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A Underwriting Agreement is a legally binding contract between a company issuing securities and investment banks who agree to purchase and resell those securities to the public. In Hong Kong's financial markets, these agreements play a crucial role in initial public offerings (IPOs) and bond issuances, setting out the exact terms and conditions of the underwriting process.

Under Hong Kong Securities and Futures Commission (SFC) regulations, the agreement spells out key details like offering price, commission rates, and risk allocation between parties. It also includes important safeguards such as representations and warranties, indemnification provisions, and conditions for when underwriters can withdraw from the deal - making it an essential document for both issuers and underwriters in Hong Kong's capital markets.

Companies need a Underwriting Agreement when raising capital through public securities offerings in Hong Kong's markets. This applies particularly to IPOs, bond issuances, and other significant capital-raising activities where investment banks will underwrite the offering. The agreement becomes essential once you've decided on your offering structure and selected your underwriting syndicate.

Time your agreement carefully - it needs to be in place before the securities registration process with the SFC and typically follows the engagement letter but precedes the final prospectus. Having this agreement ready early helps avoid delays in your offering timeline and ensures all parties understand their commitments, especially regarding pricing, allocation, and risk-sharing responsibilities.

• Firm Commitment Underwriting: Most common in Hong Kong IPOs, where underwriters guarantee to buy and resell all securities, offering maximum certainty to issuers
• Best Efforts Underwriting: Underwriters commit to sell as many securities as possible without guaranteeing full placement, typically used for riskier offerings
• Standby Underwriting: Underwriters agree to purchase any unsubscribed shares after the public offering, common in rights issues
• Syndicated Underwriting: Multiple banks share the underwriting responsibility, with detailed provisions on roles and liability allocation
• Mini-maxi Underwriting: Sets minimum and maximum offering amounts, protecting both issuer and underwriter if subscription levels fall short

• Issuing Companies: Companies seeking to raise capital through public offerings, responsible for providing accurate information and meeting disclosure requirements
• Investment Banks: Act as lead underwriters, managing the offering process and committing to purchase securities
• Legal Counsel: Draft and review agreements, ensuring compliance with SFC regulations and Hong Kong listing rules
• Corporate Finance Teams: Negotiate terms, pricing, and allocation strategies on behalf of both issuers and underwriters
• Company Directors: Sign off on representations and warranties, bearing personal liability for accuracy of disclosures
• Compliance Officers: Monitor adherence to regulatory requirements throughout the underwriting process

• Offering Details: Gather precise information about security type, offering size, price range, and timeline
• Due Diligence: Complete financial statements, business plans, and risk assessments for accurate representations
• Syndicate Structure: Confirm lead and co-underwriters, allocation percentages, and commission rates
• Regulatory Compliance: Review current SFC requirements and Hong Kong listing rules
• Lock-up Terms: Define post-offering sale restrictions for major shareholders and management
• Risk Allocation: Outline indemnification provisions and force majeure conditions
• Closing Mechanics: Specify payment, delivery, and settlement procedures

• Parties and Roles: Clear identification of issuer, underwriters, and their respective obligations
• Securities Description: Detailed specifications of the securities being offered, including type, quantity, and price
• Purchase Commitment: Terms of the underwriters' obligation to purchase securities
• Representations & Warranties: Issuer's statements about business condition and disclosure accuracy
• Closing Conditions: Prerequisites for completing the transaction, including regulatory approvals
• Termination Rights: Circumstances allowing underwriters to withdraw from the agreement
• Indemnification: Protection provisions for both issuer and underwriters
• Governing Law: Explicit statement of Hong Kong law application and jurisdiction

A Underwriting Agreement differs significantly from a Bond Purchase Agreement in several key aspects, though both are used in securities transactions. Understanding these differences is crucial for Hong Kong capital markets transactions.

• Scope and Purpose: Underwriting Agreements cover the entire securities distribution process, including marketing and risk allocation, while Bond Purchase Agreements focus solely on the direct purchase terms between issuer and buyer
• Party Structure: Underwriting Agreements involve investment banks acting as intermediaries for public distribution, whereas Bond Purchase Agreements typically involve direct transactions between issuer and institutional investors
• Risk Distribution: Underwriting Agreements include complex risk-sharing mechanisms and market-out clauses, while Bond Purchase Agreements generally have simpler, direct purchase obligations
• Regulatory Requirements: Underwriting Agreements must comply with SFC's extensive public offering regulations; Bond Purchase Agreements follow simpler private placement rules