April 30, 2018

Hong Kong Listing Rules on Weighted Voting Rights Structure Takes Effect Today


The long debate surrounding Weighted Voting Rights (WVR ) is finally concluded in the affirmative.   The Stock Exchange of Hong Kong Limited (“HKSE”) announced on 24 April 2018 the addition of three new chapters of the Rules Governing the Listing of Securities on HKSE (the "Listing Rules") to facilitate the listing of high-growth companies from emerging and innovative sectors on the Main Board.  The new chapters, which take effect today, are:

  1. Chapter 8A on WVR;
  2. Chapter 18A on Biotech Companies; and
  3. Chapter 19C on Secondary Listings of Qualifying Issuers (i.e. issuers primarily listed on New York Stock Exchange, Nasdaq Stock Market or the Main Market of the London Stock Exchange “Premium Listing” , each a "Qualifying Exchange").

We have updated you on Biotech Companies (Legal Update of 27 April). Below are highlights on WVR in the form of questions and answers.

Who can apply under Chapter 8A?

Only an "innovative company" (see the definition box) meeting the following criteria may, as new listing applicant, apply for a listing with a WVR structure:

Market cap:

not less than HK$10 billion at listing


HK$1 billion in most recent financial year
(not applicable if market cap reaches HK$40 billion)

External validation:

meaningful investment (which must remain at IPO) from at least one sophisticated investor, who will also be required to retain 50% of its investment for six months post-IPO.

Are all WVR structures permissiable?

No. Under Chapter 8A, the WVR structure must be share-based (i.e. attached to a specific class (or classes) of shares); and save for enhanced voting power, the rights attached to WVR shares in all other respects must be the same as ordinary shares.

However, a non-share based WVR structure (e.g., board control mechanism adopted by Alibaba) or a non-compliant share-based WVR structure may still be allowed to list on HKSE if it is already listed on a Qualifying Exchange with two years of good record of compliance and seek a secondary listing under Chapter 19C.

Who can hold WVR shares?

Under Chapter 8A, each WVR beneficiary must:

(a) be an individual who has been materially responsible for the growth of the business; and

(b) has an active executive role within the business and is a director at the time of listing.

He or she may, for estate and/or tax planning purposes, choose to hold WVR shares through a limited partnership, trust, private company or other vehicle.

However, HKSE will launch a separate consultation by 31 July 2018 to explore the option of allowing corporate entities to benefit from WVRs.

What are the Chapter 8A restrictions on WVR shares?

Voting power:

no more than ten times the voting power of ordinary shares.

WVR shares in issue:

at least 10% of the total issued share capital at listing.

Further issue:

no increase in WVR proportion nor change in the terms after listing.

Lapse of rights:

WVR will lapse (a) upon transfer of WVR shares; or (b) if beneficiary dies, ceases to be a director, or deemed by HKSE incapacitated or no longer meets directors' requirements. When none of the beneficiaries have beneficial ownership of the WVR shares, the whole WVR structure ceases.

How about non-WVR shares?

Under Chapter 8A, non-WVR shareholders must be entitled to cast at least 10% of the votes that are eligible to be cast on resolutions at any general meetings; and would thus be able to convene an extraordinary general meeting and add resolutions to the meeting agenda.

What are the Chapter 8A Corporate Governance requirements?


The following matters must be resolved by voting on one vote per share basis:


(a) changes to constitutional documents;
(b) variation of rights attached to any class of shares;
(c) appointment or removal of an independent non-executive director (INED);
(d) appointment or removal of auditors; and
(e) voluntary winding-up.


establish a nomination committee, a corporate governance committee (comprising entirely of INEDs to oversee and confirm compliance with the WVR rules) and appoint a compliance adviser on a permanent basis.

Enhanced disclosure and stock name ends with marker "W"


An " innovative company" is expected to possess more than one of the following characteristics:

  • success of the company is attributable to the application of new technologies, innovations and/or a new business model;
  • research and development is a significant contributor of its expected value and constitutes a major activity and expense;
  • it has unique features or intellectual property contributable to its success; and/or
  • it has an outsized market capitalisation/intangible asset value relative to its tangible asset value.

If you have any questions or comments in relation to the above, please contact the authors or your usual Mayer Brown contact.

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