The guidelines are intended to strike a balance between investor protection and allowing issuers with negative or negligible net tangible asset value appropriate flexibility to carry on their business activities, whilst providing the market with sufficient information to appraise the position of such issuers. They will also help ensure consistency of approach by The Stock Exchange of Hong Kong (the Exchange) and transparency on how the Exchange deals with any application for such modification. A summary of the guidelines is as follows:
- Eligible issuers can apply for a De-minimis Concession under which the “assets test” and “consideration test” would not apply to transactions carried out in the ordinary course of business of the issuer, which are entered into on normal commercial terms, and where the consideration or value of each transaction does not exceed a fixed amount (normally expected to be HK$1 million).
- Issuers whose negative or negligible net tangible asset value did not arise from operating losses can also apply for a Modified Calculation Concession. In this case, the “assets test” and “consideration test” would be calculated by reference to the gross assets of the issuer less intangibles and current liabilities as disclosed in its latest annual accounts subject to adjustments in light of the interim accounts and transactions that have been completed by the issuer after publication of the annual accounts (if any). A different set of indicative percentage ratios will be used to determine applicable disclosure or approval requirements.
The Exchange would consider each application based on its own merits using these guidelines. If an application is approved, the issuer will be required to release an announcement to inform investors of the concession given and the period for which it is applicable. The issuer will also be required to disclose such details in its next annual report.
