SPACs and Enhanced shareholder protection

Following market consultations, the Hong Kong Stock Exchange (HKEx) has recently published two sets of significant amendments to its Listing Rules (together with related guidance notes, the Amendments). The Amendments create a new listing regime for special purpose acquisition companies (SPACs) and enhance shareholder core protection standards for HKEx listed companies. The Amendments take effect on 1 January 2022.

Shareholder Core Protection Standards

The Amendments introduce a common set of core shareholder protection standards (the Core Standards) that will apply to all companies with shares listed on the HKEx, regardless of jurisdiction of incorporation. This approach will supersede the current regime, which broadly requires overseas issuers to afford protections to shareholders that are at least equivalent to those available in Hong Kong. The Core Standards cover a broad range of matters, including notice and conduct of shareholder general meetings and voting requirements and the appointment and removal of directors. The Core Standards are intended to be applied in a unified manner across all listed companies, and so derogation from any of the Core Standards will not ordinarily be available. Prospective issuers incorporated outside of Hong Kong and the PRC are required to demonstrate how their domestic corporate law regime, together with their constitutional documents, satisfy the Core Standards. Companies that currently have shares listed on the HKEx will be required to confirm compliance with the Core Standards not later than their second annual general meeting after 1 January 2022.

With approximately 75% of companies with shares listed on the HKEx incorporated offshore with more than 50% incorporated in the Cayman Islands), Walkers' dedicated equity capital markets team in Hong Kong is working very closely with prospective issuers, listed clients and onshore advisers on the amendments required to meet the Core Standards from a Cayman, BVI or Bermuda law perspective.

HKEx-listed SPACs

The Amendments introduce Chapter 18B to the Listing Rules, which creates a new listing regime for SPACs. Whilst some of the more restrictive proposals set out in the earlier consultation document have not been taken forward, the HKEx's SPAC listing regime will nevertheless differ from the US and European approaches in a number of key areas in relation both to the SPAC's IPO and subsequent business combination. These include:

• limiting IPO and pre-business combination trading to professional investors (and requiring a minimum of 75 professional investors, of which at least 20 must be institutional);
• stringent eligibility requirements for the SPAC's promoters / sponsors;
• mandatory PIPE investment for the business combination; and
• requiring a fresh listing application for the post-business combination combined entity.

It remains to be seen how the HKEx's SPAC listing regime will be received by market participants in light of significant competition from the US and European markets and from the Singapore Stock Exchange (SGX). Our teams across Hong Kong and Singapore have advised on a significant number of SPAC IPO and de-SPAC business combination transactions across the region, and are actively working with clients exploring both HKEx and SGX SPAC listings, with a number of these expected to come to market early in the new year.

Walkers is proud to be able to field one of the largest and most experienced dedicated offshore capital markets teams in the region, with team members based both in Hong Kong and Singapore. Contact details for the core team members are set out below and we would be delighted to discuss any aspect of the Amendments, or in relation to regional equity capital markets transactions more generally, as helpful.

In Ireland, the recent Supreme Court decision in Baranya v Rosderra Irish Meats Group Limited [2021] has important implications for employers addressing protected disclosures made in the workplace. The timing of the Supreme Court decision is particularly apt with the imminent deadline for implementation of Directive (EU) 2019/1937 of the European Parliament and of the Council on the protection of persons who report breaches of Union law ("Directive").

Read our advisory, which covers an overview of the Baranya v Rosderra case, further details surrounding the implementation of the Directive and key takeaways for employers surrounding protected disclosures and grievances: 

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On 25 November 2021, the European Commission (the "EC") published its proposal (the "EC Proposal") for a directive amending the Alternative Investment Fund Managers Directive ("AIFMD"). The EC Proposal is a key element of the EC's Capital Markets Union package with the other proposals relating to: (i) the establishment of a European single access point; (ii) amendments to the ELTIF framework; and (iii) revision of the rules under MiFIR.  Notwithstanding the overarching assessment that AIFMD is "generally meeting its objectives", the EC have identified a number of areas under AIFMD that could, in their view, be improved. Read our advisory, which provides a brief overview of some of the key proposed amendments to AIFMD described in the EC Proposal. 

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On 1 December 2021 the Central Bank of Ireland ("CBI") issued a Dear CEO Letter detailing the findings of a review undertaken by the CBI as part of a Common Supervisory Action coordinated by the European Securities and Markets Authority ("ESMA") into firms’ compliance with the suitability requirements under MiFID II. The purpose of the Letter is to provide feedback to industry on the findings of the review and to outline the CBI’s expectations in relation to the application of the MiFID II suitability requirements.

To read our advisory, which covers the main findings of the Letter and the actions required by impacted Irish-authorised MiFID firms and credit institutions, please click below.

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