Hong Kong's securities regulator wants to lower the takeover trigger to 30 per cent from 35 per cent in a bid to match other international markets and to enhance investor protection. The Securities and Futures Commission said the proposed move would bring Hong Kong in line with other markets, including China and Britain. Malaysia has a trigger point at 33 per cent and Singapore at 25 per cent although it is proposing to increase that to 30 per cent. Hong Kong and South Africa are the only advanced markets maintaining the 35 per cent trigger point. Brokers and fund managers said the high trigger point was unfair because it meant one company could take actual control of another company with no need to take over shares from the small shareholders. The SFC will consult the market until the end of May. It hopes the new rules will be implemented on January 1. Presently, if a firm wants to take more than 35 per cent in another company, it has to take over all shares held by the minority shareholders at the same price it offered the controlling shareholders. SFC executive director David Stannard said this rule was unfair to small shareholders as buyers who took 34.9 per cent have effectively taken control of a company by holding more than one-third of its shares. Lowering the trigger point to 30 per cent would limit major stakeholders to 29.9 per cent before a general offer was required. 'This would give the buyers less control of the company if they don't want to make a general offer,' Mr Stannard said. 'This will enhance the protection of the rights of the small shareholders of the listed companies in takeover deals.' Shareholders who already hold 35 per cent or more of a company would not be affected by the proposed change. Major shareholders who presently hold between 30 and 34.9 per cent of a company will be protected by the so-called 'grandfather' rule for 10 years. This rule allows them to take a further stake - up to 35 per cent - in the company without having to make a general offer. However, if their shareholding fell below 30 per cent within the 10 years, they would lose the protection of the 'grandfather' clause. The commission expects that after 10 years, all companies will be bound by the 30 per cent trigger point. The SFC also suggested: The creeper point be cut from 5 per cent a year to 2 per cent a year. The creeper is the percentage of shares a major shareholder, who already holds more than 30 per cent, could increase with no need to make a general offer. In any privatisation plan by a major shareholder, which would require the purchase of all small shareholders' stakes and the cancellation of the company's listing, 75 per cent of independent shareholders must vote for and less than 10 per cent of independent shareholders vote against the plan. Presently, approval is required from 90 per cent (in terms of value) of shareholders present while disapproving shareholders cannot exceed 2.5 per cent of total shares. Companies would be required to include reports by accountants and financial advisers in the valuation of any technology or Internet firm targeted for takeover. Investec Asset Management Asia managing director Stewart Aldcroft supported the proposed rule as it would bring Hong Kong in line with the rest of the world. 'If Hong Kong wants to maintain its position as a leading international financial centre, it has no choice but to follow international practices,' he said.