Markus Fell­ner joins Leaders in Law as the Banking & Finance Law Member in Austria

Leaders in Law the leading platform in its field, is delighted to welcome Markus Fell­ner as our exclusively recommended & endorsed Banking & Finance Law expert in Austria.

Markus Fellner is a founding partner at fwp and specialises in banking and finance, corporate and M&A, insolvency law and restructuring, and dispute resolution.

As a specialist speaker and author of specialist publications on banking & finance, company law, insolvency law as well as restructuring, Markus Fellner, with the support of his team, stands for exceptional quality, profound expertise and long-term experience. His clients include both domestic and international companies and financial institutions. The international character of the Austrian business law firm fwp is highlighted by regular cooperation with leading partner law firms in a network spanning all relevant jurisdictions.

Firm Description:

Fellner Wratzfeld & Partners is a well-respected player in the reorganisation and restructuring space and has traditionally focused on advising credit institutions but has steadily expanded its client share in the corporate arena. The team led by founding partner Markus Fellner is a key fixture on some of Austria’s most high-profile restructurings such as the restructuring of the Steinhoff Group and is well equipped to assist clients with associated distressed M&A transactions and insolvency proceedings, including enforcement claims.

Investor Identification Regime at the Trading Level for the Securities Market in Hong Kong


Currently, for securities orders placed by intermediaries for their clients, the trading system of The Stock Exchange of Hong Kong Limited (SEHK) only captures information of the intermediaries, but not of its clients which instruct the orders. When suspicious trading activities arise, the Securities and Futures Commission of Hong Kong (SFC) has to issue notices to the intermediaries to identify the underlying clients, and may not be able to deal with such activities as promptly as the regulator would like to. From the perspective of the intermediaries (including SFC licensed corporations and registered institutions), they have to incur substantial compliance costs in handling with SFC’s enquiries. Thus, the SFC determined to introduce a new investor identification regime for the securities market in Hong Kong so that securities trading orders can be traced to those who give instructions.


The Hong Kong investor identification regime will be launched in the later part of Q4 2022 at the earliest.

Under the new regime, a regulated intermediary is required to assign a unique Broker-to-Client Assigned Number (BCAN) to every client. Each BCAN should be mapped to the client’s identification data (CID). The intermediary should also submit the BCAN-CID matching files of its clients to the SEHK.

When the intermediary submits the client’s order to the SEHK trading system for execution or reports the off-exchange trade order to the SEHK, such on-exchange order or off-exchange trade report is required to include the relevant client’s BCAN.

Off-exchange trades refer to trades conducted outside SEHK’s trading system but are required to be reported to SEHK under the SEHK Trading Rules. They include trades matched between clients of an intermediate or two different intermediaries directly through an alternative liquidity pool as well as trades matched on a pre-IPO trading platform operated by an intermediary licensed or registered to provide automated trading services.

The new regime would facilitate market surveillance by regulators because the originators of the on-exchange orders and off-exchange trades can be identified via their BCANs.

Having said the above, the Hong Kong investor identification regime and the investor identification regime launched on 26 September 2018 for northbound trading under Stock Connect are expected to work independently.

Personal data privacy of clients

An intermediary has to collect each individual client’s CID, including name and identity document number, type, and place of issue. If the client has a Hong Kong identity card but uses different identity documents to open securities accounts, the intermediary should follow up with the client to update the CID with his/her Hong Kong identity card information.

To comply with the Personal Data (Privacy) Ordinance of Hong Kong, intermediaries have to obtain their clients’ consents before submitting their CID to the SEHK. Clients who do not give consents will not be able to purchase securities through the intermediaries but will still be able to sell their securities.

Also, the BCAN should not be generated, assigned or handled in a way which would identify any individual client, compromise the confidentiality of the client’s identity, or give rise to non-compliance with the applicable privacy laws.

With reference to the industry standards and practices, the SFC and SEHK have considered appropriate measures to ensure the security and confidentiality of CID in aspects including data transmission/storage, access to CID, incident management and cybersecurity.

Practical impacts

When taking steps to comply with the investor identification regime, intermediaries are enhancing data security for their clients. Some of them are taking this opportunity to make additional investments in financial technology at the same time, in order to further develop online and mobile clientele and businesses.

The new regime is also described as a “real-name system” for Hong Kong securities trading. In the past, there were incidents where different investors used the same securities account to participate in Hong Kong securities trading. This practice may cease because orders placed by persons other than the securities account holder will be tagged with the BCAN of the account holder who may no longer be willing to let other persons’ orders be taken by the regulators as his/her own orders.

(The author would like to thank Ms. Mandy Kong (paralegal) for her contribution in this article.)

LC Lawyers LLP



Penalty Profiles of the Fraudulent Use of Extracurricular Internships

In note No. 1451/2022, the INL (Ispettorato Nazionale del Lavoro, The Italian National Labour Inspectorate) expressed its views on the rules applicable to extracurricular internships started before and continued after the entry into force of the Budget Law 2022, which introduced new provisions in relation, in particular, to the penalties for their fraudulent use as a substitute for employment relationships.

Given that the internship does not constitute an employment relationship and cannot be used as a substitute for subordinate employment, the provision stipulates that, if the internship is carried out fraudulently by circumventing these requirements, the host entity is punished with a fine of 50 euros for each intern involved and for each day of the internship. Such fine does not prejudice the possibility of recognizing at the intern’s request the existence of a subordinate employment relationship, based on the judicial pronouncement.

Since this is an offense of a permanent nature, in the case of extracurricular internships continued and/or concluded after January 1, 2022, the date on which the Budget Law came into force, the INL states that:

  • the punitive treatment is applicable where the internship itself is found to have been carried out fraudulently;
  • the offense takes place as of January 1, 2022, resulting in the calculation of the relevant penalty for only the days starting from that date;
  • for the purposes of the charge of the offense, it is sufficient to prove that the internship relationship was carried out as a genuine subordinate employment relationship;
  • on the other hand, the administrative penalties provided for in cases of requalification of the employment relationship (i.e., failure to notify the establishment of the employment relationship and failure to deliver the declaration of employment) are not applicable.

This is without prejudice to the possibility, at the trainee’s request, of recognizing the existence of an employment relationship as of the judicial pronouncement, starting at the establishment of the relationship, even if it occurred before January 1, 2022.

With reference to the social security profiles, it should be clarified that since the social security relationship is taken away from the availability of the parties, on the other hand, the recovery of contributions cannot be considered to be conditioned by the worker’s choice to request the recognition of the employment relationship in the hands of the host entity.

>> Find out more about LDP Services


LC Lawyers

LC Lawyers shortlisted for four ALB Hong Kong Law Awards 2022

We are pleased to announce that LC Lawyers LLP has been shortlisted as a “Finalist” in the following four categories at the ALB Hong Kong Law Awards 2022 presented by Asian Legal Business (ALB).  The winners will be announced at the awards ceremony on 9 September 2022.

  • Finance Deal of the Year
  • Rising Law Firm of the Year
  • Transactional Boutique Law Firm of the Year
  • Managing Partner of the Year – Rossana Chu

ALB’s 21st annual ALB Hong Kong Law Awards, the preeminent legal awards and ALB’s biggest and longest-running awards in Asia, pay tribute to the outstanding performance of private practitioners and in-house teams in the region. This is the third consecutive year in which the firm has been nominated in the ALB Hong Kong Law Awards for Rising Law Firm of the Year.

For more information about the finalists for ALB Hong Kong Law Awards 2022, please visit the website:

Firm Description:

An independent law firm in Hong Kong

LC Lawyers LLP is an independent law firm in Hong Kong providing legal services to financial institutions, corporate clients and private enterprises. Our law firm offers quality legal services to financial institutions, private enterprises and corporate clients in Hong Kong in a variety of areas including mergers & acquisitions (M&As of listed and private companies), takeovers, privatizations, corporate restructuring, corporate finance, HK IPOs, capital markets, legal due diligence, employee share-based incentive plans, private equity and venture capital investments, fund formation, asset management, wealth management, family trusts, family business, debt markets, debt restructuring (including re-financing arrangements, asset disposals and introduction of angel investors), bankruptcy, insolvency, dispute resolution (including mediation, arbitration and litigation), legal compliance and regulatory investigations (including bribery, corruption, fraud, market misconduct and money laundering), compliance training, legal & regulatory risk assessment, data privacy (including personal data, trade and state secret, data localization and data transfer laws), cybersecurity, employment law and labour law compliance, and talent management.

What our services can offer you:

At our law firm, together with other members of EY Law, we assist our corporate and private clients in Hong Kong with legal technologies. Our legal advice, combined with innovative technology-driven services, empowers process innovation and allows better control over legal costs. We provide services in contract lifecycle management (including contract creation, data abstraction and analysis, template design and obligations management), regulatory mapping and compliance monitoring, managed review and functional analysis (including data analysis, document redaction, audio and video file reviews and eDiscovery) and entity compliance and governance.

Whether you represent a corporate client or a private enterprise, as a law firm based in Hong Kong we can provide you with sound strategic advice, commercial solutions as well as detailed guidance that you need to navigate the increasingly complex legal environment of the ever-changing global economy.

Briefing on the New Draft Legislation on Exporting Data out of China

On 30 June 2022, the Cyberspace Administration of China (the “CAC“) released the draft of Provisions on Standard Contracts for Cross-border Transfers of Personal Information (the “Provision“) for seeking public comments until 29 July 2022. This Provision contains an appendix of a sample template of standard contractual clauses (the “SCC“) for businesses to integrate into their commercial contracts entered into with other data handlers.

Since the Provision is drafted in accordance with the Personal Information Protection Law (the “PIPL“), the definitions formulated by the PIPL will be inherited by the Provision and consistent with the PIPL.

As per Article 38 of the PIPL, there are four scenarios for data exporters to transfer personal information outside of China legitimately, that is:

  1. The relevant security assessment organised by the CAC has been passed in accordance with Article 40 of the PIPL;
  2. The relevant certification of personal information protection issued by a professional institution according to the regulations of the CAC has been obtained;
  3. The contract in compliance with the standard contract terms provided by the CAC has been signed with the overseas personal information recipient; or
  4. Other conditions prescribed by the laws, regulations or the CAC.

The release of the Provision is to address the scenario (c) above and provide detailed guidance. According to Article 2 of the Provision, a data handler who intends to export personal information based on the scenario (c), shall enter into the SCC to establish the rights and obligations of both the exporter of personal information in China (the “Exporter“) and the overseas recipient (the “Importer“).

Most Exporters shall proceed with transferring personal information out of China by signing the SCC with Importers, instead of passing a security assessment or obtaining the certification. According to Article 4 of the Provision, a personal information handler (i.e. the Exporter in this case) shall meet all of the following conditions if it wants to export the personal information to the Importer:

  1. It should not be a critical information infrastructure operator (the “CIIO“);
  2. It handles personal information of less than 1,000,000 data subjects;
  3. It has provided personal information of less than 100,000 data subjects in aggregate to the Importer since 1 January of the previous year; and
  4. It has provided sensitive personal information of less than 10,000 data subjects in aggregate to the Importer since 1 January of the previous year.

In other words, CIIOs or personal information handlers who go beyond either of the above thresholds will not be able to legally transfer personal information out of China by signing the SCC. They would either carry out a security assessment organised by the CAC, obtain a certification of personal information protection issued by a professional institution, or follow any other condition prescribed by laws and regulations in the future as the case may be.

Other than signing the SCC, the Provision still requires Exporters to carry out a Personal Information Protection Impact Assessment (“Impact Assessment“) before transferring personal information out of China.

The Impact Assessment shall focus on i) the legal basis and necessity of transfer; ii) the scope and volume of data involved, the potential risks of such transfer; iii) Recipients’ warranties on safeguarding the personal information transferred; iv) the potential remedies for protecting the personal information for data subjects to deploy; and v) the impact of personal information protection policies and regulations in the country or region where Importers are located and governed, on the enforcement of the SCC. In sum, this Impact Assessment is equivalent to the TIA (Transfer Impact Assessment) under the General Data Protection Regulation (GDPR) as one would usually hear.

Once the SCC is signed and the Impact Assessment is completed, within 10 working days from the effective date of the SCC, the Exporter shall file the SCC and the Impact Assessment report with the CAC at the provincial level where it is located (“Cross Border Filing“).

It is worthwhile to note that the above filing is not a once-and-for-all process. Should there be any changes of circumstances that may affect data subjects’ rights and interests on their personal information, the Exporters shall amend, resign and redo the Cross Border Filing. The language of the circumstances of redoing the Cross Border Filing is rather ambiguous, i.e., the regulator may have a large room to interpret what can be deemed a change at its own discretion.

Failing to do, or redo, the Cross Border Filing with the CAC or filing false materials will cause administrative orders to rectify, to cease transfer and/or other administrative punishments according to the PIPL. If the violation is sufficiently serious to constitute a crime, Exporters may bear criminal liability as well.

The Provision is still a draft legislation, but once promulgated, it will definitely have an impact on companies with international data flows. We will follow this very closely and update our clients on the progress. We recommend companies start to review their data flows accordingly to be ahead of the legislative procedures.

Our lawyers are here to help answering queries in this regard. For more information, please speak to Le Rong and Nelson Tian.


How LLCs and S Corporations Differ

When you establish a Florida business, how you decide to structure that business impacts everything from your tax obligations to your degree of personal liability. Many Florida business owners decide to create limited liability companies, while others often structure their businesses as S Corporations.

Per Business News Daily, entrepreneurs trying to decide between the two options may have an easier time doing so once they understand how they differ.

Understanding LLCs

An LLC is a business formation type that limits your personal liability should someone file a lawsuit or score a judgment against your company. Taxed in the same manner as sole proprietorships, LLC members may report profits made on their personal, rather than corporate, tax returns.

Understanding S corporations

An S-corp is a tax election status dictating that your business undergoes taxation in the same manner as a partnership. Known as shareholders, S-corp business owners collect reasonable salaries, and the business’s profits, losses, deductions and credits undergo taxation at the shareholder level. You must register your business as an LLC or C Corporation before becoming an S-corp.

Understanding how they differ

There are important differences between LLCs and S-corps, including key tax implications. When it achieves S-corp tax status a business avoids double taxation. LLC members, meanwhile, have to pay self-employment taxes, among other key tax differences.

LLCs and S-corps also differ when it comes to their management structures. Managing an LLC is not unlike managing a partnership or sole proprietorship, and LLCs may have any number of members. An S-corp has to have less than 100 shareholders, and they also typically maintain boards of directors.

While these are some of the key differences that exist between LLCs and S-corps, there are other important distinctions, too, that might help you determine whether an LLC or an S-corp might better suit your needs.

On Behalf of   |  Business Law |


Swaps and Non-Divisible Contractual Scheme (Ensemble Contractuel Indivisible)

Swaps and Non-Divisible Contractual Scheme (Ensemble Contractuel Indivisible)

On 08 September 2021, the French Supreme Court dealing with private matters (Cour de cassation) ruled a remarked decision relayed by economic specialized press (see Sophie Rolland, Les Echos dated 18 November 2021 « Swaps de taux : un arrêt de la Cour de cassation sème le trouble chez les professionnels du financement »).

This decision (Cour de cassation, civ., 1, 08 September 2021, 20-14.201), albeit non-published (inédit) on the Bulletin de la Cour de cassation, is important as to its impact on the financial field and by the use of the concept of non-divisible contractual scheme (ensemble contractuel indivisible).

The contractual scheme put in place is quite widely spread: a loan hedged by a rate interest swap entered into between a bank and a real estate civil company (SCI – Société Civile Immobilière). In this contractual scheme, the SCI, which corporate purpose is to acquire real estate, entered into a loan agreement with a floating interest rate (namely Euribor 1M plus 1% per year), such loan being hedged by the same bank, this later paying Euribor 1M and receiving a fixed rate of interest of 3.73%. It has to be stressed that the position of the SCI was not fully hedged as a delta of 1% per year remained to be paid by the SCI under the loan. From a strictly legal standpoint two separate agreements were entered into by the same parties: the loan and the swap, resulting in the bank receiving 3.73% plus 1% per year.

This case arose due to the contractual reimbursement before maturity of the loan by the SCI after the real estate being sold by the SCI. In terms of sequences, from a chronological standpoint, the SCI sold the real estate, contractually reimbursed the loan which triggered the unwind of the swap. The question raised to the Court was the existence of an unwind cost under the swap in addition to the cost associated with the reimbursement of the loan before maturity.

The Court of appeal of Paris, with a decision dated 27 November 2019, ruled that no amount shall be paid as to the unwind of the swap and ruled that the amount of 175,000€ (paid by the SCI in respect of the unwind costs plus legal interest as of 10 July 2014 – under penalty payment (astreinte)) shall be reimbursed to the SCI. In this context, the bank seized the French Cour de cassation, with the view of cancelling this reimbursement and receiving what it considers the contractual unwind costs.

The French Cour de cassation ruled that the Court of appeal of Paris rightly deducted, by the contractual terms and the behavior of the bank a manifest willingness, as to the borrower, to enter into an indivisible contractual scheme composed of the loan and the swap, with the cancellation of the first (the loan) resulting in the caducity of the second (the swap), the bank being obliged to pay back the unwind costs associated with the swap

This concept of contractual scheme (initially groupe de contrats) is commonly used by French case law and was named and revealed in France by French doctrine (firstly Bernard Teyssié, Les groupes de contrats, LGDJ 1975 cited in Droit des obligations P. Malaurie, L. Aynès, P. Stoffel-Munck LGDJ 11 ed. N°494 and A. Bénabent, Droit des obligations LGDJ e.g. 15 ed. N°330 et seq.) and is in line with the position of the French Cour de cassation, as described by the French doctrine (see Droit des obligations P. Malaurie, L. Aynès, P. Stoffel-Munck op. cit. N°495: «The unity of the group is easily admitted when the contracts are entered between the same parties or by the intermediary of the same pilot company». Other authors (Droit civil Les obligations Y. Buffelan-Lanore, Virginie Larribau-Terneyre), 17 ed. N°997 et seq. states that when the goal of the parties is the achievement of a global contractual operation using several contracts, reference is made to a contractual scheme (ensemble contractuel). For these later authors, « these contractual schemes are now a reality which is used by case law all the more than contracts are more and more driven by economy » (Droit civil Les obligations op.cit. N°998).

Ordinance Macron N°2016-131 dated 10 February 2016 (as ratified by Law N°2018-287 adopted on 11 April 2018, with an entry into force on 1 October 2018) gives the possibility for the judge to use the caducity (caducité), giving rise to the end of a contract with a potential halo effect on the contractual scheme, as a whole (not to mention the latitude for the judge to allow restitutions).

In this perspective, article 1186 alinea 2 of the French civil Code (as created by Ordinance Macron), states that «When execution of several contracts is necessary to the achievement of a single operation and when one of them disappears, other contracts which performance is then impossible by this disappearance and those for which the performance of such disappeared contract was a condition precedent of the willingness of one party are caduc »Alinea 3 of such article states that « Caducity however only applies if the counterparty against which the caducity is opposed knew the existence of the single global operation when his willingness was given »

As such, it can be argued that there is no specificity applied in the fields of capital markets, as common civil principles and rules apply the same way, whereas ordinance Macron excludes derivatives (contrats financiers) from the unforeseen theory (théorie de l’imprévision), secular in administrative law and new in civil law (article L211-1 of the French monetary and financial Code), avoiding a potential disruption of the international recognized existing legal scheme based on the material adverse change (MAC) provisions.

The import of this case law on the capital markets, as a whole, remains to be determined. It is common practice that a bank offers a package composed of a loan and a hedge, resulting in the corporate paying a fixed interest amount and be covered against the increasing of a floating rate (to be paid under the loan). In this perspective, the case law of the French Cour de cassation may be applied with possible adjustments, offered by French regulation i.e. cancellation (nullité), resolution (resolution), caducity (caducité) of contract(s) and / or non-divisible contractual scheme (ensemble contractuel non divisible) with retroactive effect or not (article 1187 of the French civil Code).

It is reasonable to think that this case law may rather be considered as a reference for market participants rather than a decision not subject of amendments or evolution depending on the context of the case. If this is common practice that a bank be at the same time the lender and the hedger, it cannot be excluded that a corporate may enter into a hedge agreement with another bank. In this perspective, a non-divisible contractual scheme (ensemble contractual non divisible), may also be characterized.

Another question is the import of this decision on other non-divisible contractual schemes. This case law should apply to OTC derivatives (forward) or derivative admitted on markets (futures). In addition, it cannot be excluded as well that the hedging bank (or the corporate) has also entered contracts with other financial institutions. Should a non-divisible contractual scheme have an impact on other transactions, and on other non-divisible contractual schemes, such other transactions and other non-divisible contractual schemes may have to be unwind (or assigned), potentially ad lib.

As alinea 3 of article 1186 of the French civil Code states that « Caducity however only applies if the counterparty against which the caducity is opposed knew the existence of the single global operation when his willingness was given »other legal tools will have to be used by the judge.

Considering this, the current tools provided for by French regulation (e.g. caducity, nullity, resolution), as amended by Ordinance Macron put the judge in a situation to rule efficiently the cases brought before his Court (with also the possibility to declare a contractual relationship not enforceable against third parties – inopposabilité, or to declare a provision of a single contract of the non-divisible contractual scheme as non-written – clause reputée non écrite).

In this perspective, a distinction can be proposed based on the identification of the relevant contracts underpinning the non-divisible contractual scheme. When the judge can easily identify these contracts and can ‘close’ the non-divisible contractual scheme, a solution should be given accordingly (based on the current legal tools). If this is not the case (the end of the non-divisible contractual scheme cannot be identified), the parties may have indirectly to contractually apply a pragmatic decision of the judge, negotiating with their counterparties, based on the ratio decidendi of the case and inter alia article 1186 of the French civil Code alinea 3.

One should be confident on the pragmatism of the French Cour de cassation (especially the commercial Chamber), not only to apply the French civil Code (and French regulation, as a whole), but also previous case law architecture, based on concepts created and revealed by French doctrine.

Up to date as of 08 September 2021.

Ludovic Timbal Duclaux de Martin 

EIRL Me Ludovic Timbal Duclaux de Martin Avocat à la Cour – Barreau de Paris 


Revised Hong Kong Listing

Revised Hong Kong Listing Regime For Overseas Issuers

A revised listing regime for overseas issuers on the Stock Exchange of Hong Kong (SEHK) took effect following consultation on 1 January 2022. Major changes under the revised Rules Governing the Listing of Securities for overseas issuers are:

  • One common set of core shareholder protection standards for all issuers;
  • Consolidation of secondary listing requirements in revised chapter 19C, with relaxed qualification requirements for an overseas issuer primary listed on a Qualifying Exchange such as NYSE, Nasdaq or LSE, with a centre of gravity in Greater China without a weighted voting rights (WVR) structure; and
  • Eligibility for dual primary listing by Grandfathered Greater China Issuers and Non-Greater China Issuers with non-compliant WVR and/or variable interest entity (VIE) structures. (Note: A Grandfathered Greater China Issuer is (1) primary listed on a qualifying exchange on or before 15 December 2017; or (2) primary listed on a qualifying exchange after 15 December 2017, but on or before 30 October 2020, and controlled by corporate WVR beneficiaries as at 30 October 2020.)

Protection standard revisions

Previously, non-Hong Kong issuers had to demonstrate that their shareholders were afforded shareholder protection at least “equivalent” to Hong Kong’s equivalence requirement.

To comply, listing applicants were either companies incorporated in recognised jurisdictions (namely Cayman Islands, Bermuda, mainland China and Hong Kong) or companies incorporated in acceptable jurisdictions that the SEHK accepted as place of incorporation eligible for listing in Hong Kong.

Under the new regime, the equivalence requirement and distinction between recognised jurisdictions and acceptable jurisdictions are removed.

Now a baseline level of shareholder protection requirements (core standards) set out in appendix 3 of the new Listing Rules is adopted for all issuers to ensure the same level of protection to all investors.

The core standards concern different aspects regarding, among others, directors, proceedings at general meetings, variation of rights, amendment of constitutional documents, appointment, removal and remuneration of auditors, proxies and corporate representatives, inspection of branch register, and voluntary winding up.

Shareholder protection requirements under the core standards should be set out in the issuer’s constitutional documents – unless the stock exchange is satisfied that the domestic laws, rules and regulations to which the issuer is subject provide for the same protection.

Existing listed issuers are required to ensure they fully comply with the new core standards – otherwise they need to make any necessary amendments to their constitutional documents to conform by their second annual general meeting following 1 January 2022.

Secondary listing requirements

To provide clearer guidance and reduce complexity, all relevant provisions in relation to secondary listing are now consolidated in revised chapter 19C of the Listing Rules. Set out below is a summary of the qualification requirements.

For overseas issuers with WVR:

  • Track record of good regulatory compliance of at least two full financial years on a qualifying exchange; and
  • Market capitalisation of at least HKD40 billion (USD5.09 billion); or market capitalisation of at least HKD10 billion and revenue of at least HKD1 billion.

For overseas issuers without WVR:

Criteria A

  • Track record of good regulatory compliance of at least five full financial years on a qualifying exchange (or other recognised exchange, but for non-Greater China Issuers only); and
  • Market capitalisation of at least HKD3 billion.

Criteria B

  • Track record of good regulatory compliance of at least two full financial years on a qualifying exchange; and
  • Market capitalisation of at least HKD10 billion.

A waiver of the listing track record criteria may be granted if the applicant seeking a secondary listing is well established and has a market capitalisation at listing significantly larger than HKD10 billion.

The stock exchange may reject a secondary listing application if a material part of the applicant’s business was listed on the primary listing market by way of a reverse takeover.

Compared to previously, secondary listing requirements for Greater China issuers without WVR structures have been relaxed under the new arrangement in two respects:

  1. Removing the “innovative company” requirement; and
  2. Lowering the market capitalisation requirement.

Before the amendments, Grandfathered Greater China Issuers and Non-Greater China Issuers with non-compliant WVR and/or VIE structures could only apply for secondary listing in Hong Kong.

Under the new arrangements, these categories are permitted to directly seek dual primary listing without amending their existing WVR or VIE structures – even though structures do not meet relevant listing requirements applicable to primary listing applicants – provided they meet current suitability and eligibility requirements of chapter 19C of the Listing Rules.

Revised Hong Kong Listing Regime For Overseas Issuers

By Li Fai / Rossana Chu

LC Lawyers LLP

First published in April issue 2022 of China Business Law Journal.

ESG Series – Green and Sustainable Finance Grant Scheme of Hong Kong

It has been one year since the launch of the Green and Sustainable Finance Grant Scheme (Scheme) in May 2021[1]. The Hong Kong Monetary Authority (HKMA) announced in its Quarterly Bulletin of March 2022[2] that more than 60 debt instruments had been approved under the Scheme. This article summarizes the core elements of the Scheme and provides tips for applications.

Grant and eligibility of the Scheme

The Scheme consists of two tracks[3]:

  Track I

General Bond Issuance Costs

Track II

External Review Costs

Finance instruments Eligible green and sustainable bonds Eligible green and sustainable bonds and loans
Applicants First-time bond issuers First-time and repeated bond issuers and loan borrowers
Eligible expenses covered by the grant under the Scheme Bond issuance expenses, including arrangement, legal, audit, rating, listing and clearing fees Only expenses of transaction-related external reviews

u  pre-issuance reviews, e.g. certification, second party opinion, verification, ESG scoring/rating, assurance, consultation to develop the bond/loan framework)

u  post-issuance external reviews or reporting

Grant amount 50% of the eligible expenses, up to (i) HK$2.5 million where the bond, issuer or guarantor possesses a credit rating by a recognised rating agency, or (ii) otherwise, HK$1.25 million 100% of the eligible expenses, up to HK$800,000
Key eligibility criteria u  pre-issuance external review provided by a recognised external reviewer

u  issued in Hong Kong (half or more of the lead arrangers are Hong Kong based)

u  issuance size of at least HK$1.5 billion

u  listed in Hong Kong or lodged with and cleared by the Central Moneymarkets Unit (CMU) operated by the HKMA

u  issued in Hong Kong to (i) 10 or more persons or (ii) less than 10 persons none of whom is an associate of the issuer

u  pre-issuance external review provided by a recognised external reviewer

u  issued in Hong Kong  (half or more of the lead arrangers/lenders are Hong Kong based)

u  issuance size of at least HK$100 million (raised from the initial HK$200 million threshold)

u  (for bonds only) listed in Hong Kong or lodged with and cleared by the CMU

u  (for bonds only) issued in Hong Kong to (i) 10 or more persons or (ii) less than 10 persons none of whom is an associate of the issuer


There are currently 14 external reviewers (including Ernst & Young) recognised by HKMA[4].

A few tips

Because a pre-issuance external review is mandatory in either track, it is advisable for any applicant to consult a recognized external reviewer. The core references adopted by reviewers may include (a) the Green Bond Principles and Social Bond Principles developed by the International Capital Market Association (ICMA Bond Principles), (b) the Green Loan Principles and Social Loan Principles jointly issued by the Loan Market Association, the Asia-Pacific Loan Market Association and the Loan Syndications and Trading Association (LMA Loan Principles), (c) the Catalogue of Projects Supported by Green Bonds (绿色债券支持项目目录) issued by the People’s Bank of China, (d) EU Technical Expert Group final report on Sustainable Finance Taxonomy, (e) ISO/FDIS 14030-3 Environmental Performance Evaluation—Green debt instruments—Part 3: Taxonomy and (f) Sustainable Development Goals adopted by the United Nations.

It is essential for the issuer/borrower to formulate the relevant bond/loan framework in line with the ICMA Bond Principles or LMA Loan Principles. The core elements of the framework should at least include (i) use of proceeds, (ii) process for project evaluation and selection, (iii) management of proceeds and (iv) reporting. Please refer to our earlier article for more details of such 4 elements[5].

HKMA does not require the eligible projects must be in Hong Kong or the proceeds must be used in Hong Kong.

Eligibility conditions are imposed on bond arrangers, loan lenders and external reviewers, but the Scheme does not require that the issuer/borrower must be a Hong Kong company.

Prior to or after the issuance of the bond/loan, it is desirable to consult the HKMA before submitting the formal application. The HKMA may indicate no-objection to the pre-application consultation if it is satisfied that, based on the preliminary information provided, the Scheme eligibility requirements are met.

A formal application may be made within 3 months after the bond/loan is issued. The HKMA processes applications in monthly batches.






ESG Series – External Reviews on Sustainable Bonds and Loans

The principles on sustainable bonds (ICMA Bond Principles) formulated by the International Capital Market Association (ICMA) are widely applied in Hong Kong listed bonds, as discussed in our previous articles[[1]]. External reviews play an important part in green, social and sustainability-lined bonds/loans, and the author will summarize the common types of external reviews here.

Common types of external reviews

The Guidelines for Green, Social, Sustainability and Sustainability-Linked Bonds External Reviews[[2]] of the ICMA group external reviews in four main types, namely, second party opinion, verification, certification and rating/scoring.

The “Green Loan Principles”[[3]], the “Social Loan Principles”[[4]] and the “Sustainability-Linked Loan Principles”[[5]] issued by the Loan Market Association, the Asia-Pacific Loan Market Association and the Loan Syndications and Trading Association (LMA Loan Principles) also highlight the functions of external reviews.

(1) Second party opinion

Alignment of the bond/loan framework with international principles

A second party opinion usually comments on whether the green, social, sustainability and sustainability-linked bond/loan framework is in line with the international principles (such as the ICMA Bond Principles and the LMA Loan Principles). It is given by an independent institution with environmental/ social/ sustainability expertise.

For green and social bonds/loans, the following aspects are often considered in giving the second party opinion:

Use of proceeds:

  • Eligible projects or project categories covered in the bond/loan framework of the issuer/borrower
  • Sustainability objectives of each project category
  • Nature of uses, e.g. capital expenditure, research & development
  • Excluded projects and activities

Process for project selection and evaluation:

  • Section process and eligibility criteria used, e.g. international or market-practice standards and taxonomies, science-based targets, self-developed sustainability benefit indicators
  • Target period of fully applying the net proceeds
  • Committees or departments participating in the selection and their respective roles
  • Regulatory approvals required before carrying on the projects
  • How the associated environmental and social risks are monitored and mitigated
  • Regular reviews on the continuity in project eligibility

Management of proceeds

  • Whether the proceeds are placed in a designated account or sub-account, or in a general account with a register to track the uses
  • How the proceeds are used before being allocated to eligible projects, and the commitment of not using the unallocated proceeds on activities that conflict with the eligibility criteria
  • How to re-allocate the proceeds to an alternative eligible project if a designated project ceases to be eligible


  • Frequency of reporting
  • Contents of reporting, e.g. allocation of proceeds to eligible projects, qualitative and quantitative expressions of sustainability impacts for each project, balance of unallocated proceeds, proportion of financing versus refinancing
  • Whether post-issuance third-party verification or certification reports will be issued

Sustainable Development Goals

Seventeen Sustainable Development Goals (SDGs) were adopted by the United Nations in 2015[[6]] as a universal call to end poverty, protect the planet, and achieve peace by 2030. Mindful of the SDGs, all countries should recognize that development must balance social, economic and environmental sustainability.

Second party opinions often include mapping of the proceeds uses to SDGs. ICMA provides a broad frame of reference on SDG mapping, and sets out a table illustrating the relevance of 15 SDGs to the uses of proceeds[[7]]. Nevertheless, each project should be reviewed individually as to whether it aligns with any particular SDG.

SDG Green Bond Principles of
ICMA project categories
Social Bond Principles of
ICMA project categories
1.      No Poverty u  Climate Change Adaptation u  Access to Essential Services

u  Affordable Housing

u  Socioeconomic Advancement and Empowerment

2.      No Hunger u  Climate Change Adaptation

u  Environmentally Sustainable Management of Living Natural Resources and Land Use

u  Access to Essential Services

u  Affordable Basic Infrastructure

u  Food Security

u  Socioeconomic Advancement and Empowerment

3.      Good Health and Well-being u  Pollution Prevention and Control

u  Renewable Energy

u  Access to Essential Services

u  Affordable Basic Infrastructure

4.      Good Education u  Access to Essential Services

u  Socioeconomic Advancement and Empowerment

5.      Gender Equality u  Socioeconomic Advancement and Empowerment
6.      Clean Water and Sanitation u  Sustainable Water and Waste Water Management

u  Terrestrial and Aquatic Biodiversity Conservation

u  Affordable Basic Infrastructure
7.      Affordable and Clean Energy u  Energy Efficiency

u  Renewable Energy

u  Affordable Basic infrastructure
8.      Decent Work and Economic Growth u  Eco-efficient and/or Circular Economy Adapted Products, Production Technologies and Processes

u  Energy Efficiency

u  Renewable Energy

u  Access to Essential Services

u  Employment Generation

u  Socioeconomic Advancement and Empowerment

9.      Industry, Innovation and Infrastructure u  Energy Efficiency

u  Renewable Energy

u  Access to Essential Services

u  Affordable Basic infrastructure

u  Employment Generation

10.   Reduced Inequalities u  Access to Essential Services

u  Socioeconomic Advancement and Empowerment

11.   Sustainable Cities and Communities u  Clean Transportation

u  Eco-efficient and/or Circular Economy Adapted Products, Production Technologies and Processes

u  Environmentally Sustainable Management of Living Natural Resources and Land

u  Green Buildings

u  Pollution Prevention and Control

u  Renewable Energy

u  Sustainable Water and Waste Water Management

u  Affordable Basic infrastructure

u  Affordable Housing

u  Socioeconomic Advancement and Empowerment

12.   Responsible Consumption and Production u  Eco-efficient and/or Circular Economy Adapted Products, Production Technologies and Processes

u  Environmentally Sustainable Management of Living Natural Resources and Land Use

u  Pollution Prevention and Control

u  Renewable Energy

u  Sustainable Water and Waste Water Management

u  Food Security
13.   Climate Action u  Climate Change Adaptation

u  Climate Change Mitigation

14.   Life Below Water u  Environmentally Sustainable Management of Living Natural Resources and Land Use

u  Terrestrial and Aquatic Biodiversity Conservation

u  Socioeconomic Advancement and Empowerment
15.   Life on Land u  Environmentally Sustainable Management of Living Natural Resources and Land Use

u  Terrestrial and Aquatic Biodiversity Conservation

u  Socioeconomic Advancement and Empowerment

Contribution of the sustainable finance to the sustainability strategy of the issuer/borrower

A second party opinion may start with the issuer’s/borrower’s sustainability strategy. It then discusses how the sustainable bond/loan and its framework can actualize the strategy and lead to positive environmental and social outcomes. The reviewer may also comment on that quantitative results which may be achieved through the sustainable finance, e.g. extent of electricity consumption reduction, contribution to carbon offset, creation of affordable houses, increase in recycle content, reduction in waste. References can be made to international benchmarks such as the Science-Based Targets Initiative[[8]].

Notwithstanding the benefits, eligible projects could create environmental and social risks, e.g. employee injuries, negative environmental impacts and production of harmful materials at the construction and operation stages, unbalanced allocation of affordable resources amongst vulnerable groups, safety issues of new products. The opinion may report on how the issuer/borrower manages the risks via its policies, trainings, compliance with regulations, as well as how the issuer/borrower works with employees, suppliers, customers, regulators, local communities and other stakeholders to assess and mitigate the risks.

(2) Verification

It refers to an independent verification on the bond/loan framework or the underlying projects against a designated set of internal sustainability criteria.

In the case of a sustainability-linked bond/loan, it is a must to obtain independent and external verification on measuring performance against the key performance indicators or on the progress of achieving the sustainability performance targets. According to the ICMA Sustainability-Linked Bond Principles[[9]] and the LMA Sustainability-Linked Loan Principles, the verification must be conducted at least once a year, and at the time for assessing whether an adjustment to the bond/loan characteristics is triggered, until after the last trigger event has been reached.

A bond issuer usually reports, at least once a year, on the proceeds amounts applied to eligible projects. Some issuers of Hong Kong listed bonds engage professional firms (including EY) to examine and provide limited assurance in certain assertions set out in the issuer’s post-issuance reports, in order to give comfort to investors. The professional firm reviews the issuer’s procedures on the project selection and proceeds management, implementation of the procedures, calculations performed and disclosure policies. The conclusion is normally taken in the form of a negative statement as to whether anything has come to the professional firm’s attention that causes it to believe the assertions do not meet the requirements of the relevant international principles or the issuer’s bond framework.

(3) Certification

The issuer/borrower can engage a qualified and independent third party to certify its sustainable bond/loan, the relevant framework, use of proceeds, key performance indicators and sustainability performance targets against recognised external sustainability standards which define specific criteria.

(4) Rating/scoring

A third-party rating agency or specialized research provider may evaluate or assess the sustainable bond/loan framework, use of proceeds, selection of key performance indicators, calibration of the level of ambitiousness of sustainability performance targets SPTs, according to an established scoring/rating methodology.

Although rating and scoring are not very common, certain bonds listed in Hong Kong have been scored via evaluation approaches encompassing sustainability benefits, governance (proceeds management and impact assessment structure) and transparency in reporting.

Key takeaway

Bond issuers and loan borrowers are engaged to make good use of external reviews, because they promote best practice for the issuer’s/borrower’s internal control, allow stakeholders to understand how the bond/loan framework is aligned with international principles, and give comfort to investors on how their monies are channeled to sustainable uses.