Consultation from the Securities and Futures Commission Consultation on proposed amendments to the Codes on Takeovers and Mergers and Share Buy-backs

The Securities and Futures Commission (“SFC”) had on 19 January launched a public consultation on “Proposed Amendments to the Codes on Takeovers and Mergers and Share Buy-Backs”.

The proposed amendments to the Codes aim at affording fair treatment for shareholders and protecting the interests of those who participate in Hong Kong’s securities markets. One of the key proposals to the Codes is to raise the voting approval threshold for whitewash waivers from a simple majority of independent votes (i.e., 50% of the shareholders who are not involved in, or interested in, the transaction in question) to 75%.

The above consultation was considered by Council with the assistance of the Company Law Committee of the Law Society. The Law Society considers the SFC’s proposals are generally acceptable except for the proposed increase in the voting threshold for whitewash waivers from 50% to 75%. The Law Society is of the view that the 75% threshold can only be granted on a case-by-case basis. Shareholders’ inaction could be on account of different factors, such as warehousing of shares by certain shareholders, and the problem will not be resolved by increasing the approval threshold. Further comments on the draft submission were given with a need to react to the unnecessarily harsh and draconian approach and the deviations from the “Introduction to the City Code on Takeovers and Mergers” of UK.

A copy of the submissions can be found on the Law Society's website:
http://www.hklawsoc.org.hk/pub_e/news/submissions/20180425.pdf

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