Mergers and Acquisitions

Like many other jurisdictions around the world, Hong Kong law restricts companies incorporated in Hong Kong from providing financial assistance for the purchase of their own shares. These restrictions may, for example, limit the ability of a purchaser of a company from using the assets of the company to secure the debts incurred by the purchaser in financing the purchase.

Minority investors in companies will often wish to secure board representation so as to ensure that the company in which they have invested is managed in a manner satisfactory to themselves. Whilst it is easy to secure a right to appoint a director, it is more difficult under Hong Kong law to ensure that the appointee is not removed if relations with the majority shareholder sour. In this article, we examine the relevant legal issues following the introduction of the new companies legislation earlier this year.

Allegations of share splitting in the proposed privatization of PCCW have raised an important question as to how the statutory majority to approve a scheme of arrangement should be determined. This question is significant both in the short-term for investors trading PCCW and in the long-term in the context of future schemes of arrangement. In this article, we examine the applicable laws and regulations with a view to providing hedge funds and other investors with guidance.