(c) Contractual arrangements
The use of contractual arrangements will only be permitted if it is due to foreign ownership restrictions and if the related risks of contractual arrangements are sufficiently mitigated. In case contractual arrangements shall be adopted, listing applicant should refer to listing decision LD43-3 for relevant guidance.
(d) Avoidance of creation of Shell Companies
The Stock Exchange had been particularly cautious and skeptical about the fact that some listing applicants will thrive for the listing status for the disguised purpose of creation of “Shell Companies”, since the controlling shareholders of these “Shell Companies” would either change or gradually sold their interests shortly after the lock-up period following listing. Such companies may invite speculative trading activities which lead to opportunities for market manipulation, insider trading and unnecessary volatility in the market post-listing. This would potentially trigger back-door listing circumventing all the regulatory scrutiny of the Listing Rules. Guidance Letter GL68-13A sets out the following characteristics which such Shell Companies may have as identified by the Stock Exchange.