Exemptions and Waivers from Requirements of Connected Transactions


The rules on connected transactions are set out in Chapter 14A of the Listing Rules. The objective of the connected transactions rules is to ensure that a listed issuer takes into account the interests of shareholders as a whole when it or one of its subsidiaries enters into connected transactions. Connected transactions include both capital and revenue nature transactions. They may be one-off transactions or continuing transactions. The general requirements for connected transactions include disclosures in announcements, circulars and annual reports, and shareholders’ approval. Persons with material interests cannot vote on the resolution approving the transaction. Continuing connected transactions also require annual reviews by independent non-executive directors and the auditors.

To reduce listed issuers’ compliance burden, exemptions and waivers from all or some of the connected transaction requirements are available for specific categories of connected transactions. These apply to connected transactions that are immaterial to the listed issuer’s group, or specific circumstances where the risk of abuse by connected persons is low. This article summarizes the exemptions and waivers with respect to the connected transactions requirements under the Listing Rules.

Connected persons and connected transactions

Generally speaking, a connected transaction is any transaction between a listed issuer or any of its subsidiaries and a “connected person”. “Connected persons” are defined to include:

  1. a director, chief executive or substantial shareholder (holding 10% or more of the voting rights) of the listed issuer or any of its subsidiaries, or an associate of any such persons;
  2. a person who was a director of the listed issuer or any of its subsidiaries in the past 12 months, or an associate of such a person; or
  3. a connected subsidiary, namely: (a) a non-wholly owned subsidiary of the listed issuer where any connected person(s) at the issuer lever are entitled to exercise, or control the exercise of, 10% of more of the voting power at general meetings of the non-wholly owned subsidiary. This excludes an indirect interest in the subsidiary which is held by the connected person(s) through the listed issuer; or (b) a subsidiary of such a non-wholly owned subsidiary.

Requirements for connected transactions

Written agreement requirement: The listed issuer must enter into a written agreement with all relevant parties in respect of the connected transaction (LR14A.34).

Reporting requirements: The listed issuer’s next published annual report must include the details of the connected transaction specified in LR14A.71, among others, the transaction date; the transaction parties and a description of their connected relationship; a brief description of the transaction and its purpose; total consideration and terms; and the nature and extent of the connected person’s interest.

Notification and announcement requirement: The listed issuer must notify the Stock Exchange as soon as possible after the terms of the connected transaction have been agreed upon and publish an announcement as soon as possible (LR14A.35 and 14A.68).

Independent shareholders’ approval requirement: Connected transactions must be approved by the issuer’s independent shareholders. Voting on the resolution approving the connected transaction must be by way of poll. Any shareholder with a material interest in the transaction(s) must abstain from voting (LR14A.36 and 14A.70(12)). The Stock Exchange may waive the general meeting requirement and accept a written independent shareholders’ approval if: (a) no shareholder of the issuer would be required to abstain from voting if a general meeting were held; and (b) the written independent shareholders’ approval is obtained from a shareholder or closely allied group of shareholders who (together) hold more than 50% of the voting rights in general meeting (LR14A.37).

Independent board committee and financial adviser requirements: An independent board committee (consisting only of independent non-executive directors) must be established to advise shareholders on the connected transactions (LR13.39(6)(a)). An independent financial adviser must be appointed to advise the independent board committee and independent shareholders on the matters set out above (LR13.39(6)(b)).

Shareholders’ circular requirement: The listed issuer must send a circular to shareholders at the same time as it gives notice of the general meeting to approve the transaction; or if the transaction is to be approved by way of written shareholders’ approval from a shareholder or closely allied group of shareholders, within 15 business days of publication of the announcement (LR14A.46 and 14A.48). The shareholders’ circular must comply with the contents requirements of LR14A.69(1) to (4), 14A.42, 14A.43, 14A.45 and 14A.70 and must include the letter from the independent board committee and the independent financial adviser’s opinion.

Additional requirements for continuing connected transactions

Fixed period of not exceeding three years: In the case of continuing connected transactions…


By Fai Li

Note: This material has been prepared for general information purposes only and is not intended to be relied upon as professional advice for any cases. Should you need further information or legal advice, please contact us.