ASIFMA Standardises Underwriter Documentation for Hong Kong IPOs

The initiative will promote efficiency and reduce costs and legal risks by offering standardised forms for agreements among underwriters and between underwriting syndicates.

ASIFMA’s Equity Capital Markets Committee, working with law firm Slaughter and May, has created a new set of standard form agreements for use among underwriters in Hong Kong IPOs.

The agreements govern the relationships among the various underwriters and between the different underwriting syndicates, including:

  • an Agreement Among Hong Kong Underwriters;
  • an Agreement Among International Underwriters; and
  • an Agreement between International and Hong Kong Underwriting Syndicates.

According to ASIFMA, there are currently no standard forms for agreements among underwriters or between underwriting syndicates in Hong Kong, so when such agreements are prepared they are often based on precedent agreements, which may not have been carefully scrutinised over many years. The working group on the initiative found that precedent agreements often included terms that were no longer relevant or ambiguous.

ASIFMA members have also noticed a recent trend where the agreements were not being executed in a timely fashion due to certain commercial terms not being finalised. The absence of a contract among underwriters potentially exposed them to various risks during the interim period between the pricing of a deal and the signing of agreements.

To address these risks, ASIFMA has restructured the agreements so the commercial terms are set out in a schedule to the agreement, so any unresolved terms do not prohibit the agreement from being executed at pricing, thereby ensuring the rights and obligations are afforded to underwriters and syndicate members under the agreement terms.

Matthew Chan, Head of Policy and Regulatory Affairs at ASIFMA said:

“Hong Kong is one of the biggest global capital formation markets, attracting many IPOs annually. That vibrance relies on the market working efficiently and in the best interests of investors and companies seeking capital. Members identified an opportunity to eliminate unnecessary complexity in this part of the IPO process and so ASIFMA worked closely with banks to develop a common approach to these agreements.”

The initiative is expected to promote efficiency by reducing the need to prepare bespoke agreements for each offering, and by providing a baseline set of terms that are largely not controversial or subject to little/no negotiation, and which will become familiar to practitioners in the long run.

It will also reduce the costs of having external counsel create and negotiate the agreements, while also reducing legal risks by ensuring the agreements contain relevant and unambiguous terms that can take effect in a timely manner without undue delay of execution.

“We continue to look for areas where we can improve efficiencies and the way the market works, including best practices and participating and open dialogue with supervisors,” Chan added.

The set of agreements is available here.

ASIFMA is an independent, regional trade association with over 125 member firms that works to promote the development of liquid, deep, stable and competitive capital markets in Asia.

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