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Christine Chan

THE stock exchange is in the final stages of modifying its rules to enable the nine mainland listing candidates to meet Hongkong requirements.

   An exchange official yesterday said the proposals would have to be discussed and approved by the listing committee, the exchange council and, ultimately, the Securities and Futures Commission.

   Mr Kenneth Koo, deputy head of the listing division and head of the exchange's China listing affairs unit, revealed the latest progress of the nine at a Hongkong Management Association luncheon yesterday.

  Without giving specific details, he said the exchange was amending provisions on a set of mainland regulations outlining how the nine would comply with Hongkong company regulations.

  The amendment was necessary because of the difference between Hongkong and mainland regulations.

   Changes were being made to the regulation governing the formation and management of stock-holding companies, first issued last May.

 Originally, the exchange had hoped that China's new securities law would come into effect in time for a convergence with Hongkong's.

 However, because of a lengthy delay, the exchange has had no alternative but to proceed.

  ''The exchange has agreed with the mainland to several amendments [of the regulation issued in May last year] and with clarification of those provisions as they would have applied to the enterprises planning to list in Hongkong,'' he said.

  Mr Koo said the amendments the exchange would make were to conform certain provisions with Hongkong company law.

  ''The guideline is now a mainland company regulation with nationwide scope and effect, and there have been a number of provisions that talk about the set-up and running of a company,'' Mr Koo said.

  The provisions included initial capital contribution, rights of shareholders and similar matters, he said.

   However, something that would not change was the higher quorum requirement for ordinary and special resolutions.

  Apart from the amendments, the exchange will also include the additional provisions in mainland firms' articles of association when they list in Hongkong.

  This could be done by incorporating as much as possible of the existing company law of Hongkong into the mainland firms' articles of association.

  He would not give details of the provisions to be embraced, but said those that attracted most concern were shareholders' duties and directors' responsibilities.

  Although these had to be interpreted over time and would differ from case to case, he said the outline would at least lay the foundation for the provisions.

  On the progress of the nine companies, Mr Koo hoped ''a few of them'' would be listed by mid-year.

  ''We've been approached by some and we've looked at some the of the listing materials as well,'' he said.

  On shareholders protection, Mr Koo said there would be a separate vote by international shareholders on certain proposed company events which would lead to potential dilution of shareholdings.

  His comments were made in the context of the present mainland regulatory framework which was not to the benefit of international investors, for example, B share investors. A shares and B shares are ordinary shares and renminbi special ordinary shares, respectively.

  These compared with I shares, originally named H shares, for those to be issued by the mainland's nine companies to list in Hongkong.

  ''Although the shares are the same class of ordinary shares, it has different effects on one group of shareholders than the other in certain circumstances,'' he said.

  Mr Koo said the exchange would ensure directors of mainland companies would be kept fully informed of their responsibilities in order that information disclosure would not be a problem.

 In the wake of the much sought after Denway Investment issue, Mr Koo said the exchange had looked into the proposals from Mr Joseph Yam Chi-kwong, chief executive of the Monetary Authority.

  However, he believed there was no problem with the present offering mechanism, and he would like the market to regulate itself.



Rule changes for nine near completion