Hong Kong stock market regulators will not grant any special exemptions to ensure a local share listing for mainland e-commerce giant Alibaba Group, sources with direct knowledge of the discussions told the South China Morning Post.
Alibaba has piled pressure on Hong Kong Exchanges and Clearing (HKEx), which has seen share listings fall 28 per cent in the first half of 2013 from a year ago, by threatening to take the potentially US$15 billion deal to New York unless a controversial plan to cement management control in founder Jack Ma Yun's hands is accepted.
US listing rules allow a dual share structure that could grant Ma and Alibaba management the control they crave. Hong Kong rules do not.
"There will be no exceptions," a top official at the Securities and Futures Commission (SFC), the ultimate approver of share listings in Hong Kong, told the Post on condition of anonymity.
A source close to Alibaba said the firm neither wanted nor required a dual class structure.
Instead, it is proposing to use existing rules on board-level appointments to allow the firm's senior management to maintain a partnership structure to nominate a majority of board candidates, on whom shareholders would then be allowed to vote.
"The company is not asking the exchange to do anything special for it," said the source, who declined to be identified. "This solution would leave all shareholder rights intact."
The internet giant, which is expected to list its shares before the end of this year, has more than 20 partners including Ma, his co-founders and senior executives.
Ma and the management team own a combined 10.4 per cent stake in Alibaba. Japan's SoftBank and US internet giant Yahoo, which own more than 60 per cent of the firm's share, are not included in the partnership programme, which was established in 2009.
A senior source at HKEx told the Post that the exchange would consider a scheme that did not seek to curtail the voting rights of shareholders.
"At present, the major shareholders or management always have the right to nominate directors, which will be subject to shareholders' approval. As long as Alibaba could suggest that its nomination process would not affect shareholder protections, HKEx would consider it," the HKEx source said.
Under Hong Kong's regulation, the SFC has the right to reject any listing applications and a source with the regulator told the Post that there would be no exemptions.
Charles Li Xiaojia, the chief executive of HKEx, said after the results announcement of the exchange last week that the exchange put shareholder protection as its priority.
"If we want to introduce a dual shareholders structure, we would need to first do a public consultation, but at the moment we have no plan to do so," Li said.
"We would approve any listing application that has shareholder protection as its priority. Other markets may have different ways to do it and we would consider their practices, but at the end of the day, we would not sacrifice shareholder protection."