Exchange proposes to bring share award schemes under the regulation of the Listing Rules

On 30 October 2021, the Hong Kong Stock Exchange published a consultation paper on Proposed Amendments to Listing Rules relating to Share Schemes of Listed Issuers, revealing the long-awaited proposed regulations on share award schemes. The Exchange proposes to bring share award schemes under the remit of Chapter 17 (Share Option Schemes) of the Listing Rules to ensure consistent treatment of equity-based remuneration where grants of options or awards will be satisfied by new issues of shares. The effect will be increased shareholder approval and disclosure requirements for all new issue schemes. The Exchange has indicated that share award plans where grants will be satisfied with existing shares will not require shareholder approval as they would not result in a dilution of shareholders’ interests, however issuers with these schemes will still need to comply with the same enhanced disclosure regime which is applicable to new issue schemes. 

The Exchange also proposes to place greater responsibilities on the remuneration committee to oversee the operation of all share schemes to ensure that grants of share options and awards meet the purpose of the schemes. 

The consultation is open for responses until 31 December 2021.

In this bulletin, we summarise the notable features in the proposal and our observations.