EN
In December 2021, the Hong Kong Stock Exchange announced new rules to accommodate listings of Special Purpose Acquisition Companies (“SPACs”) after witnessing the growth of SPAC listings in the US. A SPAC, as defined in the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, refers to “an issuer that has no operating business and is established for the sole purpose of conducting a transaction in respect of an acquisition of, or a business combination with, a target, within a pre-defined time period, to achieve the listing of the target”. A SPAC is often known as a blank check company. The SPAC listing regime in Hong Kong came into effect on 1 January 2022.
In general, the Hong Kong Stock Exchange only allows professional investors (as defined in section 1 of Part 1 of Schedule 1 to the SFO) to invest in SPACs. A SPAC is required to raise IPO funds of at least HK$1 billion which must be held in a ring-fenced escrow account in Hong Kong operated by a trustee or custodian. The minimum board lot size and subscription amount will be HK$1 million. At listing and on an ongoing basis, at least one SPAC promoter must be licensed for regulated activity Type 6 (advising on corporate finance) and/or Type 9 (asset management) under the SFO and must hold at least 10% of the promoter shares. The Hong Kong Stock Exchange also requires the SPAC board to include at least two Type 6 or Type 9 licensed individuals (including one director representing the licensed SPAC promoter). Further, a SPAC must meet all other open market requirements applicable to a new listing, including the 25% public float requirements.
Hong Kong had its first SPAC IPO in March 2022, and the Hong Kong Stock Exchange is reviewing a further 10 SPAC applications for listing filed between January and March 2022. It is believed that Hong Kong will attract prospective SPAC issuers as it offers a platform for the SPAC issuers to hunt for acquisition targets in mainland China.
Private equities and companies looking to acquire targets in mainland China with a SPAC are advised to consider whether its SPAC may be eligible to be listed on the Hong Kong Stock Exchange when considering its listing venue.
On 11 February 2022, the Government of the HKSAR published the Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Bill 2022 (the “Bill”) in the Gazette after years of consultation. The Bill is to abolish the use of the accrued benefits of employers’ mandatory contributions under the Mandatory Provident Fund (“MPF”) Scheme to offset statutory severance payment (“SP”) and long service payment (“LSP”) (the “Offsetting Arrangement”). The abolition is also applicable to other retirement schemes, notably the ORSO Scheme. The eventual implementation of the Bill is said to be in 2025 at the earliest.
The Offsetting Arrangement will be abolished starting from a date to be appointed after the enactment of the Bill (the “Transition Date”). The proposed abolition will not have retrospective effect. After the Transition Date, employers can no longer use employers’ mandatory contributions to offset employees’ SP/LSP in respect of an employee’s employment period starting from the Transition Date. Typically, for employees who commence their employment before the Transition Date and whose employment is terminated on or after the Transition Date, their SP/LSP will be divided into two portions:
The rate and maximum payment of SP and LSP will remain unchanged after the abolition of the Offsetting Arrangement, being 2/3 x (the last month’s wages (or the average monthly wages of the preceding 12-month period) or HK$22,500, whichever is lesser) x years of services, subject to a cap of HK$390,000. The pre-transition portion would generally be calculated on the basis of the monthly wages immediately preceding the Transition Date whereas the post-transition portion would be calculated on the basis of the last monthly wages before the termination of employment.
While abolishing the Offsetting Arrangement would help improve employees’ retirement protection, the business sector, notably micro-, small- and medium-sized enterprises (“MSMEs“) remained highly concerned over the possible financial impact of the abolition. The Administration advised that supporting measures would be put in place to facilitate the transition and MSMEs would stand to benefit from, among others, the Government 25-year subsidy scheme totalling $33.2 billion at 2021 prices.
Employers are advised to get familiar with the changes introduced under the Bill and seek legal advice if necessary.
For further information, the Bill is available here.
On 11 February 2022, the District Court handed down its judgment for Francis William Haden v Leighton Contractors (Asia) Limited [2022] HKDC 152, a case concerning alleged race discrimination in the context of a termination of employment. This case was nicknamed the “gweilo” case as this term was allegedly the subject of the race discrimination complaint. The article explores the legal principles laid down by the Court in the judgment and highlights lessons for making a successful discrimination claim. MinterEllison LLP acted for the successful respondent in the case.
The full article can be found here.
On 24 March 2022, our Senior Associate Iris Cheng presented a webinar for the members of The Hong Kong Federation of Insurers on “Statutory Secrecy under the Insurance Ordinance (Cap.41) and Legal Professional Privilege”. The session was attended by nearly 60 participants including Board members, C-suite executives and legal and compliance functions from various insurers.
We are pleased to have received feedback that the webinar was “very useful” and that “the speaker is very well-prepared and know the subject well”.
There have been new and much welcomed developments in the area of cross-border insolvency between Hong Kong and the PRC. Traditionally, a foreign liquidator (such as a Hong Kong court appointed liquidator) often faces difficulties for him to be recognised in the PRC and to carry out his work in the Mainland, even though the company to which he was appointed a liquidator is the parent company of the PRC operating subsidiaries, or where the assets in the Mainland clearly belonged to the liquidated company. A breakthrough came in May 2021 when the Vice-President of the Supreme People’s Court of the PRC and the Hong Kong Secretary of Justice signed a Record of Meeting, setting out a consensus on the mutual recognition and assistance to insolvency proceedings between the PRC and Hong Kong. Initially, this new arrangement will apply to the Intermediate People’s Court in three pilot areas, namely Shanghai, Xiamen and Shenzhen, with a view to expanding the areas progressively.
Under the arrangement, certain requirements must be satisfied in order for Hong Kong insolvency proceedings to recognised in the PRC. One notable requirement is that the liquidated company must have a centre of main interests (COMI) in Hong Kong for at least 6 months at the time of the recognition application. COMI is generally considered to be the place of incorporation, but may also include considerations as the place of business, principal office and assets.
There have been some recent judgments in Hong Kong which have provided guidance on the operation of mutual arrangement between Hong Kong and the PRC Courts recognising each other’s liquidators.
In the judgments of Re Joint and Several Liquidators of Ozoner Water International Holding Ltd (in liquidation) [2022] HKCU 940, Re Edward Simon Middleton and Others [2022] HKCU 352 and Re Samson Paper Company Limited [2021] HKCFI 2151, the Hong Kong Court in each case granted an application by the liquidators to issue a letter of request to the Shenzhen Intermediate People’s Court to recognise the liquidators and grant them assistance, pursuant to the mutual arrangement. In Harris J’s judgments, he set out the principles for such an application of a letter of request to be issued to the PRC Court.
For instance, in addition to the requirement that the company’s COMI must be in Hong Kong, the Court would also consider whether the company’s assets which the liquidators wish to have control over are in the PRC in order to ensure that the PRC Court is the most appropriate forum to decide the liquidators’ powers over such assets.
Following the decisions in Hong Kong to issue a letter of request for recognition and assistance to the PRC Court, there has only been one case (Samson Paper Company Limited) so far where the Shenzhen Intermediate People’s Court allowed the Hong Kong liquidators to be recognised in the PRC and be provided with assistance. This may not come as a surprise because it is clear that Samson Paper Company Limited’s COMI is in Hong Kong where it was incorporated. It remains to be seen whether the PRC Court will similarly grant recognition and assistance to the Hong Kong liquidators of Ozoner Water International Holding Ltd, which was incorporated in the Cayman Islands.
See news from our global offices