Hong Kong overhauls city’s takeover code to strengthen protection for small shareholders
Major changes to company takeover rules proposed by the regulator would bring Hong Kong in line with London and Singapore
Hong Kong’s securities regulator will overhaul the city’s takeover code to strengthen the protection for minority shareholders, offering them compensation for the first time in cases of malpractice, and making it harder for corporate raiders to control companies.
Investors who lose out because of malpractice during a takeover could soon be entitled to compensation, according to recommendations by the Securities and Futures Commission (SFC), under public review until a final decision on implementation on April 19.
If approved in its current form, the move would be a significant overhaul of the takeover codes. The SFC can currently ban companies or investors from trading in the local stock market but cannot force them to pay investors who have suffered as a result of their wrongdoing.
“The proposed changes are aimed at affording fair treatment to shareholders and protecting the interests of those who participate in Hong Kong’s securities markets,” the SFC’s chief executive Ashley Alder said in a statement.
The move would bring Hong Kong in line with global financial hubs such as London and Singapore, which already have such regulations in place.
The proposals, now under review, also include a measure to limit the scope of majority shareholders looking to obtain or consolidate control of a company. That rule would make it harder for controlling shareholders to obtain a so-called whitewash waiver that frees them from the obligation to make an offer for the remaining shares.