30-05-2019

4. Recommendations. 4.4 Shareholders

S 4.4.1 Shareholders as beneficiaries of listing rules

Step required
Establish a legal mechanism that gives shareholders locus standi.

Recommendation level
Support.

Topic addressed
Shareholders to have a personal right to seek an action for damages for loss suffered as a result of breaches of certain listing rules.

Details of recommendation
1.Amend the listing rules to express shareholders as third party beneficiaries of the contract between the issuer and the SEHK.
2.The SEHK could do this with the approval of the SFC, or the SFC could use its existing SFO powers to direct the exchange to do so.
3.The provisions over which shareholders have the right to take action to include all mandatory disclosure provisions of the listing rules.

Attendant considerations
The mechanism of assessing damages would need to be considered further - likely this will need to be referenced to the UK position where shareholders can sue for damages for disclosure breaches.
The position of issuers already listed on the SEHK would need to be addressed.

Jurisdiction references
United States.
UK.
Singapore.

Section 3 reference
3.6.2Listing rules
See also:
3.3.2Disclosure of listing rule compliance.

A4.4.2*Collective redress

Step required
Re-visit the Law Commission's 2012 proposal on the implementation of class action rights and to widen its approach to collective redress.

Recommendation level
Advocate.

Topic addressed
The ability in practice of shareholders to give effect to their legal rights.

Details of recommendation
1.Undertake a review of the original proposal with a view to identifying aspects of the proposal able to be adjusted to make this more acceptable in the Hong Kong context.
2.To widen the scope to reconsider implementing collective redress on a case management basis, i.e. group litigation as opposed to class action.
3.To consider removal of any contingency fee requirement associated with collective redress (since deep pocket institutional investors may still be prepared to commence an action that proportionally reduces the cost burden for smaller tag-along shareholders).

Attendant considerations
To identify the parameters of the review, its objectives and timeframe, and who should be undertaking the review.
The objectives of the review should be such that, if met, they are consistent with the political will to implement.
Implementing a case management based form of collective redress

Jurisdiction references
Hong Kong (LRC 2012 proposal). United States (class action rights). UK (group litigation order). Mainland China (joint litigation).

Section 3 reference
3.6.1.
See also:
3.7.2 Policy development agencies.