UPDATE 1-HK exchange, SFC to discuss new shareholding structures in Q1

Fri Jan 24, 2014 4:12am EST

* HK rules allowing different classes of stock never used

* Discussions not necessarily related to Alibaba rejection-HKEx

By Elzio Barreto

HONG KONG, Jan 24 (Reuters) - Hong Kong Exchanges and Clearing Ltd (HKEx) and the Securities and Futures Commission (SFC) will discuss a paper on new shareholding structures for publicly traded companies in the first quarter before putting it up for public consultation, a top exchange official said on Friday.

The paper will touch on a broad range of topics, not just "weighted voting rights," David Graham, chief regulatory officer and head of listing at HKEx, told Reuters.

The move comes after Hong Kong regulators last year rejected Internet giant Alibaba Group Holding Ltd's planned IPO after the company requested to keep a shareholder structure that allowed a group of top managers and founders to nominate and control the board, while holding only around 13 percent of the company shares.

That request went against the Hong Kong's one-share-one-vote principle.

"We've worked on a paper and we're discussing that paper with the listing committee and the SFC. We will be working on it during the first quarter," Graham said on the sidelines of a regulatory forum organized by the SFC.

Discussions on the new shareholding structures are not necessarily related to Alibaba and come more as the exchange and city officials look to develop Hong Kong's financial markets, Graham added.

"The question of looking at weighted voting rights in the broader sense pre-dates any discussions around Alibaba. This is not a response to Alibaba," he said.

Hong Kong rules allow for the listing of different classes of stock with different voting rights under exceptional circumstances, but no companies have requested that exemption in the 26 years since it was put in place.

"For the record, we never received such a request. It's clearly a hypothetical question," Stephen Brown, deputy chairman of the listing committee of the HKEx said in a panel at the forum. "We haven't used that rule exception in 26 years."

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