Compliance Corner: Hong Kong, SPACs

Editorial Staff

20 December 2021

Hong Kong
Special purpose acquisition companies – entities that have boomed in the US over the past two years – can now list in Hong Kong from 1 January, the jurisdiction reportedly said on Friday last week.

Hong Exchanges and Clearing has set out adjustments to proposals for a SPAC regime that had been published in a consultation document this year, relaxing some of those initial rules, Reuters reported.

Adjustments included saying that a SPAC's securities must be distributed to a minimum of 20 institutional professional investors, not 30, and adjusting rules that had restricted the circumstances in which investors could redeem shares in a SPAC, the report said. The reported noted that some investment banks and corporate advisors had said the initial regime proposals were too onerous and would make Hong Kong uncompetitive.

Although SPACs surged two years ago in the US, these blank cheque entities have slowed since the US Securities and Exchange Commission tightened oversight of the sector.

“Without compromising on market quality and investor protection, the Exchange has fine tuned the details of the SPAC listing regime in response to the comments from different market stakeholders within a short period of time,” Louis Lau, partner, Capital Markets Advisory Group, KPMG China, said. “The efficiency and direction of travel are worthy of recognition. Those changes from the original proposals, such as removing the requirement to align voting with redemption, reducing the minimum number of institutional professional investors and lowering the tiered thresholds for minimum constitution of independent PIPE investors, have greatly enhanced the flexibility and attractiveness of Hong Kong SPAC listing regime, which will help promote the development of the Hong Kong capital market.”