Submission to HKEX – Proposed Amendments to the Listing Rules relating to Share Schemes of Listed Issuers

On 31 December 2021, ACGA sent a letter to the Hong Kong Exchanges and Clearing (HKEX) in response to its consultation paper on “Proposed Amendments to the Listing Rules relating to Share Schemes of Listed Issuers” released on 29 October 2021.

While we welcome the revival of the proposal, we believe that core elements are not in the best interests of investors. In particular, the proposals concerning shareholder ratification of awards to connected persons, as well as controlling and substantial shareholders, represents a weakening of existing rules. It will be more difficult for minority shareholders to veto sizeable share awards to insiders and majority owners. In effect, investors will have less ability to reject share grants than they currently have under the Chapter 14A connected party rules. With respect, the same pretext for diluting the rules on share awards being given today as it was 20 years ago—to afford issuers greater flexibility—does not justify a downgrade in corporate governance standards.