(b) Tighten the Compliance Requirements for Reverse Takeover Transactions and Extreme Transactions
Extreme transactions: (i) codify the current “extreme very substantial acquisitions” requirements in Guidance Letter GL78-14 and rename this category of transactions as “extreme transactions”; and (ii) impose additional eligibility criteria on the issuer that may use this transaction category.
Additional requirements for reverse takeover transactions and extreme transactions: require that both the acquisition targets in a reverse takeover or extreme transaction and the enlarged group must be suitable for listing (Rule 8.04), and the acquisition targets must meet the requirements of Rule 8.05 (or Rule 8.05A or 8.05B). If an issuer fails to comply with Rule 13.24, each of the acquisition targets and the enlarged group must meet all the new listing requirements set out in Chapter 8 of the Listing Rules.
II. Continuing Listing Criteria for Listed Issuers
(a) Rule 13.24 (Sufficient Operations)
Require an issuer to carry out a business with a sufficient level of operations and to have assets of sufficient value to support its operations to warrant its continued listing.
Proprietary securities trading and/or investment activities by an issuer’s group (other than a company listed under Chapter 21 of the Listing Rules) are normally excluded when considering whether the issuer can meet Rule 13.24 (except for those carried out by a member of the issuer’s group that is a banking company, an insurance company or a securities house that is mainly engaged in regulated activities under the Securities and Futures Ordinance).
(b) Rules 14.82 and 14.83 (Cash Companies)
Extend the definition of “short-dated securities” in Rule 14.82 to cover investments that are easily convertible into cash and rename it as “short-term investments”.
Confine the exemption under Rule 14.83 to cash and short-term investments held by members of an issuer’s group that are banking companies, insurance companies or securities houses.
(c) Trasitional Arrangements
A transitional period of 12 months from the effective date of the amendments to the Listing Rules will apply to listed issuers that do not comply with the new Rule 13.24 or 14.82 strictly as a result of the amendments to the Listing Rules. However, the transitional arrangement will not apply to issuers that do not comply with the current requirements under Rule 13.24 or 14.82 or become non-compliant with the new Rule 13.24 or 14.82 after the effective date of the amendments to the Listing Rules.