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Publicity Requirements During Listing Process

Mineral companies are expected to adhere to requirements in relation to publicity during the listing process. Charltons is experienced in advising mineral companies on their publicity strategies and in drafting and reviewing publicity memoranda and materials to conform to Hong Kong law.

Under the HKEX Listing Rules, all publicity materials released in Hong Kong relating to an issue of securities by a new listing applicant must be reviewed by the HKEX before release and must not be released until it has confirmed that it has no further comments. Furthermore, under the Companies (Winding Up and Miscellaneous Provisions) Ordinance it is an offence to publish (i) by way of advertisement any extract from or abridged version of a prospectus; or (ii) an advertisement relating to a prospectus or proposed prospectus, relating to shares or debentures of a company whether incorporated in or outside Hong Kong. Additionally the Securities and Futures Ordinance (SFO) makes it an offence, unless the SFC’s authorisation for the issue is obtained, to issue any advertisement, invitation or document which to the issuer’s knowledge is or contains an invitation to the public to enter into or offer to enter into an agreement to deal in securities.

The overriding principle is that material information which is necessary to enable an investor to make an informed assessment of an applicant’s activities, assets and liabilities, financial position, management and prospects should be included in and released in the form of a prospectus only, and not in the form of publicity materials.

Even though certain publicity materials may on their face appear to be for the purpose of promoting the applicant, its products or business, the HKEX normally considers that these materials relate to an issue of securities and incline not to consent to their publication if they are:

  1. not commensurate with the particular nature of the applicant’s business, products, customers or markets, e.g. that place disproportionate emphasis on the applicant’s name rather than its products and business;
  2. presented in a manner which makes them likely to be read together with information related to the public offering; and/or
  3. likely to condition the market ahead of the prospectus and affect perceptions of the upcoming offer.

In assessing whether the information in question may condition the market, the HKEX will consider all relevant circumstances, including the nature of the applicant’s business, its advertising history, the form of the publicity materials and the way they are presented.

Applicants and sponsors should ensure compliance with the restrictions on publicity under the HKEX Listing Rules, the Companies (Winding Up and Miscellaneous Provisions) Ordinance, the SFO and other statutory requirements regarding “publicity requirements,” especially where materials are issued shortly before or during the offer period, and regardless of the form of the materials (for example, advertisements, news articles or editorials based on interviews with the applicant’s senior management and designed to look like objective stories, etc.).

The HKEX will take strict measures against unauthorised publicity materials. These may include suspending vetting until all unauthorised publicity materials are withdrawn and delaying the listing timetable so that the influence of unauthorized promotion has “cooled-off”.

Charltons is also experienced in advising mineral companies, who are listed on overseas exchange’s or whose parents are listed on overseas exchanges, and where the company or its parent have disclosure of information requirements pursuant to the rules of those exchanges and/or other legislation in the jurisdiction where the company, or its parent are listed or domiciled. Such companies can find themselves in the unenviable position of being subject to both a duty to disclose and a duty to keep confidential certain information. Charltons is experienced in working with foreign counsel to establish disclosure protocols which are timed and tailored to ensure compliance with the provisions of conflicting legislation.

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