美股招股观察

The route begins with incorporation, not the proposed counter

The boundary is categorical. An issuer incorporated in the PRC falls under Chapter 19A Issuers Incorporated in the PRC. An overseas issuer already primarily listed on another exchange falls under Chapter 19C Secondary Listings of Overseas Issuers. For a US-listed overseas issuer seeking a Hong Kong counter, Chapter 19C is therefore the relevant route. The proposed Hong Kong listing does not itself determine the chapter.

That distinction also prevents a related error. Rule 19A.13A sets out open-market requirements for PRC issuers by reference to H shares held by the public, with separate provisions for PRC issuers with or without other listed shares. Its H-share percentages are not Chapter 19C eligibility thresholds and must not be imported into a secondary-listing analysis.

Rule 19C.02A: basic conditions do not create an entitlement to approval

Under the Basic Conditions in Rule 19C.02A, the overseas issuer’s primary exchange must have granted its listing before the Exchange can grant the Hong Kong listing. The issuer must also comply with Rule 19.05(2) by appointing and maintaining a person authorised in Hong Kong to accept service of process and notices on its behalf. Rule 19C.02A further requires compliance with the securities registration requirements in Rules 19.05(3), 19.05(4) and 19.05(5).

Satisfaction of those requirements does not make approval mandatory. Rule 19C.02A(1) gives the Exchange the right, in its absolute discretion, to refuse the listing if, in its opinion, any of the following grounds applies:

it believes that it is not in the public interest to list the securities;
the issuer’s primary listing is or is to be on an exchange that cannot provide shareholder protection standards at least equivalent to those provided in Hong Kong;
the issuer has received waivers from, or is exempt from, rules, regulations or legislation that subject it to regulatory requirements materially less stringent than those generally applying to entities of its nature listed on its primary market;
the application constitutes an attempt to avoid rules that apply to a primary listing on the Exchange; or
the majority of the issuer’s worldwide trading will take place in Hong Kong upon or shortly after its Hong Kong listing.

The final ground is substantive, not administrative. An issuer cannot treat overseas primary listing plus Hong Kong admission as sufficient where the Exchange considers that most worldwide trading will migrate to Hong Kong immediately or shortly after listing.

For Rule 19C.02A(1)(d), the rule permits the Exchange to apply the test in Rule 14.06B to relevant transactions, arrangements or series of transactions conducted on the primary exchange. If a material part of the applicant’s business is listed there by way of a reverse takeover, the Exchange will normally regard the secondary-listing application as an attempt to avoid the rules applicable to a primary listing.

Rules 19C.04 and 19C.05 apply only to a WVR structure

The qualifications in Rules 19C.04 and 19C.05 must be kept within their stated boundary: they apply only to an overseas issuer with a WVR structure.

Rule 19C.04 requires that issuer to have a track record of good regulatory compliance of at least two full financial years on a Qualifying Exchange.

Under Rule 19C.05, the issuer must satisfy one of these alternatives:

a market capitalisation of at least HK$20,000,000,000 at the time of listing; or
a market capitalisation of at least HK$6,000,000,000 at the time of listing and revenue of at least HK$600,000,000 for the most recent audited financial year.

These are not general admission thresholds for every US-listed company. An ordinary US-listed issuer without WVR is not subject to Rules 19C.04 and 19C.05.

Rule 19C.11 is a non-applicability list, not an approval shortcut

Rule 19C.11, under Exceptions to the Rules, provides that specified rules do not apply to an overseas issuer that has, or is seeking, a secondary listing on the Exchange. Its operative language is a list of non-applicable rules, not a grant of secondary-listing status.

The list includes, among other provisions, Rules 3.09F, 3.09G, 3.09H, 3.12A, 3.13A, 3.17, 3.21 to 3.23, 3.25 to 3.27C, 3.28, 3.29, 4.06, 4.07, Chapter 7, 8.08(1), 8.08A, 8.09(4), 8.18, 9.11(10)(b), 10.05, specified provisions of 10.06, 10.06A, 10.07 and 10.08, numerous Chapter 13 provisions, Chapter 14, Chapter 14A, Chapters 15 to 17, Practice Note 4, specified paragraphs of Practice Note 15 and identified appendices.

The express limits within Rule 19C.11 remain important. Some entries apply only to issues outside the Exchange’s markets. Other entries address spun-off businesses, parent-shareholder approvals or particular continuing transactions. Rule 13.51(2), for example, still requires each director or member of the overseas issuer’s governing body to provide contact information and personal particulars under Rule 3.20.

Rule 19C.11 is therefore neither a simplified approval route nor an expedited approval route. It identifies rules that do not apply while the issuer remains within the secondary-listing regime. It does not displace Rule 19C.02A or the Exchange’s absolute discretion.

Repealed provisions cannot support a current application

The Chapter 19C directory marks Rule 19C.03, Rules 19C.06 to 19C.09, Rule 19C.12 and Rule 19C.14 as repealed. Rule 19C.12 and Rule 19C.14 each state “Repealed 1 January 2022.”

None of those provisions may be cited as a current requirement, qualification or exception. In particular, Rule 19C.12 must not be used as a present waiver basis, and Rule 19C.14 must not be presented as a current de-listing obligation.

Rule 19C.13: migration of at least 55% changes the listing status

Rule 19C.13, Migration of the Majority of Trading to the Exchange’s Markets, addresses a permanent change in where an overseas issuer’s shares trade. For this purpose, the Exchange regards migration as having occurred if at least 55% of the total worldwide trading volume, by value, in US dollars, over the issuer’s most recent financial year takes place on the Exchange’s markets, including trading in the relevant depositary receipts issued on those shares.

Once Rule 19C.13 applies, the Exchange regards the issuer as having a dual-primary listing. Rules 19C.11, 19C.11A, 19C.11B and 19C.11C, as applicable, cease to apply.

The issuer then receives a grace period of 12 months to comply with the applicable Exchange Listing Rules. That period ends at midnight on the first anniversary of the date of the Exchange’s written notice of its decision that the majority of trading in the listed shares has migrated permanently to the Exchange’s markets.

Rule 19C.13 also addresses continuing transactions. A continuing transaction in place on the date of the Exchange notice continues to be exempted from the applicable rules in Rule 19C.11 for three years from that notice date. This transaction exemption does not displace the separate 12-month compliance grace period.

Rule 19C.13A: loss of the original primary listing has a different consequence

Rule 19C.13A, De-listing, addresses a different event. Its trigger is the issuer’s shares, or the depositary receipts issued on those shares, ceasing to be listed on the Recognised Stock Exchange on which the issuer is primarily listed.

The consequence is not the Rule 19C.13 dual-primary outcome. The Exchange instead regards the issuer as having a primary listing in Hong Kong. Rules 19C.11, 19C.11A, 19C.11B and 19C.11C, as applicable, then cease to apply.

Rule 19C.13 therefore answers whether the majority of worldwide trading has migrated to Hong Kong and produces a dual-primary listing. Rule 19C.13A answers whether the original primary listing has ended and produces a primary listing in Hong Kong. The triggers and consequences must not be conflated.