in the JPS do not apply to qualifying issuers seeking a secondary listing under Chapter 19C of the Listing Rules.
- Regulatory cooperation arrangements – The statutory securities regulator of an overseas issuer’s jurisdiction of incorporation must have adequate arrangements with the SFC for regulatory co-operation.
- Accounting and auditing related and other disclosure requirements – The HKEX may be prepared to accept accountants’ reports and financial statements that are not prepared in accordance with the Hong Kong Financial Reporting Standards (HKFRS) or International Financial Reporting Standards (IFRS), to accommodate overseas companies, particularly those who are dual-primary or secondary listed, to alleviate their burden of having to prepare accountants’ reports and financial statements according to more than one set of financial reporting standards.
- Practical and operational matters – The JPS contains guidance on an overseas issuer’s ability to comply with Hong Kong’s rules and regulations; the eligibility of securities; cross-border clearing and settlement; Hong Kong depositary receipts; taxation; and stock name identifications.
- Suitability for secondary listing – An overseas company can apply for a secondary listing on the HKEX if it already has a primary listing on another stock exchange or it is unlisted and is applying to list simultaneously in multiple jurisdictions, which includes a secondary listing on the HKEX.
Australia as an acceptable jurisdiction for listing on the HKEX
Australia is one of the acceptable jurisdictions for listing on the HKEX and the HKEX published the country guide for Australia in December 2013 (updated in April 2014) (Country Guide).
The Country Guide applies to primary and secondary Main Board listing applicants and primary GEM listing applicants incorporated in Australia. The HKEX does not accept applications for secondary listing on GEM.
Shareholder protection standards and constitutional document requirements
Subject to Australian incorporated companies meeting the conditions set out in the Country Guide, the HKEX does not consider Australian shareholder protection standards to be materially different to that of Hong Kong.
The Country Guide highlights the major differences between JPS / Listing Rules requirements and Australian standards in this regard, including those relating to proceedings at general meetings and constitutional document requirements:
- Timing of an annual general meeting – The JPS requires the overseas company to hold a general meeting each year and any two annual general meetings should not be held more than 15 months apart. An Australian public company only has to hold its first annual general meeting within eighteen months after its registration, and once every calendar year, and the HKEX has accepted this timing.
- Notice of general meetings – The JPS requires an overseas company to give members reasonable written notice of a general meeting. Under Australian law, a listed company must give its members at least 28 days' notice of a general meeting.
- Right to speak and vote at general meetings – The JPS requires that all members must have the right to speak and vote (for disinterested members) at a general meeting. Australian-incorporated applicants must address whether they are able to comply with this requirement.
- Notice to nominate directors – The Listing Rules require notice for nomination of a director and notice to the issuer by the candidate indicating their willingness to be elected, to be given at least seven days before the time set for holding a general meeting and such notice must be made between the date after the despatch of the notice of the meeting and no later than seven days prior to the date of meeting. The ASX Listing Rules provide that an entity must accept nominations for the election of directors up to 35 business days before the relevant general meeting - or in the case of a requisitioned meeting, 30 business days, unless the constitution of the entity provides otherwise. The HKEX is aware of the inconsistency in these requirements and is prepared to grant a waiver for this requirement for eligible secondary listing applicants.
- Quorum for class meetings – The Listing Rules require a quorum of at least one-third of the issued shares of separate classes of shares for a separate class meeting. Under Australian law, the quorum required for a meeting of members holding shares in a class is set by the entity’s constitution. The HKEX is aware of the inconsistency between these requirements and is prepared to grant a waiver for this HKEX requirement for eligible secondary listing applicants.
Regulatory cooperation arrangements
The requirement for adequate arrangements with the SFC for regulatory co-operation is met for issuers incorporated in Australia as the Australia Securities and Investments Commission (ASIC) is a full signatory of The International Organisation of Securities Commissions Multilateral Memorandum of Understanding. In addition, the ASIC has signed a memorandum of understanding with the SFC to provide mutual assistance on exchange of information in relation to securities matters with the SFC.
If a listing applicant is incorporated in Australia but its place of central management and control is elsewhere, similar international co-operation arrangements must generally also be in place with that jurisdiction.
Accounting and auditing related and other disclosure requirements
The HKEX is prepared to accept financial statements that comply with the Australian Accounting Standards (AAS) from issuers with, or seeking, a dual primary or secondary listing. Financial statements prepared in accordance with AAS must contain a statement of the financial effect of the material differences (if any) from either HKFRS or IFRS. If the issuer is no longer listed in a jurisdiction that allows AAS, then it must revert to HKFRS or IFRS.
Practical and operational matters
Applicants are encouraged to notify the Listing Division of the HKEX if they envisage difficulties in complying with the practical and operational matters as set out in the JPS.
In particular, the HKEX has noted it may be difficult for Australian companies to comply with the requirement to destroy documents of title in respect of repurchased shares. For Australian companies, shares that are repurchased by an Australian company are cancelled immediately after the registration of the transfer of repurchased shares to the company. The HKEX is prepared to grant a waiver to Australian issuers with shares in uncertificated form to comply with the requirement to destroy documents of title in respect of repurchased shares, since there are no documents of title to destroy.
Options to list an Australian company
Australian companies may seek to list on the HKEX using the following structures:
- Dual primary listing
- Secondary listing
- Delisting of an overseas listed company and relisting the same entity on the HKEX (see the Dragon Mining listing below)
- A buy-out of minority shareholders through an offshore company acting as the “bidder” and then listing the offshore company on the HKEX
- A share swap, with shareholders of an overseas listed company with shares of an offshore company, and listing the offshore company on the HKEX (see the OPUS / Left Field listing below)
OPUS / Left Field
KWM recently advised OPUS on the move of its listing from the ASX to the HKEX. This marks the first successful delisting of an Australian-listed company, OPUS Group Limited, to be made in conjunction with the listing of a new Bermudan holding entity, Left Field. Left Field was listed on the HKEX on 8 October 2018.
OPUS was listed on the ASX on 12 April 2012 with the stock code OPG, and was delisted from the ASX on 9 October 2018. OPUS is a non-wholly owned subsidiary of Lion Rock Group Limited (Lion Rock, HKEX Stock Code: 1127). OPUS is a one-stop-shop printing solutions and services provider based in Australia.
The listing of Left Field did not constitute a separate listing of assets or business of Lion Rock as contemplated under Practice Note 15 of the Listing Rules because the transaction constituted the migration of the listing status of OPUS / Left Field from Australia to Hong Kong.
Set out below are the key features and issues arising from the listing of Left Field on the HKEX and the delisting of OPUS from the ASX.
The Scheme of Arrangement
A Scheme of Arrangement is statutory procedure involving both court and shareholder approvals which can be used to effect a transfer of shares held by shareholders to another party.
As part of the steps to effect the move to HKEX, the OPUS shareholders exchanged all of their OPUS shares for Left Field shares under the Scheme of Arrangement.
The conditions precedent for the Scheme of Arrangement were set out in the scheme implementation agreement entered into between OPUS and Left Field (Scheme Implementation Agreement). Those conditions included, among other things, approval by the OPUS shareholders and approval of the Federal Court of Australia. Implementation of the Scheme of Arrangement was also subject to Left Field receiving final written approval from the HKEX for the listing and that approval becoming unconditional.
OPUS / Left Field Timeline
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Dividend reinvestment plan
OPUS declared a special dividend on the date of execution of the Scheme Implementation Agreement and put in place the dividend reinvestment plan, whereby each OPUS shareholder could elect to receive additional new OPUS shares in lieu of cash for all or part of the special dividend that they were entitled to receive.
Less than marketable parcel sale
OPUS also conducted a “less than marketable parcel” sale in order to allow for the shares held by OPUS shareholders with a market value of less than AUD500 to be sold on the ASX. The facility was put in place on an “opt-out” basis under provisions in OPUS’ constitution. This was designed to assist with “cleaning-up” the OPUS register prior to implementation of the transaction and to give minority shareholders an easier exit pathway.
Following our role in OPUS / Left Field’s listing, we also advised Altus Capital Limited as the sole sponsor on the Hong Kong law aspects of the listing of Dragon Mining on the Main Board of the HKEX. That listing was effected under Chapter 18 of the Listing Rules.
Set out below are the key features and issues arising from the delisting of Dragon Mining from the ASX and listing on the HKEX.
Dragon Mining is an Australian-incorporated company which is an established resources player - principally engaged in gold exploration, mining and processing, with operating mines, pre-production mining assets and production plants in both Sweden and Finland. Dragon Mining was delisted from the ASX on 19 October 2018 and listed on the HKEX on 5 November 2018.
Delisting of Dragon Mining on the ASX and listing on the HKEX
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As opposed to Left Field, the listing of Dragon Mining on HKEX (DM Listing) involved the delisting of the same entity which was previously listed on the ASX (DM Delisting).
The DM Delisting was conditional upon satisfaction of certain conditions, including relevant approval by the shareholders of Dragon Mining and the satisfaction of the conditions to the DM Delisting set out in ASX’s formal approval for delisting. The DM Delisting however was not made conditional on the DM Listing.
Dragon Mining was formally delisted from the ASX prior to its listing on the HKEX.
Voluntary Sale Facility (VSF) of Dragon Mining shares
All share registers of existing shareholders of Dragon Mining maintained by the Australian principal share registrar were transferred to the Hong Kong branch share register maintained by the Hong Kong share registrar before the listing date of Dragon Mining.
Unlike HKEX where securities are traded in board lots, shareholders of companies listed on the ASX are allowed to trade in single shares. In addition, as the existing shareholders of Dragon Mining reside in Australia or other jurisdictions, it was anticipated that it may be difficult for them to establish a relationship with a Hong Kong broker in order to trade shares on the HKEX. To facilitate trading of Dragon Mining shares by existing shareholders on the HKEX, Dragon Mining established the VSF to provide a trading avenue for the existing shareholders to trade their Dragon Mining shares on the HKEX for a period of three months from the listing date. Dragon Mining was responsible for the payment of fees or charges of the VSF broker and any transaction costs arising from the VSF share sale during that period.
Dragon Mining did not offer any buy-back or redemption facility.
Reporting Accountants and Accounting and financial reporting standards
The Listing Rules and Hong Kong Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the laws of Hong Kong) require that accountants’ reports be prepared by certified public accountants who are qualified under the Professional Accountants Ordinance (Cap. 50 of the laws of Hong Kong) (PAO). The Listing Rules further require that qualifications of the auditor of an overseas issuer must be qualified under the PAO or a firm of accountants acceptable to the HKEX.
Ernst & Young, Perth (EYP) have been Dragon Mining’s statutory auditors since October 2006. EYP is not an accountant qualified under the PAO. EYP reported on the historical financial information of Dragon Mining group in accordance with IFRS and it is intended that EYP will remain as Dragon Mining’s sole reporting accountants.
Dragon Mining applied for, and was granted, a waiver by the HKEX, and the SFC granted a certificate of exemptions from the relevant requirements to allow Dragon Mining to appoint EYP as its reporting accountants. The waiver and exemptions were applied for and granted on various grounds, including that: EYP is an internationally recognised accounting firm and is supervised and regulated by ASIC, and has extensive experience in securities offerings on the ASX. EYP is also a member of Ernst & Young Global Limited (EYGL) and all member firms of EYGL adopt a consistent global audit approach.
Other Australian Companies listed on HKEX
Apart from Left Field and Dragon Mining, we have seen other Australian companies listed on the HKEX. These include:
- Yancoal Australia Ltd (HKEX Stock Code: 3668) – incorporated in Australia. Yancoal is Australia’s largest pure-play coal producer based on aggregate coal reserves and marketable coal production, and has been listed on the ASX since 2012 and dually listed on HKEX on 6 December 2018.
- Top Education Group Ltd. (HKEX Stock Code: 1752) – incorporated in Australia. Top Education’s business is providing higher education programs in international business studies in Australia. It was listed by way of a primary listing on the HKEX in May 2018.
- Sino Gold Mining Limited (previous stock code: 1862) – incorporated in Australia and headquartered in Sydney. Sino Gold conducts most of its mining operations in the PRC. It was primary listed on the ASX, and was then listed on the HKEX by secondary listing in 2007. It was delisted from the ASX and HKEX in 2009 by way of scheme of arrangement.
The Left Field and Dragon Mining transactions are currently the only two transactions involving a delisting from the ASX in conjunction with a listing on the HKEX.
Our cross border team from KWM Hong Kong and Australia worked to successfully deliver the transactions. This showcased KWM’s strength in offering one-stop-shop support and knowledge in respect of both Hong Kong and Australian laws.
KWM Hong Kong also has a wealth of experience in advising overseas companies (including PRC, Canadian and Southeast Asian companies) which have sought/are seeking to list on the HKEX.
 SFC and HK Stock Exchange, Joint Policy Statement regarding the listing of overseas companies, 27 October 2013 (amended on 30 April 2018)
 HKEX, Country Guide - Australia (20 December 2013, updated in April 2014)
 ASX Listing Rule 14.3.