Rigid new rules on delisting - Interviewing Warren Lee (1)
With new amendments of the Listing Rules on delisting mechanism being effective from 1st August onwards, suspended listed companies are required to complete all necessary procedures of resuming their listing statuses within 18 months.
Warren Lee, Managing Director of Yu Ming Investment Management, regards this 18-month time period as rigid. Taking RTO as an example, he points out that the duration needed for an issuer to locate a suitable project, come to setting the terms, and handle non-compliant matters would last at least 1 year, leaving only 6 months for regulatory bodies to review their relisting applications. In any case of active market activities, under the circumstances of limited human resources possessed by the regulators for the whole capital market of Hong Kong’s, it is probable that relisting procedures are to be delayed. “The way in which the SEHK sets this 18-month time limit, whereas there are numerous factors out of the control of the suspended companies, sponsors and any other related parties, is very rigid. It will be very difficult for them to resume listing.”
Nevertheless, Lee sees two advantages brought by the new rules. Firstly, they compress the time frame for which to work on, forcing listed companies to handle things faster, as compared to the space for procrastination in the past. On the other hand, as difficulties of handling are to increase, companies of the sort of Yu Ming may be benefited, by collecting higher fees.
In response to the saying that the SEHK is clearing the old to make way for new economy companies as the regulator amended its rules earlier on which favour such companies to list in Hong Kong while recent edits seemingly set up high standards to make relisting difficult, Lee regards the nature of developing new economy as not an unrightful thing to do. Successful development of the city makes its citizens the ultimate beneficiaries. While there are such needs on the market, it is natural for regulatory bodies to react accordingly. But he does doubt the necessity of the amendments: “As long as no trading is allowed for long suspended companies, their presence will only cause bad perceptions but not pragmatic damage. They aren’t like stinking rubbish, or breeding bateria. Is the presence of these companies reputationally harmful? I am not so sure.”