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Monday, July 11, 2016, 16:00

Measures against shell firms on the anvil

By Luo Weiteng
Measures against shell firms on the anvil
The flag of Hong Kong Exchanges & Clearing Ltd (HKEx) ( Left), the Chinese national flag and the Hong Kong SAR flag flying in the Central district of Hong Kong. (Edmond Tang / China Daily)

HONG KONG - The Hong Kong Stock Exchange and Securities & Futures Commission of Hong Kongm are reportedly working out six measures to clamp down on the rampant shell business problem and improve the quality of local listed companies.

The measures under discussion include extension of the lock-up period for large shareholders, higher requirement for companies’ earnings performance, improvement of the initial public offering (IPO) system, and lifting the threshold for professional investors.

The lock-up period for large shareholders is tipped to be prolonged from six months to two years, while the earnings requirement for listed companies on Main Board may be increased by 60 percent an aggregate of HK$80 million for the past three years. Companies applying for IPOs on Main Board may require a minimum of HK$100 million cash flow in the past two years, while the asset threshold for professional investors may increase from HK$8 million to HK$10 million.

HKEx had introduced revised guidelines to deal with speculative shell businesses in the past two years. In March this year, it revealed five shell company-related transactions that had failed to get the green light.

The stock exchange also issued new rules late last year to ban the listing of cash companies – whose assets consist wholly, or substantially, of cash. The new regulations followed a surge in listed companies proposing large-scale fundraising efforts, triggering suspicious cash injections into these companies.

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