Companies incorporated in the British Virgin Islands (BVI) may soon be able to list on the HKSE, according to a guidance letter recently issued by the HKSE which confirms that it is considering an approval.
The Hong Kong government has been trying to increase Hong Kong’s competitiveness as a financial centre and has implemented a number of initiatives in the past few years to achieve that goal. “One of the initiatives was to encourage the HKSE to permit listings of companies incorporated in other jurisdictions. What has been happening is that the HKSE is gradually recognising other jurisdictions,” said Spencer Privett (pictured), joint managing partner of Maples and Calder’s Hong Kong office.
In making its determination about whether to approve a new jurisdiction, the HKSE will consider various issues, the most important being shareholder protection. “What they want to ensure is that the level of shareholder protection under the corporate law in a particular jurisdiction meets Hong Kong standards,” said Barry Mitchell, partner and head of Maples and Calder’s Hong Kong-based BVI team.
Approval is expected around the end of this year. “Based on the Jersey experience, we would expect a decision within 2 or 3 months,” said Privett, referring to the HKSE’s recent decision to allow companies incorporated in Jersey to list in Hong Kong.
A listing on the HKSE is an attractive exit option for private equity investors with investments in China. “Foreign private equity investment is reaching a certain level of maturity in China and with exits sometimes difficult to achieve, the ability to list in a well regulated and cost-effective jurisdiction such as Hong Kong should provide BVI companies with an exit strategy which has not hitherto been available without first undertaking a significant restructuring,” said Mitchell.
If this approval is granted, Maples and Calder expects that work will flow from IPOs of BVI-incorporated companies on the HKSE. As Maples and Calder does not provide advice on Hong Kong law, it will collaborate with other Hong Kong law firms on such transactions. General corporate work involving M&A and structured finance will also flow through Maples and Calder’s Hong Kong-based BVI team as more investors elect the BVI as a jurisdiction of incorporation.
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