Publication
HKEx's commitment to sustainability: The new phase of paperless regulatory reform
In recent years, the Hong Kong Stock Exchange (HKEx) has introduced several initiatives to digitize its regulatory processes.
HKEx's commitment to sustainability: The new phase of paperless regulatory reform
Global | Publication | February 2025
In recent years, the Hong Kong Stock Exchange (HKEx) has introduced several initiatives to digitize its regulatory processes. These reforms have not only improved operational efficiency but also reduced environmental impact by minimizing paper usage.
To build on these advancements, the HKEx has concluded on 24 January 2025 its proposals to further enhance the paperless regime (the Conclusion). The Listing Rules will be amended (the Amendments) to expand the use of electronic channels in both compliance and listing requirements, reinforcing its commitment to sustainability while streamlining operations. Some of these changes will be implemented alongside the uncertificated securities market regime1 (the USM) driven by the Securities and Futures Commission (SFC).
In this article, we will take you through an overview of this latest update.
1. Key Updates
1.1 Compliance Requirements
In this round of Listing Rules amendments, the HKEx has introduced compliance requirements which are designed to foster a practice of electronic communication and interaction between issuers and shareholders. Specifically, it addresses the below aspects:
|
Compliance obligations |
Interactions with USM |
Implementation Timeline |
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(a) Electronic instructions from shareholders to issuers |
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Electronic instructions2 |
Issuers shall offer shareholders an option to send the below instructions or responses to issuers electronically:
(collectively, "Requested Communications") |
To be implemented together with USM |
Together with USM, which is estimated to be the end of 20254 (USM Effective Date)
But with transitional period to comply within: (i) 1 yr after the USM Effective Date for dividend election instructions and Meeting Instructions; (ii) 5 years after USM Effective Date for Non-Meeting instructions |
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While issuers must facilitate electronic submissions, they are also obligated to accept hard copy communications from shareholders. |
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Mechanism for receiving electronic instructions5 |
Issuers may select their preferred mechanism for receiving the Requested Communications, whether through emails, tailor-made platforms of the issuers or share registrars, or other means. Issuer shall however ensure appropriate measures are in place to verify the authenticity of the Requested Communications, and take into account applicable legal requirements (e.g. personal data laws). |
Approved Share Registrars6 (ASR) under USM can continue to provide relevant electronic platforms |
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(b) Real-time electronic payment of corporate action proceeds to shareholders |
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Electronic payment to shareholders7 |
Issuers shall provide shareholders with an option to receive corporate action proceeds8 electronically on the announced payment date. Non-electronic option should also be offered to shareholders. |
Electronic payment to shareholders is within the scope of services expected to be provided by ASR under USM9 |
The USM Effective Date, but with transitional period to comply within 1 year thereafter
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Payment methods10 |
Issuers are permitted to provide electronic payment options of their choice to shareholders, including autopay and FPS. They must ensure that the payment option can result in good funds being received by shareholders on the announced payment date. |
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Fees and Charges11 |
Issuers are required to bear outward charges e.g. bank charges. Shareholder will be responsible for inward charges. |
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(c) Electronic payment of subscription monies from shareholders |
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Electronic payment from shareholders12 |
Issuers shall provide an option for shareholders to pay subscription monies for offers (such as rights issue, bonus issues) via electronic means. Issuers are however still required to accept payments by paper cheques or cashier orders at shareholders’ choice. |
Electronic payment from shareholders is within the scope of services expected to be provided by ASR under the USM13 |
The USM Effective Date, but with transitional period to comply within 1 year thereafter |
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Payment methods14 |
Issuers may choose the electronic payment options to be provided e.g. FPS and autopay. |
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(d) Hybrid general meetings and E-voting by shareholders |
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Constitutional documents15 |
Issuers’ constitutional documents (e.g. bye-laws, articles) shall expressly allow hybrid general meetings and E-voting16, subject to the applicable laws and regulations. Generally, laws in PRC, Hong Kong, Cayman Islands and Bermuda allow hybrid general meetings and E-voting17. Issuers incorporated in these jurisdictions will be able to comply with the Amendments accordingly. |
Not applicable
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10 February 2025, with transitional arrangements： Constitutional documents shall be amended by issuer’s first AGM to be held after 1 July 2025
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Meetings and voting arrangements |
The Amendments have not mandated the use of hybrid meetings or E-voting.18 Issuers shall however consider holding general meetings in hybrid manner.19 |
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1.2 IPO Process
During the share subscription process in an IPO, prospectus for public offerings of shares are currently published electronically20. However paper application forms are still permissible as a subscription channel for the offering. This is known as the Mixed Media Offerings (the MMO).
Since paper prospectuses are no longer required pursuant to previous reforms, the HKEx finds that MMOs no longer serve useful purposes21. Therefore subject to relevant legislative process, MMO will be abolished and all applications of public offer of shares, collective investment schemes and debt securities can only be made through electronic channels.
This change aligns with the HKEx’s initiatives for a fully electronic IPO process, and further enhance efficiency of the regulatory functions.
2. Applicability to Different Types of Issuers
Certain types of issuers may already be governed by other regulatory frameworks on similar subject matters (such as collective investment schemes, which are regulated by the SFC’s codes of practice). While for others, market practices may already be well-established and making significant changes neither necessary nor appropriate.
Therefore in developing these reforms, the HKEx has considered various factors pertaining to different issuers. The Amendments will apply as follows:
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Type of Issuer |
Electronic instructions from securities holders to issuers |
Real-time electronic payment of Corporate Action Proceeds |
Electronic subscription monies |
Hybrid general meeting and E-voting |
Abolition |
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Meeting Instructions |
Non-Meeting Instructions |
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Issuer of equity securities |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
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CIS |
No |
No |
Yes |
Yes |
No |
Yes |
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Issuer of structured products |
No |
Yes |
No |
No |
No |
No |
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Public Debt Issuer |
Yes |
No |
No |
No |
No |
Yes |
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Professional Debt Issuer |
No |
No |
No |
No |
No |
No |
3. Getting Ready for the Change
In this latest phase of paperless reform, majority of the proposals are presented as options for shareholders. While this will provide flexibility and accommodate shareholders from diverse backgrounds, from the issuers' perspectives, it is imperative to establish the requisite infrastructures and legal frameworks to prepare for the Amendments.
These infrastructures and frameworks include issuers’ constitutional documents, which are the legal backbone to issuer’s corporate actions. With the implementation of the Amendments, they have to be able to accommodate hybrid general meetings and E-voting. It is advisable for issuers to consult with their legal advisors early to address and prepare for relevant amendments as soon as possible.
Separately, as outlined above, share registrars (which will become ASRs upon implementation the USM) are anticipated to be in a position to provide services that complement the HKEx’s proposals above. Issuers are therefore advised to engage with their share registrars at an early stage to comprehend the services available, or to explore alternative options if they consider appropriate.
4. Conclusion
Along with the HKEx’s other recent proposals (such as USM), the above initiatives collectively signify an inevitable trend of an environmentally sustainable securities market. This ongoing evolution aligns the HKEx with the global standards, and highlights the importance for issuers, shareholders, share registrars and all other stakeholders to be proactive in adopting sustainable practices.
Footnotes
1
Generally, USM refers to a regime that enables investors to hold listed securities in their own names without paper instrument through the infrastructures of the financial market, subject to certain legal and regulatory requirements (Consultation paper on proposed subsidiary legislation for implementing an uncertificated securities market in Hong Kong dated March 2023 by the SFC, paragraphs 17 and 47)
2
HKEx’s Main Board Listing Rules (MBLR) New 2.07D and amended 1.01
3
Actional corporate communications is defined as any corporate communication that seeks instructions from issuer’s securities holders on how they wish to exercise their rights or make an election as the issuer’s securities holders (HKEx MBLR 1.01). Provisional allotment letters at rights issue transactions are expressly excluded for this latest change (HKEx’s Consultation Paper for the Amendments dated August 2024 (the Consultation Paper) paragraph 29(b) and the Conclusion paragraph 14(b))
4
Conclusion page 38
5
New MBLR 2.07D, Conclusion paragraph 63
6
Under the USM environment, share registrars’ systems and facilities will be used to hold and manage securities, which will take a more significant role and form a critical part of the securities market infrastructure. Hence share registrars will be regulated more directly and robustly than today as Approved Securities Registrars (Consultation paper on proposed code and guidelines for implementing an uncertificated securities market in Hong Kong dated October 2023 by the SFC, paragraph 15); Consultation Paper paragraph 48
7
New MBLR 2.07E, Conclusion paragraph 66
8
“Corporate action proceeds” means proceeds paid by issuer to holders of securities in connection with its corporate actions, e.g. dividends, refunds relating to rights issues, open offers and payments relating to takeovers and privatisations (Amended MBLR 1.01)
9
Consultation Paper paragraph 77
10
New MBLR 2.07E Note 1, Conclusion paragraph 63
11
New MBLR 2.07E Note 3
12
New MBLR 2.07F, Consultation Paper paragraph 84
13
Consultation Paper paragraph 91
14
Conclusion paragraphs 69 and 76
15
New MBLR Appendix A1 paragraph 14(6)
16
“hybrid general meetings” means issuers’ general meetings that allow physical and virtual attendance by shareholders; “E-voting” means voting by shareholders at issuers’ general meetings via electronic means (Conclusion page 35)
17
In relation to Hong Kong law, sections 583A and 547(1) of Companies Ordinance (Cap. 622); Consultation Paper paragraph 113
18
Consultation Paper paragraph 132
19
HKEx’s General Meeting Guide paragraph 3.3
20
MBLR 12.11
21
Consultation Paper paragraph 101
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