![]() ![]() Ordinary shares unit: Like other normal ordinary shares, this will pay dividends or other distributions as there is an economic interest in the listco. Preference shares unit: While this unit will not pay dividends or other distributions from the listed company, in the event that the business trust is terminated, holders may be entitled to certain rights over common stockholders. The three-component model provides three layers of protection, one more than a typical two-component model: Only a single price quotation will appear on the HKEx, and no price quotations will be given for the individual components. The number of units, ordinary shares and preference shares in issue will be the same at all times. All the components of the stapled security will be traded as one on the HKEx. The share stapled unit will comprise three components: (i) a beneficial interest ordinary share in the listco (where the legal interest is held by the trustee-manager) (ii) a unit in the unit trust and (iii) a preference share in the listco. ![]() In PCCW’s case, subscribers will be able to subscribe for share stapled units jointly issued by the unit trust and the listco. The dividend payout from the share unit is taken from the listco’s profits, whereas the dividend payout from the trust unit can be taken from the listco’s operating cash flow, allowing for a steady payout to long-term investors. Under the model adopted by the Australian Stock Exchange, a business trust is issued and traded as a "stapled security" comprising two components:Ī share in a listed company (listco): the legal entity of the stapled security exists in this share unitĪ unit in a unit trust: the unit trust being typically not a legal entity and created by a trust deed ![]() A stapled security enables an investor to own two or more securities, which are generally related and bound together through one vehicle. Stapling is an arrangement under which two or more securities are combined such that the stapled securities cannot be traded separately. That law also sets out in detail the roles and responsibilities of the trustee-manager. For instance, the Singaporean government has enacted the Business Trusts Act, which regulates the structure and registration of business trusts. However, business trust structures have been adapted for some years in various jurisdictions for listing purposes. The business trust is a novel concept in Hong Kong, where real estate investment trusts, or REITs, are recognized. Investors hold units rather than shares, and their liability is limited to the amount they paid for those units. It is controlled by a trustee-manager, typically an affiliate of the company establishing the trust, who has legal ownership of the assets of the business enterprise. ![]() It is created by a trust deed and does not have a separate legal identity. This article explores business trusts and stapled securities in light of the increasing use of innovative business structures for listings in Hong Kong.Ī business trust combines elements of a company with aspects of a unit trust. The announcement by telecoms carrier giant PCCW Limited that it plans to spin-off its telecommunications business marks the first business trust listing with stapling on the Hong Kong Stock Exchange (HKEx). ![]()
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