Hong Kong introduces Uncertificated Securities Market regime

Established under Part IIIAA of the Securities and Futures Ordinance (Cap 571) and the Securities and Futures (Uncertificated Securities Market) Rules (Cap 571AS) (the USM Rules), the USM regime seeks to enable investors to hold and transfer legal title to prescribed securities (including shares, depositary receipts and stapled securities listed on Hong Kong Stock Exchange) in their own names and in paperless form. This is achieved through dematerialisation, where physical share certificates are replaced by electronic records maintained by approved securities registrars (each an ASR) through computerised systems.

Listing applicants incorporated in the Cayman Islands seeking a listing on the Hong Kong Stock Exchange after 16 November 2026 must ensure that their shares become participating securities from the date of listing. On the other hand, British Virgin Islands incorporated companies are not subject to mandatory timelines, though voluntary participation is strongly encouraged.

All listing applicants must appoint an ASR prior to listing, and must ensure that their constitutional documents permit the holding, evidencing, and transfer of shares in uncertificated form before listing. In particular, the constitutional documents must provide for dematerialisation, prohibition on issuing certificates in respect of participating securities, and maintenance of the register of members in accordance with the USM Rules. Listing applicants must also include appropriate USM-related disclosure in their prospectus, covering the fact that shares will be participating securities from listing and information on setting up electronic profiles with the listing applicant’s ASR.

For existing listed issuers incorporated in the Cayman Islands, the requirement to transition their shares to participating securities is mandatory and must be completed by their respective specified date, which will fall within five years from 16 November 2026. Existing listed issuers must amend their constitutional documents to ensure consistency with the USM regime, including revising provisions on the form of shares, issuance of share certificates, share transfers, dematerialisation, rematerialisation, and maintenance of register of members.

For existing listed issuers incorporated in the British Virgin Islands, voluntary participation is strongly encouraged, and any company electing to participate will likewise need to amend its constitutional documents.

The USM regime becomes effective on 16 November 2026. From that date, listing applicants of prescribed securities must ensure their securities become participating securities on the date of listing, and must include USM-related disclosure in their constitutional documents and prospectus prior to listing. Listing applicants that submit a listing application before 16 November 2026 but whose listing date falls after it must include USM-related disclosure in the draft listing document submitted for the Hong Kong Stock Exchange’s final approval.

For existing listed issuers, their securities must become participating securities on or before their respective specified date or 16 November 2031, whichever is earlier. Existing listed issuers that need to amend their constitutional documents must do so by the later of the date of their next annual general meeting held after 16 November 2026 and 16 November 2027.

Existing listed issuers are urged to commence the process of reviewing and amending their constitutional documents as soon as possible.

We are well-placed to assist prospective listing applicants and existing listed issuers in incorporating the relevant USM requirements into their constitutional documents in compliance with British Virgin Islands and Cayman Islands laws.