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FOREIGN IPOs IN THE HONG KONG

SECURITIES MARKET

An Issuer’s lawyer’s point of view

Allen Thomas23rd June 2010

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OVERVIEW – 6 IMPORTANT POINTS

• The process is thorough – but respected

• Disclosure … plus

• Who is on your side

• Prospectus and verification: hand-in-hand

• Don’t forget the underwriting agreement

• Hot buttons: the major issues

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THE PROCESS IS THOROUGH, BUT HAS GOOD POINTS

• Comparison with other international markets

• Controlling shareholder friendly

• Timing

• Overview of process:– Pre-A-1: reorganisation; jurisdiction; float; property valuation;

technical reports; management and shareholder continuity– A-1: in “substantial complete form”; financials; waiver

requests– Q and A– Tentative approval and registration

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DISCLOSURE….PLUS

• In form, a disclosure market, but …..

• “Suitable for listing” standard

– Litigations concluded

– Major risks indemnified or otherwise closed off

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WHO IS ON YOUR SIDE

Neither the Sponsor nor any underwriter is the

issuer’s advisor

• Sponsor has it’s own legal obligations and

exposures

• Where are the requests coming from

• Issuer’s financial advisor

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PROSPECTUS AND VERIFICATION

• Drafting the Prospectus and preparing the Verification

Notes should (but rarely do) go hand-in-hand

• Detail required in verification notes

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DON’T FORGET THE UNDERWRITING AGREEMENT

• It’s long, complicated and often left to the last moment

when the pressure is heavy on the Issuer and it’s counsel

to sign

• It’s the source of much of the required detailed

documentation, e.g. tricky legal opinion requirements

• It’s the source of much of the Issuer’s exposure: reps and

warranties; indemnities

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HOT BUTTONS: MAJOR ISSUES

• Disclosure of ultimate and intermediate chain of ownership• Company and/or controlling shareholder indemnities• Tax comfort• Connected transactions• Non-reliance on controlling shareholder• Non-competition undertaking• Legal opinions

In addition to pre-A-1 issues:

• Re-organisation• Jurisdiction• Float• Management and shareholder continuity• Detail of property valuations; any “materiality” threshold