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SFC releases consultation paper on Takeovers and Mergers

On Aug 24, 2011, the SFC in Hong Kong announced the release of a consultation paper on the Codes of Takeovers and Mergers and Share Repurchases, aiming to relax and streamline takeover procedures. This may be of interest to foreign institutional investors who are looking to expand operations through acquisition of other existing organizations. The property element stressed in this code may be quite exotic to foreign entrants, but they often constitute a good chunk of local companies’ assets.

The consultation paper proposes changes in three areas. The first element is to require only offeror companies, which have significant property interests and are related-parties to vendor companies, to perform property valuation, whereas in the past the requirement is more of a blanket one. The second element aims to shift responsibility for verifying independence between vendor and offeror solely to the placing agent, freeing the executive from the vendor side in shouldering the responsibility. Thirdly the payment of shares acquired by the offeror is proposed to be shortened from 10 to 7 business days.

The proposal is particularly intriguing as it seems to offer a bit of breathing space for those prospective acquirers whose eyes are set on property, especially in the context of the region’s bubbling real estate market.    

The consultation period ends Sept 26 and the industry can make their input on the three points. The paper can be found here.

Here is the SFC announcement.

SFC proposes takeovers-related rule amendments


The Securities and Futures Commission (SFC) has today begun a one-month consultation to solicit public comments on proposed amendments to the Codes on Takeovers and Mergers and Share Repurchases.


Formulated in consultation with the Takeovers Panel, the proposals aim at amending the areas as follows:


  • Property valuation: Amend the property valuation requirement so that it will only be applicable to related-party transactions or offers which involve special deals that require shareholder approval. The proposed amendments recognise that in some circumstances, the continued full application of the valuation requirement may be unduly burdensome both in cost and time, especially in cases when the need for the valuation arises from the action of an unrelated party.
  • Confirmations of independence of placees: Clarify that it is the responsibility of financial advisers, placing agents and acquirers of the voting rights to confirm the independence of placees.
  • Timing of payment for acceptances: Change from 10 days to seven business days the prescribed period for payment of acceptances in response to a request by the Federation of Share Registrars Limited to allow share registrars and receiving agents a more manageable timeframe to process payments without compromising the interests of accepting shareholders.

"We believe that the proposals could facilitate market operations and result in the disclosure of more focused and relevant information,” said Mrs Alexa Lam, the SFC’s Acting Chief Executive Officer. “We also believe it is important to clarify the responsibilities of market practitioners."

Interested parties are invited to submit their comments to the SFC by 26 September 2011. Comments may be submitted online via the SFC website (, by e-mail to, by post or by fax to 2810 5385.

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