Replace the clearing system

Author: | Published: 1 Jul 2009

In May, the Hong Kong High Court's Court of Appeal gave its reasons for refusing to sanction the PCCW privatisation scheme of arrangement. The judgment has implications for a wide variety of market participants in Hong Kong, as well as highlighting the imperfect electronic settlement and trading system: Central Clearing and Settlement System (CCass).

Under Hong Kong law, a scheme of arrangement may be used to restructure the share capital or debts of a company. Schemes are commonly used to effect mergers, by either swapping shares in the target for shares in the acquirer, or cancelling shares in the target in return for a cash payment. A scheme of arrangement requires approval by a double majority: both 75% of shares voting in favour (a special resolution) and a majority of shareholders in number. Once it is approved, the scheme is binding on all shareholders (regardless of whether they voted in...