Tech giants challenge HKEX reform provisions

The listing proposal is seen clashing with draft rules in the Mainland.

Bloomberg reports that technology companies and service providers are reportedly questioning key areas of Hong Kong Exchanges and Clearing Ltd.’s plan to allow dual-class shares.

The regulator is mulling revisions to its rules so that company founders can remain in control after listing but this may pose problems for China’s tech titans who employ a variable interest entity (VIE) structure like Xiaomi and Tencent Music Entertainment.

Conditions in the proposal would see the super-voting rights of founders’ shares expire in circumstances including stock transfer and death which could clash against the mainland’s draft laws that cover VIE structures.

The potential rule clash could mean that, for example, an internet company would lose its Internet Content Provider license in the world’s most populous country, said Will Cai, a capital markets partner at Skadden, Arps, Slate, Meagher & Flom LLP.

Here’s more from Bloomberg: