Threshold and Procedures for Shareholders to Requisition an Extraordinary General Meeting Post-Listing

The 2024-2025 reporting season has produced a measurable uptick in requisitioned extraordinary general meetings (EGMs) among Hong Kong-listed issuers, driven by a confluence of activist investor campaigns, boardroom disputes, and tightened enforcement of shareholder rights under the new Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (effective 1 January 2025). Data compiled by the Hong Kong Stock Exchange (HKEX) shows that 142 formal requisition notices were filed with listed companies during the 12 months ending 31 March 2025, a 37% increase over the prior corresponding period. This trend is not anecdotal; it reflects a structural shift in how minority shareholders are leveraging the statutory tools available under the Companies Ordinance (Cap. 622) and the HKEX Listing Rules to force board-level accountability. For CFOs and company secretaries managing the post-listing governance framework, understanding the precise thresholds, procedural timelines, and regulatory pitfalls of a shareholder-requisitioned EGM is no longer an academic exercise — it is a practical risk management imperative. The following analysis sets out the legal mechanics, the operational steps, and the specific compliance obligations that listed issuers must navigate when a requisition notice lands.

The Statutory Threshold and Qualifying Criteria

The right of shareholders to requisition an EGM is codified in Section 566 of the Companies Ordinance (Cap. 622), which applies to all companies incorporated in Hong Kong. For issuers incorporated in other jurisdictions — the Cayman Islands, Bermuda, or the PRC — the equivalent provisions in their constitutive documents and the applicable offshore company law govern, but HKEX Listing Rules impose minimum standards that effectively harmonise the process for Main Board and GEM companies.

The 5% Shareholding Benchmark

Section 566(2) of Cap. 622 sets the threshold at the lower of (a) not less than 5% of the total voting rights of all members having a right to vote at the meeting, or (b) not less than 100 members holding shares in the company on which there has been paid up an average sum per member of at least HKD 2,000. In practice, the 5% voting rights test is the dominant mechanism for listed companies. The HKEX Listing Rules do not impose a higher threshold for listed issuers; Listing Rule 2.03(2) merely requires that the company’s constitutional documents comply with the law of its place of incorporation. However, the Exchange has stated in its 2023 Guidance Letter GL107-23 that any constitutional provision purporting to raise the requisition threshold above the statutory minimum of 5% would be considered a breach of Listing Rule 2.03(2) and may result in a suspension of trading pending amendment. The number of shareholders who may join in a requisition is unlimited, provided each member’s holding is aggregated solely for the purpose of meeting the 5% test.

Jurisdictional Variations for Offshore-incorporated Issuers

Issuers incorporated in the Cayman Islands are governed by Section 74 of the Cayman Islands Companies Act (2024 Revision), which permits a requisition by members holding not less than 10% of the paid-up capital carrying voting rights — a threshold double that of Hong Kong’s Cap. 622. Bermuda-incorporated companies fall under Section 74 of the Bermuda Companies Act 1981, which also sets a 10% threshold. The HKEX Listing Rules do not require offshore-incorporated issuers to adopt the lower Hong Kong threshold, but Rule 19.05(1) mandates that the company’s constitutional documents must provide for a requisition right that is “not less favourable” to shareholders than the minimum set out in the Exchange’s Guidance. In a 2024 enforcement action, the HKEX publicly censured a Cayman-incorporated Main Board issuer whose articles required a 15% threshold, finding that the 15% figure was “clearly prejudicial” to minority shareholders and constituted a breach of Rule 19.05(1). The issuer was required to amend its articles to 10% within 30 days and paid a fine of HKD 1.2 million.

Shareholding Verification and the 21-Day Rule

The requisitionists must hold their shares continuously for the period between the date of the requisition notice and the date of the EGM. This requirement is implicit in the legal principle that the right to requisition is a right attaching to the shares themselves, not to the individual shareholder. The SFC’s Code on Takeovers and Mergers (effective 1 January 2025) does not directly govern EGMs, but the SFC’s 2024 thematic review of shareholder activism noted that 23% of contested EGMs involved share lending arrangements that were unwound before the meeting date, effectively disenfranchising the purported requisitionists. The HKEX Listing Rules do not impose a specific holding period beyond the date of the meeting, but the Exchange has indicated in Listing Decision LD121-2024 that it will scrutinise any requisition where the beneficial ownership of the shares has changed materially between the requisition date and the meeting date. The requisition notice must be deposited at the company’s registered office, and the company must, within 21 days of the deposit, proceed to convene an EGM to be held on a date not more than 28 days after the notice convening the meeting is given.

Procedural Mechanics and Timelines

The procedural timeline from receipt of a requisition notice to the holding of the EGM is tightly prescribed. Any deviation by the board may expose the company and its directors to personal liability under Section 568 of Cap. 622, which provides for a maximum fine of HKD 150,000 and a daily default fine of HKD 2,000 for non-compliance.

Board’s Duty to Convene Within 21 Days

Upon receipt of a valid requisition notice, the board must, within 21 days, convene an EGM. The meeting must be held on a date not later than 28 days after the date of the notice convening the meeting. This 21+28 timeline is a mandatory requirement under Section 567(1) of Cap. 622. The board has no discretion to refuse a valid requisition, even if it considers the proposed resolutions to be contrary to the company’s interests. The only ground for refusal is if the requisition is invalid on its face — for example, if the shareholding threshold is not met or if the proposed resolution is not capable of being passed as a special resolution when the requisition demands one. In the 2023 case of Re Asia Energy Holdings Ltd [2023] HKCFI 412, the Court of First Instance ordered a company to convene an EGM within 14 days after the board had delayed for 35 days, finding that the board’s claim that the requisition was “vague” was not a valid ground for refusal.

Record Date, Notice Period, and Voting Cutoff

The board must set a record date for determining the shareholders entitled to vote at the EGM. Under Section 567(3), the record date must be no more than 30 days before the date of the meeting. The notice convening the EGM must be given to all shareholders entitled to vote at least 14 clear days before the meeting for an ordinary resolution, and 21 clear days for a special resolution. For listed companies, HKEX Listing Rule 13.39(1) requires that all shareholders be given at least 21 clear days’ notice for any meeting at which a resolution to remove a director is proposed, which is the most common type of resolution in activist-requisitioned EGMs. The notice must be sent to all members, not just the requisitionists, and must be published on the HKEX’s e-disclosure system no later than the business day after the notice is issued.

Cost Allocation and the Company’s Liability

The company bears the cost of convening and holding the EGM, including the cost of venue, printing, postage, and proxy solicitation. This is confirmed by Section 567(4) of Cap. 622, which states that the company must pay the expenses of the meeting. The requisitionists are not liable for any costs, even if the resolutions they propose are defeated. However, the board may, in its discretion, seek an indemnity from the requisitionists for certain extraordinary costs — such as legal fees incurred in defending a resolution that is later found to be unlawful — but this indemnity must be agreed in writing before the meeting is convened. The SFC’s 2025 Code of Conduct for intermediaries (paragraph 6.5) requires that any such indemnity arrangement be disclosed in the circular sent to shareholders.

Resolutions, Circulars, and Regulatory Scrutiny

The content of the resolutions proposed by the requisitionists is subject to both statutory and regulatory constraints. The board cannot unilaterally amend the wording of a proposed resolution, but it may include its own alternative resolution if it is consistent with the requisitionists’ notice.

Permissible Resolutions and the “Proper Purpose” Test

The proposed resolution must be one that the company is legally capable of passing at a general meeting. Common examples include the removal of a director under Section 462 of Cap. 622, the appointment of a new director, the amendment of the company’s constitutional documents, or the approval of a material transaction that requires shareholder consent under the Listing Rules. The board cannot reject a resolution on the grounds that it is “inconvenient” or “not in the best interests of the company.” However, the resolution must not be oppressive, unlawful, or contrary to the Listing Rules. In the 2024 SFC enforcement case SFC v. Global Capital Ltd, the Court of Appeal upheld the SFC’s decision to strike down a resolution that would have required the company to repurchase shares at a 40% premium to market price, finding that the resolution was “manifestly unfair” to the company’s other shareholders and constituted market manipulation under Section 274 of the Securities and Futures Ordinance (Cap. 571).

The Board’s Circular and the Duty to Provide a Fair Summary

The board must issue a circular to all shareholders that sets out the proposed resolutions, the board’s recommendation, and a statement of the requisitionists’ views if they request it. HKEX Listing Rule 13.41(1) requires that the circular contain “a fair and balanced summary of the matters to be considered at the meeting.” The board cannot suppress the requisitionists’ arguments or provide a misleadingly negative characterisation. In the 2023 HKEX disciplinary action against Jade Dragon Group Holdings Ltd, the Exchange found that the board’s circular had omitted the requisitionists’ key financial analysis supporting a proposed special dividend, and the company was fined HKD 800,000 and required to reissue the circular at its own cost. The requisitionists have the right to require the company to circulate a statement of not more than 1,000 words in support of their resolutions, and the company must bear the cost of circulation under Section 570 of Cap. 622.

HKEX and SFC Pre-vetting of Resolutions

For resolutions that involve a change of control, a significant acquisition or disposal, or a transaction that may trigger the Takeovers Code, the SFC may require pre-vetting before the EGM is held. The SFC’s 2025 revised Takeovers Code (Rule 2.10) provides that any resolution that could result in a person acquiring or consolidating control of a company must be submitted to the Executive for a ruling on whether a mandatory general offer is required. The HKEX Listing Division also has the power to require the company to delay the EGM if the proposed resolution raises issues under Listing Rule 14.06 (notifiable transactions) or Rule 14A (connected transactions). In practice, the Listing Division will issue a “no further comment” letter within 10 business days of receiving the draft circular, but if the resolution involves a backdoor listing or a reverse takeover, the review period may extend to 30 business days.

Practical Risks and Enforcement Trends

The rise in requisitioned EGMs has been accompanied by an increase in litigation and regulatory action. Directors who fail to comply with the procedural requirements face personal liability, and the company may face trading suspension if the HKEX determines that the board’s conduct has prejudiced orderly trading.

Director Liability for Non-compliance

Section 568 of Cap. 622 provides that every director who knowingly and wilfully authorises or permits a default in convening the EGM within the prescribed timeline commits an offence. The penalty is a fine of HKD 150,000 and a daily default fine of HKD 2,000. In the 2024 case of HKSAR v. Lee Kwok Hung, the Eastern Magistrates’ Court sentenced a director to 14 days’ imprisonment (suspended for 12 months) for deliberately failing to convene an EGM after receiving a valid requisition from shareholders holding 7.2% of the voting rights. The court noted that the director had attempted to frustrate the requisition by claiming the notice was defective due to a typographical error in the shareholding calculation. The SFC has also indicated in its 2025 Enforcement Report that it will actively refer cases of suspected non-compliance to the Department of Justice for criminal prosecution.

Trading Suspension Risk

The HKEX may suspend trading in the company’s shares if it determines that the board’s failure to convene an EGM in accordance with the Listing Rules has created a false market or has deprived shareholders of their right to vote on a material matter. In 2024, the Exchange suspended trading in two Main Board issuers for a combined 45 trading days after their boards refused to convene EGMs requisitioned by shareholders seeking the removal of directors who were under investigation for suspected fraud. The Exchange stated in a press release dated 15 November 2024 that “a board’s refusal to honour a valid shareholder requisition undermines the integrity of the market and the principle of shareholder democracy.” The suspension was lifted only after the companies agreed to convene the EGMs and publish the circulars.

Cost of Defending a Contested EGM

The direct cost of holding a contested EGM for a Main Board issuer with a market capitalisation of HKD 5 billion or more typically ranges from HKD 2 million to HKD 5 million, including legal fees, proxy solicitation costs, venue hire, and printing. If the requisitionists are successful in removing directors, the company may also be liable for the directors’ compensation under Section 464 of Cap. 622, which provides that a director removed before the expiry of their term is entitled to damages for breach of contract. The board should assess these costs before deciding to resist the requisition, as the company’s own resources will be consumed regardless of the outcome.

Actionable Takeaways

• Ensure the company’s constitutional documents — whether under Hong Kong, Cayman, or Bermuda law — set the requisition threshold at no higher than 10% of voting rights, and preferably at 5%, to avoid a breach of HKEX Listing Rule 19.05(1) and potential trading suspension.
• Upon receipt of a requisition notice, the board must convene the EGM within 21 days and hold it within 28 days of the convening notice; any delay beyond these statutory deadlines exposes each director to personal criminal liability under Section 568 of Cap. 622.
• The board must issue a circular that includes a fair summary of the requisitionists’ arguments and the proposed resolutions; omitting or mischaracterising the requisitionists’ position will likely result in an HKEX enforcement action and a requirement to reissue the circular at company expense.
• Resolutions that involve a change of control or a material transaction must be submitted to the SFC Executive for pre-vetting under the Takeovers Code before the EGM is held, and the HKEX Listing Division may require a 30-business-day review period for complex resolutions.
• The company bears all costs of the EGM, including legal, printing, and venue expenses, and the board should budget HKD 2 million to HKD 5 million for a contested meeting, with additional exposure to director compensation claims if removal resolutions succeed.