HONG KONG: SFC Amend Codes to Align with New Resolution Regime

Tuesday July 11 2017

The Securities and Futures Commission (SFC) will introduce a new section to the Takeover Codes to align them with the new Financial Institutions (Resolution) Ordinance (FIRO) effective on 7 July 2017.

The FIRO establishes a resolution regime in Hong Kong to mitigate the risks posed by the non-viability of systemically important financial institutions to the stability and effective working of the financial system of Hong Kong. The FIRO (except for certain provisions) will take effect on 7 July 2017.

Part 9 of the FIRO (Deferral of Certain Disclosure Requirements) provides for the deferral, suspension or waiver of disclosure and other obligations under the Securities and Futures Ordinance (SFO) and rules made under the SFO where a listed entity (as defined in the FIRO) or its group company is likely to be subject or has been subject to resolution action. This includes the deferral or suspension of the obligation to disclose inside information under Part XIVA of the SFO and the obligation to disclose interests under Part XV of the SFO by the listed entity or certain other persons. Without these powers, there is a risk that premature disclosure could severely impede the effective exercise of resolution measures and thus undermine orderly resolution.

Specifically, section 153(7) under Part 9 of the FIRO exempts all persons from any obligation arising in relation to a listed entity under the Codes after the resolution authority has applied the bail-in resolution option to that listed entity or its group company and the bail-in is ongoing. This includes the obligations to make an offer for shares, to enter into a takeover or merger transaction, to make an announcement of an offer or to disclose information of any kind. When the bail-in is completed, the provisions of the Codes will once again apply to the relevant person(s).

The revised Codes will take effect on 7 July 2017. Printed copies of the revised pages will be distributed to Takeovers Code annual subscribers in due course.

Please go to page two under the title “Codes amended to align with new resolution regime” at the above link for the SFC announcement.