Conclusions on SPACs Consultation Published by the Hong Kong Stock Exchange
ISSUING AUTHORITY:
The Stock Exchange of Hong Kong Limited (“Exchange”)
DATE OF PUBLICATION:
December 17, 2021
EFFECTIVE DATE:
January 1, 2022
On December 17, 2021, the Exchange published its consultation conclusions (the “Consultation Conclusions”) on creating a new listing regime for Special Purpose Acquisition Companies (“SPAC”) in Hong Kong. The amended Listing Rules as set out in the Consultation Conclusions came into effect on January 1, 2022.
With a view to fostering the development of the Hong Kong SPAC market and better aligning the interest and incentive of SPAC promotors with SPAC shareholders, the Exchange made some amendments to the original proposals, which include:-
● Relaxation of warrant dilution cap
To better incentivize potential SPAC investors, the overall warrant dilution cap has been increased from 30% to 50% yet with more prominent disclosure on the dilutive effect of all warrants.
● Approval of share price-linked performance targets for earn-out rights
SPACs are allowed to issue earn-out rights to SPAC promoters, which are convertible into ordinary shares of the successor company if the successor company meets pre-defined performance targets.
The Exchange now recognises share price to be used as a performance target if the share price of the successor company (i) is at least 20% higher than the issue price of the SPAC shares at listing of the SPAC; and (ii) exceeds a pre-defined volume weighted average price of the successor company’s shares over a period of time.
● Removal of alignment of voting with redemption
The Exchange’s initial proposal to align voting with redemption, which suggests that only SPAC shareholders who vote against a de-SPAC transaction are able to redeem their shares, has been removed. SPAC shareholders will be able to redeem their shares regardless of how they cast their vote.
The Exchange accepts formal listing applications from SPACs commencing January 1, 2022. It is expected that the new listing regime for SPACs can offer a meaningful alternative listing method to traditional IPOs and attract high-quality SPAC listings on the Exchange.
Reference:
Consultation Conclusions on Special Purpose Acquisition Companies
Discussion Paper on Crypto-assets and Stablecoins Issued by the Hong Kong Monetary Authority
ISSUING AUTHORITY:
Hong Kong Monetary Authority (the “HKMA”)
DATE OF ISSUANCE:
January 12, 2022
On January 12, 2022, the HKMA issued a discussion paper on crypto-assets and stablecoins, seeking feedback from the public and industry players on the applicable regulatory framework.
The paper sets out HKMA’s thinking on the regulatory approach for crypto-assets particularly for payment-related stablecoins, and highlights certain issues in the form of questions and answers, which include:-
No. | Discussion questions | HKMA’s views |
1 | Should the HKMA regulate activities relating to all types of stablecoins or give priority to those high-risk payment-related stablecoins while providing flexibility in the regime to make adjustments to the scope of stablecoins that may be subject to regulation in the future? | ● The HKMA intends to take a risk-based approach initially focused on activities related to payment-related stablecoins. ● Flexibility will be preserved in the regime to adopt future changes. |
2 | What types of stablecoin-related activities should fall under the regulatory ambit, e.g. issuance and redemption, custody and administration, reserves management? | ● The HKMA has proposed regulating a broad range of stablecoin-related activities, including issuing, creating or destroying stable coins, transmission of funds and executing transactions in stablecoins. |
3 | What kind of authorisation and regulatory requirements would be envisaged for those entities subject to the new licensing regime? | ● The HMKA has suggested the new licensing regime would be subject to the high-level regulatory requirements, for example, HKMA’s prior authorisation, and fitness and propriety of the controllers. |
4 | What is the intended coverage as to who needs a licence under the intended regulatory regime? | ● The HKMA has proposed that only entities incorporated in Hong Kong and holding a relevant licence granted by HKMA should carry out the regulated activities. |
5 | When will this new, risk-based regime on stablecoins be established, and would there be regulatory overlap with other financial regulatory regimes in Hong Kong? | ● The HKMA aims to introduce the new regime no later than 2023/2024, and it will collaborate and coordinate with other financial regulators when defining the scope of its oversight to avoid regulatory arbitrage |
The paper provides valuable insight into the HKMA’s plans for the future of stablecoins regulation in Hong Kong and is seen to be a timely step taken by the HKMA to update its regulatory tools.
Reference:
Discussion Paper on Crypto-assets and Stablecoins
Hong Kong Court on Keepwell Deed Disputes: Nuoxi Capital Ltd v Peking University Founder Group Co Ltd
ISSUING AUTHORITY:
Court of First Instance, High Court of Hong Kong SAR
DATE OF PUBLICATION:
December 17, 2021
In the case of Nuoxi Capital Ltd v Peking University Founder Group Co Ltd, while recognising the Mainland insolvency proceedings, Hong Kong court held that the keepwell deed disputes should be determined in Hong Kong pursuant to the exclusive jurisdiction clause. The Hong Kong judgment is momentous as it entails a ground-breaking approach to amicably resolve cross-border insolvency cases – with an offshore court exercising a contractual jurisdiction, and an onshore court exercising an insolvency jurisdiction.
Peking University Founder Group Co Ltd (“PUFG”) was incorporated in the Mainland, an investment holding company and part of the PUFG conglomerate. The PUFG group issued bonds through BVI subsidiaries (“Issuers”), the bonds were guaranteed by Hong Kong subsidiaries (“Guarantors”), and the bonds were backed by keepwell deeds between PUFG, the Issuers and the Guarantors (“Keepwell Deeds”). The Keepwell Deeds were governed by English law and provided for the exclusive jurisdiction of the Hong Kong courts.
In February 2020, on the application of a bank, the Beijing Court ordered PUFG to commence reorganisation (“Mainland Reorganisation”) and appointed administrators (“Administrator”). The Issuers and the Guarantors defaulted on the bonds and went into liquidation, and in turn claimed that PUFG had defaulted on its obligations to them under the Keepwell Deeds. Having been rejected by the Administrator in the Mainland for their claims lodged on the basis of the Keepwell Deeds, the Issuers and the Guarantors issued proceedings in Hong Kong against PUFG (“Writ Actions”).
PUFG applied to stay the Writ Actions in Hong Kong on the basis that the Issuers and the Guarantors had submitted proofs of debt in the Mainland Reorganisation. The Administrator also requested the Hong Kong court to recognise and assist the Mainland Reorganisation by staying the Writ Actions.
Mr Justice Harris held that whilst the Hong Kong court would recognise the Mainland Reorganisation, the Writ Actions would not be stayed. The Hong Kong court would be better placed than the Mainland court in determining issues of English law, and the Hong Kong court would enforce the exclusive jurisdiction clause as there is no compelling reason for not doing so. The Hong Kong court would welcome coordination with the Beijing court in agreeing the way in which issues are to be determined, with the Hong Kong court dealing with issues of construction of the Keepwell Deeds.
Reference:
Nuoxi Capital Ltd v Peking University Founder Group Co Ltd [2021] HKCFI 3817
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