SFC sets rules for B share cash calls

GUIDELINES for China B-share issuers launching rights issues in Hong Kong have been published by the Securities and Futures Commission (SFC).

The rules affect issuers and their advisers seeking to have B-share rights issue prospectuses authorised in the territory.

SFC executive director Ermanno Pascutto said: ''Over the past few months we have had a number of inquiries concerning the requirements in relation to the registration of a rights issue prospectus for B shares.'' He said the guidelines had primarily been prepared for issuers of B shares - which are listed on the Shanghai and Shenzhen stock exchanges but restricted to investors from outside China.

But they would also be applied to any issuer not listed in Hong Kong seeking to have a rights issue prospectus authorised by the SFC.

The rights-issue prospectus of Shanghai Dazhong Taxi issued in Hong Kong earlier in the month was authorised by the SFC as complying with a draft version of the guidelines, according to an SFC spokesman.

Dazhong Taxi raised $170 million.

Rights-issue prospectuses issued by Hong Kong-listed companies must have their prospectuses authorised by the stock exchange under the listing rules and the Companies Ordinance.

While many of the initial B-share public offerings were not registered in Hong Kong because they were not marketed in the territory, some Hong Kong investors did buy B shares.

Mr Pascutto said the authorisation of a prospectus did not mean the SFC had made a determination about the quality of the securities being offered.

He said that with the exception of the prospectus and related requirements of the Companies Ordinance, B-share issuers were not subject to Hong Kong rules and regulations such as the Listing Rules or the Securities (Disclosure of Interests) Ordinance.

He said the SFC would exercise its discretion and consider rights-issue prospectuses on a case-by-case basis.

''These are very much early days in relation to offers of securities of mainland companies to Hong Kong investors and the guidelines will be kept under review to see whether they need to be revised in light of actual experience,'' he said.

Among the information that must be included in a B share rights prospectus were the proposed time of the issue, its purpose, the amount of money being sought by the issuer, how the proceeds of the issue would be used and how the proceeds of the original offer had been used.

A company must also describe its business and recent developments, outline its prospects and future plans and provide information about issued share capital structure and a summary of debt.

One of the key requirements was that the prospectus include a set of audited financial statements for the financial year not more than six months before the rights issue.

They financial statements must be prepared in accordance with Hong Kong or international accounting standards.