HONG KONG: SFC applies Hong Kong takeover-and-merger framework to REITs

Monday June 28 2010

The Securities and Futures Commission has announced the application of the Hong Kong takeover measures in the Codes on Takeovers and Mergers and Share Repurchases to SFC-authorised real estate investment trusts (REITs) with immediate effect.

Consultation conclusions on the proposals to extend the Codes to REITs and to apply the market misconduct and disclosure of interests provisions in the Securities and Futures Ordinance (SFO) to listed collective investment schemes (CISs) were released on 25 June 2010.

The majority of the proposals published in January 2010 have been adopted, with some modifications and amendments to take into account responses received during the consultation process. Details of the submissions and the SFC`s responses to the comments are contained in the conclusions.

The proposed amendments to the Code on REITs (REIT Code) and the Codes include aligning the control structure of REITs with that of listed companies and introducing a set of REIT Guidance Notes. As these amendments take effect immediately, from Friday, 25 June 2010, unit holders who increase their holding to 30% or more will be subject to the trigger provisions under the Codes. Likewise, unit holders holding between 30% and 50% who increase their holding by more than 2% from the relevant lowest percentage in the 12-month period preceding the relevant increase in holding will also be subject to the creeper provisions of the Codes. Consistent with the objective of ensuring as far as possible that all unit holders are neither advantaged nor disadvantaged, no transitional arrangement will apply.

The SFC will also proceed to discuss with the Government the proposed legislative amendments to clarify and enhance the regulation of market conduct regarding dealings in listed CIS by applying Parts XIII to XV of the SFO to them.Click on the above link for more details.