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| HKEx Eases Red Tape On BVI Listings |
by Phillip Morton, Investors Offshore.com
Monday, December 21, 2009
The Hong Kong Stock Exchange (HKEx) announced on December 15 that the British
Virgin Islands (BVI) has been placed on its list of acceptable jurisdictions for an
issuer’s place of incorporation under Chapter 19 of the Listing Rules,
paving the way for the listing of BVI-incorporated companies on the exchange.
The decision by the HKEx means that companies wishing to list shares on
the exchange can do so under a less stringent process, detailed within a guidance
note available on the HKEx's website, rather than applying as
an overseas company.
Commenting on the announcement, law firm Conyers Dill and Pearman, which has
been involved in over 40 listings on the exchange by BVI companies, said that
whilst it would significantly reduce red tape, BVI companies may need to alter
their articles of incorporation to enhance shareholder protection to comply
with Hong Kong securities legislation. Under the legislation, an applicant must
satisfy the following criteria:
- Amend its memorandum and articles to address certain issues of shareholder
protection where the protection afforded to shareholders is considered less
stringent than in Hong Kong; and
- Demonstrate a reasonable nexus between its place of incorporation and its
place of business operations.
According to Conyers Dill and Pearman: “the key advantage for British
Virgin Islands companies in being able to list directly on the Hong Kong Exchange
is there should be no need for an applicant to undertake either (i) a restructuring
of its business and operations through the establishment of a new Bermuda or
Cayman Islands holding company or (ii) a redomicile of its place of incorporation
by way of merger or continuation, prior to listing. This would be of particular
benefit for companies incorporated in the British Virgin Islands:
- with a listing on another exchange who wish to have a secondary listing
in Hong Kong and avoid the time, cost and expense of such a restructuring
or redomicile; or
- used as a private equity investment vehicle with complicated convertible
preferred share type structures, where a restructuring of the sort described
above may not be readily achievable, or only achievable with difficulty, due
to the need to obtain multiple preferred shareholder and other approvals.”
“In light of the popularity of British Virgin Islands companies as special
purpose vehicles for investments in Asia, and particularly the People’s
Republic of China, the Hong Kong Exchange’s decision provides investors
in such companies with a further route to exit investments through a listing
on a highly regarded, Asian-focused, stock exchange. In addition, for those
entities incorporated in the British Virgin Islands with operations in Asia
but a primary listing on another stock exchange (i.e. AIM, NASDAQ), a secondary
listing on a more market appropriate exchange is now easily within reach.”
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