Revised rules for share schemes of HK listed companies

Share grants may only be made to the following groups of eligible participants:

• Employee Participants;
• Related Entity Participants; and
• Service Providers.

Employee Participants

This includes directors and employees of the listed issuer and its subsidiaries. There is no differentiation between full-time and part-time employees, but it does not include former employees.

Related Entity Participants

This includes directors and employees of the holding companies, fellow subsidiaries or associated companies of the issuer. It does not include directors and employees of investee companies.

Service Providers

This includes persons who provide services to the issuer group on a continuing or recurring basis in its ordinary course of business, which are in the interests of the long term growth of the issuer group.

• Limits grants from all share option schemes to 10% of the issuer's total issued shares.
• The scheme mandate may be refreshed any time with shareholder approval, provided that the outstanding options do not exceed 30% of issued shares.
   

• Limits grants under all share schemes to 10% of the total issued shares.
• Shareholders may refresh the scheme mandate once every 3 years.
• Independent shareholders may make additional refreshments within the 3 year period.
• Need to set a sub-limit for grants to Service Providers.

• Minimum 12 month vesting period required for options and awards.
• The board may make grants to Employee Participants with a shorter vesting period. Additional disclosure requirements apply.
• No shorter vesting period is permitted to grants to non-Employee Participants.

Disclose performance targets or a negative statement.

No specific disclosure requirement for clawback

•  Disclose a description of the performance targets (which may be qualitative) and clawback, or a negative statement.
• If performance targets / clawback do not apply to grants to directors or senior management, disclose renumeration committee’s view on why this is the case.

Share options – No change to the current rule.

Share awards – The rule for share options is expressly disapplied in the case of share awards.

Share options – Shareholder approval is required for grants over 1% of the issued shares over a 12 month period (1% individual limit).

Share awards – No specific limit.

Extend the 1% individual limit to all share schemes (in aggregate).

Share options:

• Approval by INEDs is required.
•  Shareholders’ approval is required if the grants of share options exceed 1% of the issued shares of the issuer over any 12-month period.

Share awards:

• Grants of new shares to connected persons constitute a connected transaction requiring independent shareholders’ approval regardless of the size of the grant.

(a) Subject to (b), approval by the INEDs.

(b) Independent shareholders’ approval is required if the grants of share awards will cause the share awards granted to exceed 0.1% of issued shares of the issuer over any 12 month period.

Note: Shareholders’ approval is required if the grants of share awards and share options in aggregate exceed the 1% individual limit

Share options:

• Approval by INEDs (excluding any INED who is a grantee) is required.

• Independent shareholders’ approval is required for grants of options in excess of 0.1% of the issued shares of the issuer and $5 million over a 12-month period.

Share awards:

• Grants of new shares to connected persons constitute a connected transaction requiring independent shareholders’ approval regardless of the size of the grant.

(a) Subject to (b), approval by the INEDs (excluding any INED who is a grantee).

(b) Independent shareholders’ approval is required if the grants of share awards and share options in aggregate exceed 0.1% of issued shares of the issuer over any 12 month period.

Disclosure of grants of options / awards to the following should be made on an individual basis:

• a connected person;
• any individual with grants exceeding the 1% individual limit; and
• a related entity participant or a service provider with grants exceeding 0.1% of the issuer’s issued shares over any 12 month period.

Information relating to other grantees may be disclosed by category.

Voting rights of unvested scheme shares

Grants to the following grantees should be disclosed in annual reports:

• each director of the issuer on an individual basis;
• 5 highest paid individuals on an aggregated basis; and
• other participants on an aggregated basis.

Details to be disclosed in the annual report should follow the general disclosure requirements in annual reports applicable to share schemes funded by new shares.

For both share option schemes and share award schemes involving either new shares or existing shares of the subsidiary:

• Chapter 17 will only apply to Principal Subsidiaries; and
• for other subsidiaries, revised Chapter 14 of the Listing Rules (Chapter 14) will apply.

A Principal Subsidiary is a subsidiary whose revenue, profits or total assets accounted for 75% (or more) of that of the issuer under the percentage ratios in any of the latest three financial years.

Chapter 14 will be revised to apply in such situations.

If the subsidiary adopts a share scheme (either involving new shares issued by the subsidiary or existing shares held by the parent listed company), the issuer will need to consider whether it is a notifiable transaction.

Disclosure and shareholder approval requirements will depend on how the transaction is classified under Chapter 14. The announcement or circular must contain the major terms of the share scheme.

The above two points also apply if the subsidiary proposes to increase or refresh the scheme mandate, or makes a material change to the terms of the scheme.

Issuers may continue to make share grants using the existing scheme mandate

Note: No further refreshment of the Advanced Mandate is allowed

Issuer may continue to grant share awards to eligible participants up to the earlier of:

(i) the second AGM after 1 January 2023 or

(ii) the adoption of a new scheme mandate or amendments to the terms of the existing scheme to comply with the amended Chapter 17

Principal Subsidiary