HK targets regulatory arbitrage over backdoor listings

Author: Karry Lai | Published: 17 Aug 2018

The Hong Kong Exchange’s (HKEx) consultation on backdoor listings, a crucial part of its efforts to address concerns over the creation of shell companies and irregular listing activities.

Joseph Lee, partner at Simmons & Simmons explains that tightening the rules relating to reverse takeovers is a means to prevent a business from listing that would not otherwise meet existing requirements under the Listing Rules.

A shell company is a listed company which does not have substantial business but maintains its listing status to be purchased by buyers that wish to go public but are unable or unwilling to go through the official door to seek a listing status. The latest proposed amendments attempt to deal with certain unwelcome market trends in the eyes of the Hong Kong regulators.

Speaking on a recent panel on the role of regulation in changing behaviour at the SFC Regulatory Forum 2018 in Hong...